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CIMA E2 > A. Business models and value creation > Flashcards

A. Business models and value creation Flashcards

1
Q

what was the traditional approach to understanding markets?

A
  • markets defined as individuals who exchange products within environment governed by demand and supply
  • key assumption:operate in INDIVIDUAL SELF-INTEREST
  • marketing involves: understanding customer needs, segmentation, targeting and positioning and developing a marketing mix (e.g. 4Ps)
  • strategies were simple:B2B, B2C etc
  • use PEST(EL) to identify drivers of change and asses growth and reasons for growth
  • Porter’s 5 forces to understand threats to achieving profit margins
  • Porter ‘generic strategies’ to deal with 5 forces
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2
Q

What is PEST(EL)?

A 
Political
Economic
Social
Technological
Environmental
Legal
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3
Q

what is Porter’s 5 Forces model?

A

COMPETITIVE RIVALRY:drive down prices and force you to improve quality to compare, driving costs
THREAT OF NEW ENTRANTS:new entrants drive down prices, ‘barriers to entry’ are key
THREAT FROM SUBSTITUTES:substitutes put a cap on prices and again can drive quality improvements to stay competitive
POWER OF BUYERS: powerful customers can negotiate lower prices and higher quality
POWER OF SUPPLIERS: powerful suppliers can insist on high prices, driving up costs

-ranked low, moderate, high as they determine profit potential of the industry

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4
Q

What are the generic strategies to deal with Porter’s 5 forces?

A

COST LEADERSHIP:low cost, broad target
DIFFERENTIATION:high cost, broad target
COST + FOCUS: low cost, narrow target
DIFFERENTIATION + FOCUS: differentiation + focus

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5
Q

what technologies drive change?

A 
social media
IoTs
Mobile devices
User interfaces
AI and ML
Big data and analytics
Cloud technologies
Bio and nano-technologies-wearable tech
Digital assets
Bitcoin, cryptocurrencies-can make secure payments without using banks
Blockchain-highly secure distributed data system
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6
Q

What impact and effect has tech had on traditional markets in the typical areas?

A

rapid changes in CUSTOMER EXPECTATIONS-more individualised, integrated experiences
NEW types of products and services-tech now strongly influences how value is created and delivered
NEW business models-Uber vs cabs, netflix vs Blockbuster
MARKET DISRUPTION-keeping up with advancements

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7
Q

How are emerging technologies creating an environment in traditional markets?

A

CONNECTED AND OPEN-new levels of trust and accountability
SIMPLE AND INTELLIGENT-advances in tech reduce and mask complexity, orgs can leverage analytics and insights to drive decision-making
FAST AND SCALABLE-as transactions increase in number and frequency and the cost of collaboration inside and outside the organisation continues to decline

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8
Q

what is an ecosystem?

A

complex web of interdependent enterprises and relationships aimed to create and allocate business value

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9
Q

what is a web?

A

network of organisations

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10
Q

what are the key characteristics that ecosystems share with traditional markets?

A

Participants: individual players or organisations
Interactions:products or services exchanged among participants

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11
Q

what are the 3 components of ‘participants’?

A

Role-behaviour within environment, what do they bring?
Reach-ability to influence environment, B2B, B2C?
Capability-key value proposition, range of activities

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12
Q

what are the 3 components of ‘interactions’?

A

Rules:explicit guidelines
Connections:elements and linkages
Course:speed and direction at which content or value is exchanged

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13
Q

what are the key characteristics that distinguish ecosystems from traditional markets?

A

MUTUALITY: deliver more by acting together for mutual benefit
ORCHESTRATION:coordination, management and arrangement of complex environments to make things happen

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14
Q

What is value creation?

A

bringing something of value into existence

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15
Q

what is value capture?

A

act or process of appropriating or allocating value

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16
Q

what are direct and indirect value capture?

A

direct: through own transactions
indirect: through orchestrator

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17
Q

what are the value creation/capture differences in traditional markets and ecosystems?

A

traditional:
value creation:incremental and focused on covering costs and gaining a return
value capture:additive, linear sequential and based on exchanges

ecosystems:
value creation:collaborative, eco created value as a whole rather than sum of individuals participating independently
value capture:networked, dynamic, everyone to everyone process of exchange

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18
Q

What are the 4 categories of ‘ecosystem archetypes’ i.e strategies to capture value?

A

high complexity:high barriers, roles scarce/hard to replicate
low complexity:low barriers, high threat from new entrants, roles easy to replicate
tight orchestration:ability to influence behaviour or actions across the entire ecosystem
loose orchestration:no individual participant has significant influence across the ecosystem

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19
Q

what are the 4 strategies of the ecosystem archetypes?

A

HORNET’S NEST: fragmented competition
LION’S PRIDE: winner-take-all
SHARK TANK: turbulent environment
WOLF PACK: collaboration

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20
Q

what are the challenges to regulating ecosystems?

A

speed of change:can take years to regulate, tech changes fast, privacy issues and consent
innovators find ‘back doors’:loopholes
ecosystems evolve:regulators must be careful not to limit small innovators when trying to control larger players
innovations cross lines of jurisdictions:who owns oversight of new players/markets

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21
Q

According to the World Economic Forum/Accenture analysis, what do digital customers want?

A

contextualised interactions:individualised products
seamless experience across channels-continue where they left off
anytime anywhere:24/7 accessibility
great service:regardless of loyalty, shop around
self service:prepared to spend time to get what they want
transparency-best value for money, protect consumer data
peer reviews/advocacy-trust reviews, trade journals

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22
Q

how do companies keep ahead of customer expectations?

A

design thinking:individualised experience
experiential pilots:behaviour of customers & reactions
prototyping:beta testing, 80% ready product released, gauge feedback
brand atomisation: widely distributed

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23
Q

what does the term market mean?

A

groups of individuals or organisations that make up the pool of actual and potential customers for their goods or services
-dictated by demand and supply

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24
Q

what is ‘competition’?

A

two parties strive for a goal which cannot be shared:one gain one loss

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25
Q

what is a society?

A

a group of individuals involved in persistent social interaction typically subject to the same political authority and dominant cultural expectations

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26
Q

what are societal norms?

A

constructed patterns of behaviour by deeming certain actions or speech as acceptable or unacceptable

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27
Q

what is regulation?

A

management of complex systems according to a set of rules and trends

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28
Q

what are some examples of PESTEL factors?

A

P:legislation, policies, import duties
Ec:international situation, domestic developments, changes in consumption
S:social, cultural or demographic factors i.e. population shifts, age profiles, change in lifestyles, education and health
T:changes in material supply, processing methods
L:changes in laws and regulations
En/ec: impact organisation has on external environment

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29
Q

what are Porter’s 3 generic strategies through which an organisation can generate superior competitive performance?

A

cost leadership:offer same quality as competitors by lower prices

differentiation: changing higher prices by offering more innovative products or with higher quality
focus: concentrating only on a small part of the market

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30
Q

What are the key drivers of the digital revolution?

A 
mobile and internet penetration
connected devices
data analytics and the cloud
user interfaces
global accessibility:rising living standards in developing economies
increasing urbanisation
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31
Q

how does Pager and Uber show benefits of transferring to another industry?

A

Former Uber engineer founded Pager

-from transport to healthcare for on demand health care via mobile-based services

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32
Q

what are the goals of business ecosystems?

A
  • strong barriers to entry for new competition
  • compete against system
  • leverage technology achieve excellence in research and business competence
  • driving new collaborations to address rising social and environmental challenges
  • harnessing creativity and innovation to lower the cost of production or allow members to reach new customers
  • accelerating the learning process to effectively collaborate and share insights, skills, expertise and knowledge
  • creating new ways to address fundamental human needs and desires
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33
Q

what is a combination of direct and indirect value capture?

A

pay-to-play component and some direct component

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34
Q

what is the level of complexity in activities?

A

function of the number and diversity of participants

high:

  • high barriers
  • threat of new entrants is low
  • participant’s role is relatively secure and hard to replicate

low:

  • low barriers
  • high threat from new entrants
  • role is vulnerable and easy to copy
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35
Q

what are some examples of high and low complexity organisations?

A

high: nuclear power, oil exploration
low: consumables, retailing, PTs

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36
Q

what is orchestration?

A

depicts the extent of an organisation’s influence over others within an ecosystem, formality of ecosystem interactions and the degree of enforceability and compliance

tight:

  • ability to influence
  • e.g. regulators in finance industry

loose:

  • no individual has significant influence
  • absences of regulation
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37
Q

where is the Ecosystem Archetypes matrix found?

A

in the IBM Report ‘The new age of ecosystems:Redefining partnership in an ecosystem environment’

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38
Q

What us a high complexity, loose orchestration ecosystem?

A

Hornet’s Nest

  • fragmented competition
  • low loyalty, high demands

e.g. media and entertainment

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39
Q

What us a low complexity, loose orchestration ecosystem?

A

Shark Tank

  • turbulent environment
  • fend for themselves

e.g. retail

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40
Q

What us a high complexity, tight orchestration ecosystem?

A

Lion’s Pride

  • winner-take-all mentality
  • formal orchestration

e.g. healthcare industry

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41
Q

What us a low complexity, loose orchestration ecosystem?

A

Wolf Pack
-collaboration

e.g. utilities

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42
Q

What are some participants in Apple’s ecosystem?

A

software developers: employed and those who app develop externally
suppliers: components, organisations that assemble, accessories
retailers:Apple & 3rd party
competitors
customers
governements
etc

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43
Q

what are the risks and costs associated with creating value in the ‘New World’ of business ecosystems?

A
  • boundaries and constraints have traditionally determined the evolution of business
  • these boundaries are now blurry, options to create value increase rapidly
  • less need for ownership and directly controlling capabilities, can share
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44
Q

what are the risks and costs associated with capturing value in the ‘New World’ of business ecosystems?

A
  • now requires creation of new business models
  • must be flexible and capable of rapid adaptation
  • need to set clear objectives, make well-informed and integrated choices
  • adopt new approaches due to tech advancements
  • emphasis on designing and renewing business models
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45
Q

what are the risks and costs associated with creating value and society in the ‘New World’ of business ecosystems?

A
  • participating in evolving ecosystems will necessitate new alliances to address major pressing societal challenges or ‘wicked problems’ through new solutions, generating both profits and social value at the same time
  • need businesses to be concerned about social issues
  • requires investors open to tackling challenge
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46
Q

what is an Unilever’s example of using ecosystems?

A

promote hand washing during spread of cholera

  • knew product could save lives
  • poverty issue
  • NGOs, banks and schools created market for products
  • marketing program with social benefits
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47
Q

what are the risks and costs associated with regulation in the ‘New World’ of business ecosystems?

A
  • protect public interest
  • don’t stifle innovation
  • depends on regulators’ understanding of the solutions being offered
  • use expert advice
  • evolving regulations
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48
Q

what are the risks and costs associated with delivering value- supply chains in the ‘New World’ of business ecosystems?

A
  • supply chains are increasing referred to as ‘value webs’ which span and connect whole ecosystems of suppliers and collaborators
  • can reduce costs, improve service levels, mitigate risks of disruption
  • reduction of corporate dependence on ownership of key assets allowed new actors to contribute
  • global networks
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49
Q

what are the risks and costs associated with delivering value-assets in the ‘New World’ of business ecosystems?

A
  • previously used M&Ss to accelerate entry into new businesses and markets and to build their competitive strengths
  • now increased options to make use of assets without owning them
  • IP protection, market transparency
  • lower transaction costs
  • more due-dilligence reviews
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50
Q

what are the risks and costs associated with delivering value-building platforms in the ‘New World’ of business ecosystems?

A

-can be a delivery channel
-switch to pull based so less focus on forecasting demand accurately
-cost of three core digital tech capabilities (computing power, data storage and bandwidth) relative to their performance has been decreasing exponentially and at a faster rate than previous tech
-Deloitte’s ‘The Big Shift’:period of time where foundations are reshaped and potentially changed
-

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51
Q

what is a platform?

A

help make resources and products more accessible to each other on an as-needed basis

key elements:

  • governance structure, protocols
  • additional set of standards to facilitate connection, coordination and collaboration

global digital tech infrastructures are enablers, not prerequisite for platform

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52
Q

what are the risks and costs associated with delivering value-transforming business in the ‘New World’ of business ecosystems?

A
  • rethinking fundamentals of how a business creates and captures value was not a priority
  • is now essential
  • Deloitte Center for the Edge’s Shift Index suggests that they are experiencing intensifying competition, an accelerating pace of change and a growing uncertainty stemming from the increasing frequency of unanticipated extreme events
  • risk of fast, large scale change
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53
Q

what is a business model?

A

KPMG:any description of the business model must include how the firm is structures, the markets in which it operates, how it engages with those markets, its main products and services, its main categories of customers, and its main distribution methods

Magretta:business models are also stories that explain how firms work, including how they make money and how they deliver value to customers at an appropriate cost

FRC:how the entity generates or preserves value over the longer term

54
Q

what are the 4 key aspects of the traditional business model?

A

Define value-firms look at who they create value for and what counts as value e.g. R&D
Create value-how resources are sources and turned into output e.g. manufacture
Deliver value-firms find ways to get value to those it was created for e.g. advertising
Capture residual value:share between stakeholders i.e. profit

55
Q

who are stakeholders?

A

individuals and groups who have an INTEREST in the organisation and as such may wish to INFLUENCE its mission, objectives and strategy

56
Q

What is on the axis of Mendelow’s matrix?

A

level of interest and level of power

57
Q

How do firms decide who they are creating value for, with whom and why they are doing so?

A
  1. IDENTIFY shareholders for and with whom they seek to create value
  2. PRIORITISE AND RANK the stakeholders on the following attributes:
    - power:ability to impose their will
    - legitimacy:according to the norms and values of the firm and society
    - urgency:the need for immediate action in the light of a stakeholder claim
  3. ESTABLISH AND IDENTIFY the needs of the high priority stakeholders
  4. FORMULATE VALUE PROPOSITIONS that meet the needs of the high priority stakeholders
58
Q

what is Apple’s value proposition in 3 key elements?

A
  1. think different:early-adopters
  2. tech that works:seamless experience
  3. your privacy is safe with us:data protection
59
Q

what are the characteristics of value?

A

financial or non-financial to differentiate from states of value i.e price, cost , profit or cash flow
tangible and intangible
not limited to the past
short term and long term
is about people i.e. needs
created shared value: goes beyond just shareholders

60
Q

what are the 5 key elements of creating value? i.e. operating model of firm

A

PARTNERS:high priority stakeholders, build relationships
RESOURCES:use relationships to source and secure resources
PROCESSES:design, develop and deploy processes that provide the infrastructure to convert inputs into outputs
ACTIVITIES:firms and their partners engage in activities that use the processes to convert resources into products
OUTPUTS:products, services and experiences which aim to meet the customer value proposition

61
Q

what do Bain and Co suggest to achieve greatest benefit from segmentation?

A
  • divide market into meaningful and measurable segments
  • determine the profit potential of each segment
  • target segments
  • invest resources to tailor product
  • measure performance of each segment
62
Q

what are the channels in delivering value?

A
  • firms deliver value through communication, distribution and sales channels
  • ‘touch points’ include phones, tablets, retail outlets and social media
  • channels must be integrated, turning shopping into a seamless experience
  • customers expect the buying journey to be relevant and personalised, to reveal consistent features, offers and experiences based on where they’ve been, what they want and how they choose to get it
63
Q

how is residual value captured?

A
  • value captures when revenue earned>costs of creating value
  • difference between the two creates a surplus, the size of the surplus will depend on market conditions but will also reflect the decision made when defining value and the success with which firms execute those decisions
  • firms will share this surplus with stakeholders who contributed to and have been part of the value creation process but have not yet received any value themselves
64
Q

what 4 key factors is cost architecture (total cost model) based on?

A

EFFICIENCY of the processes
LEVELS of activity
RESOURCES consumed during activities
PRICE PAID for resources

65
Q

what is the revenue model?

A
  • revenue earned when product delivered to customer and any prices charged should accurately reflect the customer segments that the firm addresses, the market condition in which it trades and any regulatory control in place
  • firm will also need to establish a collection policy which dictates the speed which revenue is converted to cash
  • both pricing and collection policy are affected by these factors
66
Q

what is sharing residual value?

A

shared value comprises shareholder value and the value delivered to other stakeholders

e.g. govt taxes, shareholder dividends, performance related pay, reinvestments

67
Q

what are the 4 steps of the CIMA Business model?

A

define
create
deliver
capture

68
Q

what are the 4 parts of Tesco’s business model tat correspond to the 4 parts of CIMA’s business model?

A

Define: customers are number one priority
Create:product developed sources from best ingredients
Deliver:channels such as shops, delivery
Capture:reinvest to improve shopping experience

69
Q

why has the concept of the business model been used over many decades?

A
  • legal and regulatory requirements for reporting to shareholders e.g. UK Corp Gov Code says directors must state position, strategy, business model
  • can be means by which firms create long-term value and success and exploit business opportunities in the external environment
  • models and frameworks firms can respond to disruptions in their operating environments, particularly from firms who have new or better business models
70
Q

What model do firms use to define value in the traditional approach?

A

Mendelow model for stakeholder mapping

71
Q

what does power relate to in the Mendelow’s matrix?

A

amount of influence/power the group can have over organisation
-may not be exercised

72
Q

what does level of interest mean in the Mendelow’s matrix?

A

whether stakeholder is actively interested in the performance of the organisation

73
Q

what are some examples of low interest low power stakeholders?

A

small shareholders and general public

74
Q

what are some examples of high interest low power stakeholders?

A

staff, customers, suppliers, environmental pressure groups

75
Q

what are some examples of low interest high power stakeholders?

A

national government, institutional shareholders

76
Q

what are some examples of high interest high power stakeholders?

A

directors, major shareholders and trade unions

77
Q

How does Nestle create shared value?

A

Nestle Shared Value report (2019)
by ensuring long-term sustainable value creation for shareholders while tackling societal issues at the same time

2030 ambitions:

  • for individuals and families, help 50 mill children lead healthier lives
  • for our communities, to improve 30 mill livelihoods in communities directly connected to our business activities
  • for the planet, to strive for zero environmental impact in our operations

purpose:enhancing quality of life and contributing to a healthier future

78
Q

how does traditional segmentation focus on identifying groups?

A
  • geographic variables
  • demographic variables e.g. age, sex
  • psychographic variables e.g. personalities, values
  • behavioural variable e.g. benefits sought, product usage rates
79
Q

what is value based segmentation?

A

looks at groups of customers in terms of the revenue they generate and the costs of establishing and maintaining relationships with them

80
Q

what is the criteria for segments regardless of method?

A
  • measurable and meaningful
  • mutually exclusive
  • stable
  • substantial
  • easy to understand
81
Q

according to Oracle, firms must adopt which key actions to data on customers?

A
  • collect
  • clean
  • connect
  • transform
82
Q

What does the Oracle Report suggest about cross-channel customer experience?

A

customers start buying process based on recommendations, online product research or an email or text message offer

  • touch and feel in store but buy from home online
  • expect relevant and personalised purchase journey
  • 3/4 use 2+ channels to browse, research and purchase products
  • 85% of shoppers expect a consistent and personalised shopping experience
83
Q

What did a Deloitte 2020 study show about engaged customers?

A

delivered twice the spend value and 3 times subsequent sale through advocacy value

  • firms earn their revenue when they deliver value to customers through their preferred channels
  • important to turn revenue into cash quickly
84
Q

what are the 3 main issues to consider when capturing value?

A

cost model
revenue model
sharing residual value

85
Q

what does the CIMA business model depict?

A

how different parts of the business model should align and connect with eachother and the operating environment
-misalignment will result in lower performance

86
Q

what is disruptive technology?

A

instances where technology is used to fundamentally change and ‘disrupt’ the existing business model in an industry

e.g. Netflix, Uber and Airbnb changing industry

87
Q

what are the 2 largest growth sectors for disruptive technology?

A

health services and financial services

88
Q

Why is Fintech disruptive?

A

Fintech disrupting traditional banking sector which was long seen as highly technical, highly regulated industry run by giant banks

  • can provide same services as IBs
  • GC estimated upstarts could steal up to $4.7 trillion in annual revenue from an established financial services company
89
Q

what are some examples of Fintech?

A

Zopa:

  • peer-to-peer loan company
  • matched lenders and borrowers
  • removes bank as middleman thereby decreasing cost and transaction costs
  • some see this as more ethical

Funding Circle:
-loans to business customers with larger loans and longer periods

Betterment:

  • financial portfolio management platform
  • personal financial advisors
  • smartphone access to get advice
90
Q

what are the advantages of Fintech?

A
  • better use of data-providing better understanding of their customer and giving customers a wider choice
  • a frictionless customer experience using elements such as smartphone apps to provide a broad and efficient rand of services
  • more personalisation of products/services to individual customers
  • the lack of physical presence (with associated OHs and op costs)
  • access to cheap capital to fund growth-like when internet based businesses started in 1990s. People willing to invest in Fintech thus allowing cheap finance
91
Q

What is cryptocurrency?

A
  • digital form of money
  • meeting attributes of a store of value, unit of account and medium of exchange
  • hundreds of cryptocurrencies now exist, originating with bitcoin
92
Q

what is blockchain?

A
  • distributed decentralised database existing on multiple computers at the same time
  • constantly records or ‘blocks’ added
  • each block contains a timestamp and a link to the previous block so they actually form a chain
  • managed by network
  • all blocks are encrypted so everyone can access info and follow chain
  • owner has private key to make new records, others have public key for access
  • independent, transparent and secure
  • gets rid of need for financial services:registration, ID, contracting and transaction fees
93
Q

what are some examples of tech-driven distruption?

A

AI:self driving cars
3D printing:healthcare, hearing aids, personal prosthetics
Mobile tech:taxis and car rentals, uber
Data analytics: energy, information
IoTs:lifestyle and home products, home devices supplying stream of info
Robots:oil-drilling and exploration costs fall
Drones:logistics-amazon drone deliveries

94
Q

What are the 3 waves of disruption?

A

1st (1994-99)-unbundling products:

  • split up product
    e. g. sell singles instead of whole album, separate recipes instead of cookbook, news articles instead of newspaper

2nd wave (2000-05)- disintermediation of supply chains

  • companies used this to break the supply chain
    e. g. customer gets direct service, cut out travel or real estate agent

3rd wave (2006-still ongoing)-decoupling of the customer journey

  • break apart customer journey i.e. value chain to deliver part of value
    e. g. trial boxes of makeup, can turn insurance on and off
95
Q

Accenture Technology Vision 2015 report highlighted which 5 emerging trends that were shaping the tech landscape?

A
  1. internet of Me:user focused, personalised
  2. Outcome economy: better ability to measure outcome, customers more attracted to outcome than just products
  3. Platform (r)evolution:global platforms easier to establish and cheaper to run, Cloud computing, mobile tech offer potential for innovation and quicker delivery of services, fast evolutions
  4. The intelligent enterprise:use data to enable more innovation and achieve efficiency
  5. Workforce reimagined: role of humans is important too, just used in different way. Find ways for workforce and humans to work together
96
Q

What are the 3 myths to overcome if disruption is to be seen as an opportunity not a threat?

A
  1. those organisations that are not digital already have missed their chance
    - don’t have to be first mover, can adapt current assets to their advantage
  2. becoming a digital business is an administrative exercise that focusses on achieving operational efficiencies
    - not just looking to cut costs, also looking to increase the revenue sources available to them
  3. digital transformation can be successfully achieved just by creating a digital business unit headed up by a Chief Digital Officer
    - need buy-in from top to everyone else in the org
97
Q

what abilities will the executive leadership team/board need to exhibit to properly take advantage of a move to digital?

A
  1. INSPIRATIONAL LEADERSHIP
    - take ownership, guide from top, inspire confidence
  2. COMPETITIVE EDGE
    - persuade change in mindset, motivate innovation
  3. ESTABLISHING A STRATEGIC DIRECTION
    - digital strategy may be different
  4. INFLUENCE EXTERNAL PARTIES
    - greater uncertainty, need to be persuasive and articulate compelling value proposition
  5. COLLABORATION
    - careful though, which ecosystem to join
  6. BUSINESS JUDGEMENT
    - what sort of business model, many unknowns
  7. EXECUTION
    - people and tech work together to produce outcomes
  8. BUILDING TALENT
    - identify skills needed and manage/training and recruitment to ensure that the business has those skills, new role such as Chief Digital Office
98
Q

what are the two main challenges firms looking to become digital enterprises face?

A
  • business model that served them well for decades has been disrupted by digital innovation and no longer works as desired
  • all attempts to create a new, viable business model for the digital age will flounder unless a company is willing to disrupt itself

conundrum is called ‘innovator’s dilemma’

99
Q

what is the example of innovator’s dilemma in action with iPods and iTunes?

A

Nokia and Sony had similar products in development in the years before the launch of iPod and iTunes but chose not to continue out of fear of disrupting their existing business
-should not be afraid of change and disruption

100
Q

Amazon example of disruption?

A

started as seller of paper books but disrupted itself and cannibalised its products and services

  • launched Kindle at the expense of its physical book sales
  • now leader in promotion and sales of digital content in an e-book market worth $1.6 billion

Amazon Prime disrupted DVD sales

bold leadership and innovative corporate culture defined by a relatively high degree of autonomy and putting customer in the centre

101
Q

What is the World Economic Forum White Paper Digital Enterprise 3 step plan?

A
  1. Innovate on the periphery: innovate at edge not at core
  2. Hire digital savvy individuals
  3. Copy successful firms
102
Q

What types of design does the World Economic Forum suggest?

A

SCENARIO-BASED DESIGN:in response to disruptive trends
EPICENTRE-DRIVEN DESIGN:uses strengths and weaknesses of the existing business model to generate ideas
UNORTHODOX DESIGN:forms business models by challenging existing industry logic and company cliches
CUSTOMER-CENTRIC DESIGN:builds business models through customers’ eyes based on the question:does it solve their problems?
MIRRORED DESIGN: based on the finding that 90% of new business models are not actually new, this creatively imitates business model patterns from other industries

103
Q

what are the 5 approaches the World Economic Forum on ‘Digital Transformation of Industries’ suggest a firm needs to adopt?

A 
Build
Buy
Partner
Invest
Accelerate/Incubate
104
Q

what is the build approach of the Digital Transformation Initiative?

A

best route when related to the company’s core business
can hire necessary talent
maximises control

e.g. GE launched GE Digital in 2015 to bring together its digital capabilities into one organisation

105
Q

what is the buy approach of the Digital Transformation Initiative?

A

most appropriate when

  • strategically important to ‘own’ market
  • hiring talent not possible
  • new opportunity bears little relation to current business model
  • beat out competition

e.g. UPS acquired Coyote Logistics, a highly innovative technology driven, non-asset based truckload freight brokerage, Facebook acquiring Whatsapp

106
Q

what is the partner approach of the Digital Transformation Initiative?

A

best when there is no strategic need to own:

  • learn from ‘digital natives’
  • useful when deeper partnerships are required

e.g. Novartis and Google partnered to develop a smart contract lens for diabetics that monitors blood sugar levels, Adidas partnered with Spotify to launch running app that matches pace to music

107
Q

what is the invest approach of the Digital Transformation Initiative?

A
  • invest in startups
  • connect with the right skills and capabilities
  • avoid hindering entrepreneurial forces with a setup focused on internal governance and reporting

e.g. Intel Capital was set up as a dedicated investment arm to make investment decisions on the IoT

108
Q

what is the incubate/accelerate approach of the Digital Transformation Initiative?

A

closer relationship to founding company

  • enables internal capabilities, infrastructure and resources to be deployed to help the start-up
  • incubators and accelerators need to precisely outline both internal benefits and incentives for start-ups and entrepreneurs, and clear strategy and vision

e.g. Metro Accelerator helps start-ups through dedicated programmes, mentoring, assistance with funding etc

109
Q

what is an operating model?

A

the clear ‘big picture’ description of the key relationships between business functions, processes and structures that are required for the organisation to fulfil its mission

110
Q

what are some cross-industry operation efficiencies?

A

HR:virtual collaboration, peer-to-peer reputation systems and digital interviews. use of talent portals for hiring which reduces HR costs
Finance:cloud accounting systems, AI automation
IT:cloud computing, SaaS, AI, big data security and quantum computing
Supply chain management:key tech will include autonomous transport and drones, sensors for monitoring supply chain and 3D printing
R&D:crowdsourcing, AI and robotics

111
Q

what are the 5 successful digital operating models identified by the World Economic Forum-Digital Transformation Initiative?

A 
Customer-centric
Extra-frugal
Data powered
Skynet
Open and Liquid
112
Q

what is the customer-centric digital operating model?

A
  • focuses on making customers’ lives easier
  • emphasises front-office processes

e.g. Argos

113
Q

what is the extra-frugal digital operating model?

A
  • aim to provide high quality at low cost
  • ‘less is more’
  • standardised organisational structure

e.g. Michelin tyres

114
Q

what is the data-powered digital operating model?

A
  • focus on prowess in analytics and software intelligence
  • emphasis an ‘agile’ culture focused on innovation through empirical experimentation

e.g. Google and Netflix

115
Q

what is the Skynet digital operating model?

A
  • focus on making intensive use of machines to increase productivity and flexibility in production
  • emphasises an ‘engineer-led’ culture dedicated to automation

e.g. Amazing engineer-led culture dedicated to automation

116
Q

what is the open and liquid digital operating model?

A
  • outward focus on creating an ecosystem that can enrich the customer proposition
  • emphasises a sharing culture with a constant flow of dialog with the outside world

e.g Facebook, Paypal

117
Q

What 7 step process does the World Economic Forum project on the Digital Transformation of Industries (DTI) propose?

A
  1. Attracting and retaining talent in the digital age
  2. Becoming an employer of choice
  3. Creating a workforce with digital skills
  4. Bringing leadership to the digital age
  5. Fostering a digital culture
  6. Create environments where human and robots can work successfully together
  7. Integrate your on-demand workforce
118
Q

with increasing levels of digitisation in the workplace, which 2 features have become apparent with staff?

A
  • greater transparency about opportunities and more ‘inside-information’ via agencies and peer reviews
  • greater competition for digital talent:global skills shortage in this area
119
Q

How can firms respond to the trends of staff trends with increasing digital age?

A
  • foster a culture of transparency rather than resisting it
  • take note of what staff are saying on social platforms such as Glassdoor, LinkedIn and Twitter
  • Introduce a referral programme
120
Q

why should firms target millenials?

A

-grew up with digital age
latest generation of employees
-understand younger customers

121
Q

what does the WEF propose to become the employer of choice?

A
  • formulate a long-term working strategy for millennials:positions and promotional opps
  • work with staff to formulate company values together:take note of goals, involve seniors
  • empower the workforce:incentives, training opps
  • build workspaces that attract digital talent:physical appearance, flexibility
  • create policies that support collaboration and knowledge-sharing tools:engaging staff on platforms online
122
Q

what did a recent PwC study reveal about skills shortages and looking for broader range of skills?

A
  • 3/4 of CEOs cited skills shortages as a threat to their businesses
  • 81% claimed to be looking for a broader range of skills when recruiting
123
Q 
what are some roles that may now be relevant in the following areas:
Commercial
Technology
Web
Marketing
Facilitation
HR
A

Commercial:E-business manager, Digital account manager, Digital product manager, Fraud manager
Technology:Scrum master, Data scientist, Chief Data Officer (CDO), Data protection officer
WebWeb project manager, Web designer, Webmaster, Developer
Marketing:Digital marketing professional, Digital copywriters, Media acquisition manager, User experience designer
Facilitation:service design thinker, content curator, editorial manager, Chief Listening Officer
HR:Design learning manager, Digital work experience officer, Employer brand director

124
Q

how can leadership create a workforce with digital skills?

A
  • collaborate with educational establishments to give students confidence and skills to be future employees
  • develop required competencies within the workforce via training
  • mine your own organisation for hidden talent
  • bring new skills into the organisation
125
Q

what are the general recommendations for bringing leadership to the digital age?

A
  • leaders need to adapt:forward thinking, progressive
  • flatter organisational structures may work better than traditional hierarchies ‘ideas win arguments, not hierarchies’- Steve Jobs
  • develop structure that is more risk-tolerant and accepts failure
  • use more long-term goals
126
Q

according to the WEF, what six key roles should CEOs fulfil?

A
  • creator of vision and mission
  • strategic planner
  • driver of information-based business models
  • enabler of the shift to on-demand operating models
  • innovation promoter
  • operational excellence driver
127
Q

what is the definition of culture?

A

shared set of belief, values an mind-sets that guide a group’s behaviours

‘the way we do things around here’

  • invisible bond that ties people together
  • pattern of human activity that has significant bearing on the way it related to its stakeholders
  • development of attitude
128
Q

what factors distinguish a digital culture from others?

A
  • having a strong mission statement and a clear sense of purpose
  • lean business structures with small, cross-functional teams as opposed to individual divisions working as separate siloes
  • a diverse workforce with good digital skills
129
Q

what 4 key areas can leaders focus on to move towards a digital culture?

A

COMMUNICATION: encourage digital comms
JOURNEY MGMT:needs to be at forefront of change
MAKE CHANGES VISIBLE: visual aids e.g. charts to highlight journey
CONTINUOUS CHANGE MONITORING:use feedback surveys to monitor performance

130
Q

how can leadership integrate on-demand workforce?

A
  • recruit through online talent pools
  • can help improve overall quality of talent pool
  • senior who is well-versed in digital culture should lead

CIMA E2 (3 decks)

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