Biz model 1.2 why are they important

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  • Engineering textbooks don’t tell us about change. They tell us how to best design a product or service according to today’s situation. Should I ask students about this? Raising kids; people say something was good enough for them, so it’s good for their kids
  • Why do you think Japanese firms don’t like to sell businesses
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  • Not interested in wireless electricity
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  • Biz model 1.2 why are they important

    1. 1. A/Prof Jeffrey Funk Division of Engineering and Technology Management National University of Singapore
    2. 2.  They have a big impact on business success ◦ We discuss many examples of why some firms succeeded more than others, using concept of business models  One reason they have big impact on business success ◦ Business models need constant modifications as changes in technology etc. occur ◦ But many firms do not modify their business models  Changes in business models can also explain growing success or failure of certain countries  The variety (and pace?) of technology change and thus need for new business models may be accelerating
    3. 3.  Computer-related, video game, mobile phones, other consumer electronics  Internet content  Sharing economy  Semiconductor, Integrated Circuit (IC), MEMS, Bio- electronics  Displays,  Lighting  Transport  Medical equipment  Materials, nano-technology, superconductivity
    4. 4.  Nokia, Motorola, RIM Blackberry?  Tower Records?  Borders Books?  Blockbuster Movies?  Kodak?  Palm Pilot?  What about magazines, newspapers, travel agencies, real estate agencies, stock brokers, audio systems?
    5. 5.  Top 100 Firms in Market Capitalization ◦ Google, Facebook, Tencent were founded in the last 15 years ◦ Microsoft and Apple were founded in the last 40 years  Recent changes: http://www.economist.com/techfirms  Who will be next? Unicorns? ◦ http://graphics.wsj.com/billion-dollar- club/ (see below slides)
    6. 6.  They have a big impact on business success ◦ We discuss many examples of why some firms succeeded more than others, using concept of business models  One reason they have big impact on business success ◦ Business models need constant modifications as changes in technology etc. occur ◦ But many firms do not modify their business models  Changes in business models can also explain growing success or failure of certain countries  The variety (and pace?) of technology change and thus need for new business models may be accelerating
    7. 7.  They need constant modifications particularly when there are changes in ◦ Technology ◦ Customer needs ◦ Market segments ◦ Performance, price, and costs ◦ Levels of vertical (dis)integration ◦ Number of firms in industry ◦ Regulations and laws (e.g., deregulation) ◦ Scale (e.g., more or less economies of scale) ◦ Stage of industry lifecycle
    8. 8.  For example, what changes in value capture, customers, or value proposition were needed for some of these firms or industries?  Nokia, Motorola, RIM Blackberry?  Borders Books?  Blockbuster Movies?  Tower Records? Kodak?  Palm Pilot?  What about magazines, newspapers, travel agencies, real estate agencies, stock traders, audio systems?
    9. 9.  Nokia and Motorola?  RIM Blackberry?  Borders Books? Blockbuster Movies?  Tower Records? Kodak?  Palm Pilot?  What about magazines, newspapers, travel agencies, real estate agencies, stock traders, audio systems?  Many mental, organizational, and other barriers to change, which we won’t address…..  Basically, change is hard
    10. 10.  Clayton Christensen popularized “disruptive technologies” in many books and papers  The popular press define disruptive technologies as any technology that changes the leading firms  Christensen has a more specific definition ◦ Low-end innovation that displaces the dominant technology ◦ It enters at low-end ◦ Demand drives improvements ◦ It finally displaces the dominant technology
    11. 11.  Many argue that low-end disruptive technologies are a trivial technology that requires a new business model (Andrew Grove, CEO of Intel)  Low-end innovations involve ◦ new value proposition (always, less on one dimension, more on another dimension) ◦ new customer selection (always) ◦ often new method of value capture (sometimes, e.g., lower gross margins) ◦ may have less scope of activities (because new entrants are often vertically disintegrated) ◦ may involve new method of strategic control
    12. 12.  They have a big impact on business success ◦ Many examples of why some firms succeeded more than others can be explained in terms of business models  Business models need constant modifications as changes in technology etc. occur ◦ But many firms do not modify their business models  Changes in business models can also explain growing success or failure of certain countries ◦ The fall of Japan ◦ Challenges for Europe  The variety (and pace?) of technology change and thus need for new business models may be accelerating
    13. 13.  Success of Japanese firms partly came from new business model that involved:  Value proposition ◦ emphasize quality including reliability, durability, and low number of internal defects ◦ partly through close cooperation between design/engineering and manufacturing  Scope of activities ◦ vertically integrated in firm or business group (keiretsu)  Method of strategic control ◦ high quality in both design/development and manufacturing ◦ low inventory (just-in time manufacturing) ◦ Kaizen, continuous improvement, fast product development
    14. 14.  But many changes have occurred over the last 20 years ◦ U.S., Taiwanese, Singaporean and other firms have learned about quality, inventory control, Kaizen, fast product development ◦ These firms have used low-cost and relatively high-quality manufacturing from China to reduce importance of Japan’s advantages in manufacturing ◦ $10 to assemble iPhone in China  Result is products from other countries have quality that is comparable to Japanese quality (and costs that are much lower)
    15. 15.  Other changes have occurred ◦ Emergence of vertical disintegration enabled entry of firms in U.S., Taiwan, and Singapore that have lower scopes of activities in computers, semiconductors, consumer electronics, etc. ◦ These new entrants often have lower development costs since they use components from other firms ◦ Japanese firms have been slow to reduce their scopes of activities partly because they don’t like to sell businesses ◦ Also few startups in Japan  Result is falling shares for Japanese firms in ◦ Computers ◦ Semiconductors ◦ Consumer electronics
    16. 16.  Success of Amazon Kindle, Apple iPhone, Apple iPod, Xiaomi Phone  Emergence of Barnes and Noble Nook, Google phone, Google TV
    17. 17.  Japanese are still good in industries where close cooperation between design and manufacturing are important  Automobiles  Many types of machinery
    18. 18.  They have a big impact on business success ◦ Many examples of why some firms succeeded more than others can be explained in terms of business models  Business models need constant modifications as changes in technology etc. occur ◦ But many firms do not modify their business models  Changes in business models can also explain growing success or failure of certain countries ◦ The fall of Japan ◦ Challenges for Europe  The variety (and pace?) of technology change and thus need for new business models may be accelerating
    19. 19.  Google, Facebook, Amazon, and other U.S. firms face increased regulations in Europe  Why ◦ They may violate privacy, competition, and tax laws  Another reason ◦ Internet is becoming important to mechanical products, Internet of Things ◦ Will this cause U.S. firms to dominate a new set of industries? ◦ How can Europe prevent this? ◦ What are appropriate business models for Internet of Things? A Fearless Culture Fuels U.S. Tech Giants http://www.nytimes.com/2015/06/19/business/the-american-way-of-tech-and-europes.html
    20. 20.  They have a big impact on business success ◦ Many examples of why some firms succeeded more than others can be explained in terms of business models  Business models need constant modifications as changes in technology etc. occur ◦ But many firms do not modify their business models ◦ One example of how business models require change can be found in so-called disruptive technologies  Changes in business models can also explain growing success or failure of certain countries  The variety (and pace?) of technology change may be accelerating
    21. 21.  We can see the degree of technological change in venture capital funding and in the number of “discontinuities*” being considered by firms  These discontinuities often require changes in business models  Understanding how and when changes in business models are needed, is essential to business success *Discussed next week
    22. 22. Software 5.1 Communications & Networking 3.0 Semiconductors 1.6 Other IT 2.2 Total IT 11.9 Biopharmaceutical 3.8 Medical devices 2.0 Other healthcare 1.0 Total healthcare 6.9 Other industries 3.5 Total all industries 22.3 Source: Dow Jones 2006 Venture Capital Industry Report
    23. 23. All Industries in 2010 26.45 Billion USD Aerospace and defense 97 Agriculture and forestry 34 Biopharmaceuticals 3,246 Business support services (mostly Internet) 2,516 Communications and networking 1,027 Construction and civil engineering 141 Consumer information services 4,552 Electronics and computer hardware 1,282 Financial institutions and services 631 Food and beverage 100 Healthcare services (mostly Internet) 1,144 Household and office goods 71 Machinery and industrial goods 188
    24. 24. All Industries Billions of USD Materials and chemicals 413 Media and content 343 Medical devices and equipment 2,249 Medical software and information services 478 Non-renewable energy 296 Personal goods 47 Renewable energy 2,118 Retailers 182 Semiconductors 764 Software 3,762 Travel and leisure 133 Utilities 141 Vehicles and parts 460 Wholesale trade and shipping 0
    25. 25.  Billion Dollar Startup Club (Unicorns) ◦ valuations over $1 Billion ◦ and are still private (no IPO yet)  95 firms as of June 2015 ◦ With 19 other firms in list (total of 114), that exited in recent years due to IPOs, acquisitions or decreasing value  High valuations mean investors believe they are offering something valuable, unique, hard to copy  Some of them will eventually have ◦ 100 Billion plus market capitalizations in future, like strongest hi-tech startups: Apple, Google, Amazon, and Microsoft
    26. 26. The Billion Dollar Startup Club by Category Software, Big Data, Cloud Computing (33) e-commerce (25) Consumer internet (22) Financial services (11) Hardware: phones, wearable computing (10) Healthcare (5) Energy (3) Entertainment and Games (2) Aerospace and defense (1) Real Estate (1), Education (1) Note: this includes firms that exited for total of 114 firms
    27. 27.  Software (33) ◦ Cloud computing, big data, online ads, security, database, integration platforms, many types of tools  e-commerce (25) ◦ Many (15) mobile sites including specialty sites for fashion, clothing, interior design  Consumer internet (22) ◦ Taxi apps, social networking, food delivery, music, hotels, discount coupons, other demand economy  Financial services (11) ◦ Peer-to peer lending, mobile payment, micro-financing  Hardware (10) ◦ Phones, drones, wearable computing, rugged cameras, vision-based driver assistance, thermostats  Other (13)
    28. 28.  Every new technology requires a new business model ◦ Many forms of value propositions can be implemented, which is best? ◦ Many possible customers, which ones will be the first users? ◦ How will the firm make money? i.e., value capture  Finding the appropriate business model is difficult  This will cause incumbents and many new entrants to fail  This provides opportunities for firms with good business models
    29. 29.  Billion Dollar Startup Club suggests that many new products, services, and startups will be Internet related  Smart phones will become more important  Internet of things, wearable computing will also become more important  But many other technologies will be introduced by large incumbents  Each of these new technologies requires a new business model
    30. 30.  Everything is being connected – Internet of things  Falling costs of MEMs, sensors, transceivers, GPS, and other electronic components  Many new forms of products and services ◦ Mobile phone based systems and wearable computing ◦ Point care diagnostic systems, smart pills ◦ Chips embedded in body, clothing, and other places to monitor body and also help with prosthetic limbs  What forms of software, big data, cloud computing, and data base service are needed to support these new hardware?
    31. 31.  3D ICs – address specific types of ICs such as memory, microprocessors or combinations of them  Replacements for flash memory: phase change memory (PRAM) magnetic RAM (MRAM), Ferroelectric RAM (FeRAM), and resistive RAM (ReRAM)  Extreme ultra-violet photolithography  New types of transistors, e.g., new “FIN FET”  Molecular and atomic transistors  Transistors made from single atom-layer materials (e.g., graphene and other materials)
    32. 32.  New forms of lighting ◦ LEDs or OLEDs ◦ Smart lighting: combine ICs and LEDs/OLEDs to provide more effective and aesthetic lighting  New forms of lasers and applications for them ◦ Scanners for different applications including those that involve 3D printer ◦ Autonomous vehicles, in particular for roads dedicated to them
    33. 33.  New forms of displays ◦ Organic Light Emitting Diode (OLEDs) based displays ◦ Electronic paper such as that used in eBooks ◦ Flexible displays, holographic displays  New applications of displays ◦ Public displays ◦ Information displays ◦ Smart watches  Virtual Reality for games and other applications
    34. 34.  Graphene  Carbon Nanotubes  Boron Nitride (can provide you with connection to supplier)  Quantum Dots  Nanoparticles  Nanofibers,  Other forms of ultra-thin (single- or double atom) materials that often combine graphene with other materials
    35. 35.  home entertainment systems (e.g., Internet TV)  better imaging systems for health care  Internet of Things for agriculture, fishing, mining, sheep herding, oil drilling  Better logistics for materials and people (e.g., automate airport check-in)  Biometrics  More efficient construction (e.g., DIRTT)  Drones for new applications, e.g., delivery  Sharing economy
    36. 36.  Many have emerged including touch displays, gesture interfaces, and augmented reality ◦ LEAP ◦ Kinect ◦ Google Glass ◦ Auresma ◦ Senseg ◦ Tactus ◦ AtracTable  What kinds of new ones are emerging?
    37. 37.  DNA sequencers  DNA synthesizers  Services related to sequencers and synthesizers ◦ Drug discovery ◦ Health care services
    38. 38.  For more ideas, see my slide share account http://www.slideshare.net/Funk97/presentati ons  Based on my MT5009 module (Analyzing Hi- Tech Opportunities) ◦ Slides on when new technologies become economically feasible ◦ Some slides by me, some by students ◦ Also see my slideshare account for this module http://www.slideshare.net/Funk98/presentations
    39. 39.  Every one of these new technologies requires a new business model ◦ Many forms of value propositions can be implemented, which is best? ◦ Many possible customers, which ones will be the first users? ◦ How will the firm make money?  Finding the appropriate business model is difficult  This will cause incumbents and many new entrants to fail  This provides opportunities for firms with good business models
    40. 40.  There are many changes driving a need for new business models  Although technological changes are the most obvious, there are others  Opportunities for new entrants and incumbents continue to be created  The goal of MT5016 is to help you ◦ understand these opportunities ◦ their impact on business models ◦ create potentially successful business models

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