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L12 Digital Transformation
The document discusses the evolution of communication and business models from the 20th to the 21st century, highlighting the impact of digital transformation and technology on industries like broadcasting, retail, and music. It describes the shift from hierarchical structures to networked systems, emphasizing low coordination costs and the emergence of new business models like sharing economies. The narrative includes examples such as Airbnb and Uber, showcasing how traditional industries face disruption from digital platforms and changing consumer behavior.
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L12 Digital Transformation
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- 3. Media in the20th Century Print Radio TV CD/DVDs 1900 2000 Analog, Broadcast, One-2-many, copies to sell
- 4. Consumerism in the20th Century You need help, here is a product for you
- 5. Communication in the20th Century Phone call Postal Letter Talk with Clerk Analog, slow and expensive - coordination cost is high 1900 2000
- 6. Travelling in the20th Century How would you organise a vacation at a beach resort in the Mediterranean in 1971? How many people would need to become involved?
- 7. Coordination To solve coordination,hierarchical structures must be formed Corporate structure with layers of middle managers Coordination cost is high and involves many people Getting things done is expensive and slow Hierarchy
- 8. Fifth Technological Revolution starts Intel1971 The Technology Trigger 1971
- 9. PDP-8 Computer from DECin March 1965 Cost 18.500 USD 50.000 machines sold 12 bit architecture 32K memory 0,5 MIPS MIPS: millions instruction per second iPhone 6 Smartphone from September 2015 Cost $649 Sold 10 million phones in 3 days 64 bit architecture 128GB “capacity” 25.000 MIPS
- 10. 2000 2010 iMac iPhone iMacG3 Mac OS 9.0.4 500 MHz PowerPC G3 CPU, 128MB Memory Screen - 786K pixels Storage - 30GB Hard Drive iPhone 4 iOS 4.0 1 Ghz ARM A4 CPU, 512MB Memory Screen - 614K pixels Storage - 32GB Flash Drive MOORE’S LAW
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- 13. INTERNET – 3BILLION PEOPLE + 3 BILLION COMING ONLINE
- 14. SOFTWARE AND DATA ARE IN THE CLOUD
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- 18. Clay Shirky: Institutionsvs. collaboration TED Talk 2005
- 20. Coordination Cost All ofthe financial cost and institutional difficulties arranging group output Form an institution - get resources together 1. Management Problem 2. Structure - economic, legal, physical etc. 3. Inherently exclusionary 4. Professional class
- 21. Solving the CoordinationCost Cost of communication is now basically zero and universal Put the cooperation into the infrastructure Design a system that coordinates the output of the system as a byproduct of operating the system with out regard to institutional models
- 22. New Solutions New solutionsget built on the Internet infrastructure Napster in 1999 Music Industry goes crazy
- 23. New Solutions New solutionsget built on the Internet infrastructure BitTorrent in 2001 Music Industry goes even more crazy
- 24. New Solutions New solutionsget built on the Internet infrastructure Youtube 2005 Content creators go crazy
- 29. Monty Payton goesto War
- 32. YouTube Monty Python Videos Boost DVD Sales 23,000%
- 34. Airbnb Airbnb is biggerthan Hilton Has more than 2 millions listing Does not own any rooms or apartments
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- 37. Uber Uber has 327,000active drivers in the US 40 millions rides per month globally Don’t own a single car
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- 39. THE TRANSFORMATION DECADE 20102020 BUSINESS MODELS OF THE 20TH CENTURY BUSINESS MODELS OF THE 21TH CENTURY
- 40. HIERARCHAL NETWORK 20th Century21th Century
- 41. THE DIGITAL DECADE THECONTENT ESCAPES THE FORM INTERNET DISRUPTION BEGINS 1900 2000 From hierarchical structure to networks From broadcasting to streaming - long tail From Read-only culture to read-write culture The Move to Networks THE TRANSFORMATION DECADE BUSINESS MODELS CHANGE SMARTPHONES REAL TIME SOFTWARE CLOUD AND AI 2010
- 42. 2010 2020 Defined IndustryBoundaries Single-purpose Products Producers and Consumers Buying Economy Hierarchical Structure Platforms, ecosystems Connected Smart Products User as producer, co-creation Sharing economy Network Structure The Transformation Decade Broadcasting Streaming Gatekeepers Algorithms 2010 2020
- 43. What is happeningto traditional businesses is that they are getting challenged by digital real-time software base network companies It the transformation of old established physical way of doing business into new ways that are optimized around real-time software systems This is called Digital Transformation Digital Transformation
- 44. Software is becomingthe change agent of all business If the internet has not disrupted a business, it will Traditional industries like retail, shipping, banking, insurance, law firms, health and the list goes on… Digital Transformation
- 45. Any business thatis built around a hierarchy with high coordination cost, will be crushed by a networked software solution with low coordination cost
- 46. Finance Healthcare Retail TransportationEducation ? Any industry
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- 48. CAN BANKS SURVIVE20% DROP IN REVENUES
- 49. Traditional Banking Highly establishedand structured organisations Conservative and secretive Slow and expensive Not very transparent with endless “hidden fees”
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- 53. The evidence suggestsits just a matter of time
- 54. Sales at USretail stores on Black Friday fell to $10.4 billion this year, down from $11.6 billion in 2014 Source: ShopperTrak image: Huffington Post Canada
- 55. On-line sales aregrowing Source: BI Intelligence
- 56. IBM said spendingwas up 17.8% from Cyber Monday 2014, and more customers than ever opted to browse deals on their mobile devices.
- 57. According to Amazon’sholiday period stats, there were 10 times as many same-day deliveries this year in comparison to two years ago.
- 58. And delivery servicesare exploding…
- 59. “Retail guys aregoing to go out of business and ecommerce will become the place everyone buys. You are not going to have a choice. We’re still pre-death of retail, and we’re already seeing a huge wave of growth. The best in class are going to get better and better. We view this as a long term opportunity.” — Mark Andreessen
- 60. Retail is fundamentallyimplausible economic structure You combine the fixed cost of real estate with inventory Every retailer is put in a highly leveraged position Few can survive a decline of 20 to 30 percent in revenues There is fundamentally a better model
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- 63. A) People thatjust steals, they will never pay B) People that want to try before buy - if they like they pay C) People that want something but it is not available D) Copyright laws don’t apply anymore - its not piracy Reasons for Piracy
- 65. Content Creation inthe 20th Century Image from Jyrki J.J. Kasvi
- 66. Image from JyrkiJ.J. Kasvi Content Creation in the 21st Century
- 67. Can this delivery methodcompete?
- 68. Subscription to vastrepository of music Very accessible and relevant Music Subscription
- 69. In the LP/CDera, the industry was based in scarcity model of economics Only few artists became popstarts - professionalised and limited Today, consumers don’t want to pay as much as they did for music Add to that, the fact that anybody can be a musician and be on Soundcloud or Spotify World of Music
- 72. “Every industry thatbecomes digital becomes free” - Chris Anderson, Editor WIRED Freeconomics
- 73. The Economy ofthe Free Source: Free! Why $0.00 Is the Future of Business Subsidising Products is well known Cross-subsidy Now, a different sort of free has emerged The new model is based on the fact that the cost of products themselves is falling fast
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- 76. A Taxonomy ofFree "Freemium" What's free: Web software and services, some content Free to whom: users of the basic version Subscription model of media Varying tiers of content, from free to expensive, or a premium "pro" version The 1% Rule - 1% of a community does all the work F2P in the video games industry
- 77. A Taxonomy ofFree Advertising What's free: content, services, software, and more Free to whom: everyone Examples Yahoo's pay-per-pageview banners Google's pay-per-click text ads, Amazon's pay-per-transaction "affiliate ads" Paid inclusion in search results Paid listing in information services Lead generation
- 79. A Taxonomy ofFree Cross-subsidies What's free: any product that entices you to pay for something else Free to whom: everyone willing to pay eventually, one way or another Examples Give the music, sell concerts
- 80. A Taxonomy ofFree Zero marginal cost What's free: things that can be distributed without an appreciable cost to anyone Free to whom: everyone Examples On-line music Digital reproduction and peer-to-peer distribution, the real cost of distributing music has truly hit bottom
- 81. A Taxonomy ofFree Labor exchange What's free: Web sites and services Free to whom: all users, since the act of using these sites and services actually creates something of value Examples Free porn if you solve a few captchas Rating stories on Digg, voting on Yahoo Answers, or using Google's 411 service
- 82. A Taxonomy ofFree Gift economy What's free: the whole enchilada, be it open source software or user-generated content Free to whom: everyone Examples Wikipedia Zero-cost distribution has turned sharing into an industry
- 83. Economy of Abundance Traditionalproducts exist in the economy of scarcity When the cost of copying and distributing becomes close to nothing, the economy shifts You can’t sell copies – their worthless It’s not only about money - time and respect are also important So is your digital footprint
- 84. You can’t sell copiesthey’reworthless
- 85. 25 Videostores, DVD, late fees,clutter Everything, anywhere, anytime (almost) BEFORE NOW CHANGE IN CONSUMER BEHAVIOR
- 86. Printed books, magazines Digital,automatically delivered, interactive BEFORE NOW CHANGE IN CONSUMER BEHAVIOUR
- 87. Own, store, clutterRent, subscribe, stream OWNERLESS LIFESTYLE BEFOE NOW
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- 90. What can you sell?andmake money?
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- 99. How can you marketyourProducts?
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- 101. TRADITIONAL PRODUCTION OFCONTENT "1984"
- 102. TRADITIONAL PRODUCTION OFCONTENT
- 103. TRADITIONAL PRODUCTION OFCONTENT Benchmark: Production budget: $900,000 Audience: ~ 50,000,000
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- 105. USER GENERATED PRODUCTIONOF CONTENT
- 106. USER GENERATED PRODUCTIONOF CONTENT Benchmark: Production budget: $0 Audience: 814,105,854
- 108. Use the mediumpeople use From marketing to conversation
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- 111. Marketing becomes areal-time improvisation
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- 114. Discoverability Online web sitesand product reviews Social media, Facebook, Pinterest, Twitter etc Youtube, Vimeo etc Buying Buying online Show rooming and buying online Buying in-store has to be an experience - shareable Rating Social media, Facebook, Pinterest, Twitter etc If it is not shareable, it did not happen Use the medium people use
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- 119. The YouTube videowas posted on July 6, 2009 It amassed 150,000 views within one day, prompting United to contact Carroll saying it hoped to right the wrong 13.3 million by September 2013 http://en.wikipedia.org/wiki/United_Breaks_Guitars
- 120. Within 4 daysof the video being posted online, United Airlines' stock price fell 10%, costing stockholders about $180 million in value
- 122. STARBUCKS KNOWS THECONVERSATION
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- 129. NEXT Rise of themachine Assignment 2 Draft