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Transformational Impacts of Information Technology (IT)
Transcript of Transformational Impacts of Information Technology (IT)
Proliferation of the practice is new -- Web 2.0 apps facilitate 2-way interactions and participation in content creation by the masses MSPs ? How Profound Are the Impacts Transformational Impacts of Information Technology Yin & Yang of IT Mgmt Keeping the lights on Seeking strategic advantage vs. New missions to take on Old missions still essential Full plate already.
How much more can be added? Mission Impossible? Maintaining Harmony Challenges from All Directions Harmony Disrupted Narrow focus in the search for solutions
Ill-prepared for tsunami-scale changes cloud storage as low-cost alternative to data center
mobile computing to recapture employees' "downtime"
social media as cost-effective alternative to paid media Like a Tsunami First wave can be deceiving Efficiency Gains Process Integration Business Transformation Efficiency Gains Means: automation and digitalization
Target: low hanging fruits (e.g., labor-intensive stand alone tasks)
Impact: factor substitution Means: enterprise systems (e.g., ERP and CRM) and industry-wide standards and applications (e.g., EDI and RFID)
Target: cross-functional and cross-enterprise processes
Impact: scale effects Process Intergration Business Transformation Means: radical innovations and new business models
Target: value chain and enterprise boundaries
Impact: structural changes => new business landscape Cloud Mobile Social Big Data Boundary Spanning User Empowerment IT Tsunami: Recap: Shifting Power & Boundary New Business Landscape Open Innovation Multisided Markets & Platforms Concept not new, e.g., bank cards (AmEx, Visa, MC) been around for decades
Rapid proliferation is new, e.g., social networking (Facebook, LinkedIn, Pinterest), retailing (Amazon, eBay), content and software apps (Apple iTunes & AppStore, Google Play), media sharing (YouTube, flickr, Slideshare), crowdsourcing (TopCoder, Innocentive) among others (airBnB, RelayRides). Multi-Sided Platforms What's New? Why Now? 3 Elements Conditions favorable to proliferation of MSPs
Convergence of techno, media and business trends leading to interactions between multiple groups of participants
Extremely low transaction costs => MSPs, as market mechanism, are preferable to hierarchies
Network externalities -- value to participants on one side correlates positively to level of participation on other side(s) To support interactions, each MSP must provide:
Infrastructures: medium for users to connect and interact
Standards: ensuring compatability and hence "plug & play"
Rules: terms of transactions, responsibilities and rights of participants Android OS as a 5-sided Platform What is It? What's New? Outsourcing a task to (a) an undefined network of people (b) in the form of an open call
"The person who you think would be best qualified to do the job is not always the best person to do it" (Howe, 2006) Strategic Considerations Cross-subsidization thru pricing to build a large user base and to benefit from network effects
High multi-homing cost => winner takes all or takes most; no room for the "also run"
Vulnerable to envelopment by adjacent platforms => market dominance easier to build than to sustain => MSPs must be built to evolve Outsourcing a range of tasks, from simple to highly specialized, to a distributed virtual labor pool, available on demand 6 Categories Develop, aggregate and share knowledge and info through open Q&A, user-generated knowledge system, news, citizen journalism, etc. Tapping external sources for idea generation and problem solving, from technological challenges to business processes Apps, platforms & tools that support collaboration, communication and sharing among distributed groups of people Tapping creative talent pools to design/develop media or content (e.g., advertising, branding concepts and graphic design) Raising capital by soliciting contributions from a large number of stakeholders through donations, lending or investment Crowdfunding Tools Distributed
Knowledge Crowd Creativity Open Innovation Cloud Labor MSPs for Crowdsourcing Once More, Markets vs. Hierarchies Crowdsourcing SocialWebBiz Blog
URL: http://socialwebbiz.wordpress.com For your time and attention Thuong T. Le Open Innovation Invest heavily in internal R&D Discover best & most of ideas Closed Innovation Control & Self Reliance Successful Innovation = Smart people in the field work for us
If you want to do something right, you've got to do it yourself Open Innovation Not all the smart people work for us
We do not have to originate the research in order to benefit from it
Make the best use of internal & external ideas and we
will win Missed
Opportunities "Local Search" Phenomenon Open Innovation through Crowdsourcing Innocentive Science problems inside a firm
addressed by a limited number of scientists with single knowledge domain
identified, defined and grappled with based on local expertise using tools not working before Problems often not solved or solved with suboptimal solutions
Alternative approaches often ignored or simply not perceived Launched in 2001 with seed funding from Eli Lilly; spun off in 2005 with backing from venture capital
Online marketplace between firms ("seekers") with R&D challenges and external scientists ("solvers") who approach problems from different angles eBay of Innovation Scope widen from scientific & technical to business & non-profit challenges
Registered solvers: 270,000+
Challenges posted: 1,500+
Solutions submitted: 34,000+
Awards given: 1,300+, from $500 to $1 million
Awards total: >$37 million Get to market first, dominate & make most money Dramatic rise of the number & mobility of knowledge workers Rise of venture capital to finance start-ups Abundant knowledge World
Has Changed Empowerment Markets Hierarchies Complexity of Product or Service Asset Specificity High Low Low High Hierarchies vs. Markets Some theoretical framework essential for understanding the emergence of the new landscape First Thing First Nobel laureate in economics (1991), best known for "The Nature of the Firm" (1937)
Q: markets, being "efficient", can provide goods and services most cheaply. Why do individuals choose to create firms rather than contracting out specific tasks?
A: transaction costs in using markets (e.g., search, bargain, coordinate and guard against "opportunistic" behavior) Ronald Coase Thomas W. Malone Professor of Management, MIT
"Electronic Markets and Electronic Hierarchies", Communications of the ACM, (1987)
Transactions are info-intensive. Application of IT can drastically reduce transactions costs associated with contracting out
Markets become preferable to hierarchies. Rises or falls, depending on the complexity of a product or service and the specificity of assests used in producing it Transaction Cost Hierarchies High transaction cost, hierarchies dominate Markets Physical World (e.g., manufacturing) Markets Hierarchies Markets Low transaction cost, markets dominate Virtual World (e.g., information) Markets Hierarchies Networks "Real" World Offer both lower product & transaction costs (for lack of a better term) Networks Outsource from selected long-term partners (e.g., Apple hardware production) Supply Chain Mgmt (SCM) Multisided Platforms (MSP) Instead of selected few, "Let hundred flowers bloom" (e.g., Apple iTunes and AppStore) Markets Preferable Any organization can crowdsource directly in one-to-many fashion
Transaction cost (e.g., providing infrastructures, defining standards, setting rules & attracting participants) would be prohibitive for most organizations Hierarchies Not Attractive MSPs (many-to-many "markets") are well positioned to:
drive down transaction cost through scale economies
attract users by leveraging network effects to offer them greater value