Introduction to Connected Strategy

Deconstructing Your Connected Strategy

Professor Nicolaj Siggelkow, Phd

What Does Technology Need to Accomplish?

Physical transmission of bits

What Does Technology Need to Accomplish?
What Does Technology Need to Accomplish?
What Does Technology Need to Accomplish?
What Does Technology Need to Accomplish?
What Does Technology Need to Accomplish?

Functions
Functions

• What functions do we need to accomplish when it comes to:

• Recognize
• Request
• Respond
• Repeat
• Connection architecture
• Revenue model
4 Elements

• Identify subfunctions
• Sense
• Transmit
• Analyze
• React
Connected Strategy
Introduction to Connected Strategy
Classification Trees and Selection Tables

Professor Nicolaj Siggelkow, Phd

Classification Tree
Selection Table

++ = very good; + = good, - = poor; -- = very poor; ? = unknown

Introduction to Connected Strategy
Bottom-up Innovation

Professor Nicolaj Siggelkow, Phd

Connected Strategy
Sensing Technologies

• Sensors
• Gesture and voice interfaces
• Conversational platforms
• Augmented and virtual reality
Transmitting Technologies

• High-speed internet in homes and offices

• Smartphones
• Network slicing with 5G
• Bluetooth low energy
• Lifi - wireless communication using light
• LoRa - wireless communication over ranges up to 10km using low power
consumption
• Blockchain - improves trust of transaction over networks
Analyzing Technologies

• Rapid decrease in cost of computing

• Rapid decrease in cost of data storage
• Worldwide cloud computing
Analyzing Technologies

• Rapid decrease in cost of computing

• Rapid decrease in cost of data storage
• Worldwide cloud computing
• Machine-learning and deep-learning algorithms
• Quantum computing
Analyzing Technologies

• Rapid decrease in cost of computing

• Rapid decrease in cost of data storage
• Worldwide cloud computing
Connected Strategy
Connected Strategy
Connected Strategy
Connected Strategy
Connected Strategy
Connected Strategy
Introduction to Connected Strategy
Why Talk About Disruption

Professor Christian Terwiesch, Phd

What is disruptive innovation?
Disruption
 Survival Study

Source: Stangler and Arbesman,

The Kauffman Foundation
(2012)
What is an Innovation?
What is an Innovation?

• A novel match between a solution and a need

Disruptive Innovation

• Dimension of merit – the key user need that matters to the customer
Disruptive Innovation
Disruptive Innovation

• Dimension of merit – the key user need that matters to the customer
• Incremental innovation – an improvement along a dimension of merit
Disruptive Innovation

• Dimension of merit – the key user need that matters to the customer
• Incremental innovation – an improvement along a dimension of merit
Disruptive Innovation

• Dimension of merit – the key user need that matters to the customer
• Incremental innovation – an improvement along a dimension of merit
• Radical innovation – a major improvement along a dimension of merit
Disruptive Innovation

• Top disruptive innovations

• Mobility
• Uber valued at $50-$70 billion
• Hotel industry
• Airbnb valued ~$30 billion
• Photographic industry
• Kodak has a history of over 100 years and was worth $30 billion
Introduction to Connected Strategy
The Case of Imaging

Professor Christian Terwiesch, Phd

The Case of Imaging
The Case of Imaging
The Case of Imaging
The Case of Imaging
The Case of Imaging
The Case of Imaging

Dimension of merit for a

camera: the ability to take
good, sharp, high-quality
photos
The Case of Imaging
The Case of Imaging
The Case of Imaging
The Case of Imaging

• Component innovation – a very specific component was changed and

improved (Tushman and Henderson)
The Case of Imaging
The Case of Imaging
The Case of Imaging
The Case of Imaging
The Case of Imaging
The Case of Imaging

• Apple QuickTake 100

• Apple licensed the technology
• From Kodak
• Kodak did not want to be associated
with digital imaging
The Case of Imaging

• Disruptive innovation
• Not getting beaten by something better
• The emergence of something different
The Case of Imaging

• Disruptive innovation – a shift in the dimension of merit, often associated

with lower prices that can lead to the emergence of new markets and
applications
Introduction to Connected Strategy
The Innovator’s Dilemma

Professor Christian Terwiesch, Phd

The Innovators’ Dilemma
The Innovators’ Dilemma
The Innovators’ Dilemma
The Innovators’ Dilemma
The Innovators’ Dilemma
The Innovators’ Dilemma
The Innovators’ Dilemma
The Innovators’ Dilemma
The Innovators’ Dilemma

Film Digital

Margins >50% ~20%

The Innovators’ Dilemma

Film Digital

Margins >50% ~20%

Market size Large + growing Small + uncertain

The Innovators’ Dilemma

Film Digital

Margins >50% ~20%

Market size Large + growing Small + uncertain

Consumer Great pictures Pixelates

preference
The Innovators’ Dilemma

Film Digital

Margins >50% ~20%

Market size Large + growing Small + uncertain

Consumer Great pictures Pixelates

preference
Leverages exiting New business
Strategic fit competence model
The Innovators’ Dilemma
The Innovators’ Dilemma

• Two parts
• Why do firms succeed?
• They listen responsively to their customers and develop their next-
generation products
• Why do firms fail?
• They listen responsively to their customer and develop their next-
generation products
The Innovators’ Dilemma
Introduction to Connected Strategy
Connectivity and Disruption

Professor Christian Terwiesch, Phd

Connectivity and Disruption

• Encyclopedia Britannica
• Launched in 1768
• 32 volumes and 32,640 pages
• In its 15th edition (last one published in 2010
• 19 editors, >50 writers/employees
• Sold by a large and effective salesforce
• What caused that decline?
Connectivity and Disruption

• Competence-enhancing innovation – one that leverages the existing skills

and knowledge of an organization
• Builds on and extend competences
Connectivity and Disruption

• Competence-destroying innovation – one that destroys the existing skills

and knowledge of an organization, or makes them irrelevant
• Architectural innovation – revolution in industry structure is when
incumbents suffer and are not able to adapt
Connectivity and Disruption

• Hyatt hotels
• $4 billion in revenue annually
• 10 million guest per year
• ~100,000 employees
• Started in 1957, now has 679 properties
• $7billion in assets
Connectivity and Disruption

• Airbnb
• 3 million properties
• 80% annual growth
• 100 million users
Connectivity and Disruption

• Airbnb
• 3 million properties
• 80% annual growth
• 100 million users
Connectivity and Disruption

Hyatt vs. Airbnb Britannica vs Wikipedia

New markets were created

with different delivery models
Connectivity and Disruption

Hyatt vs. Airbnb Britannica vs Wikipedia

Connectivity and Disruption

Hyatt vs. Airbnb Britannica vs Wikipedia

Connected producer to
crowd orchestrator
Connectivity and Disruption

Hyatt vs. Airbnb Britannica vs Wikipedia

Connected producer to Connected producer to

crowd orchestrator P2P network
Connectivity and Disruption

Hyatt vs. Airbnb Britannica vs Wikipedia

Connected producer to Connected producer to

crowd orchestrator P2P network

Price-per-night to
referral model
Connectivity and Disruption

Hyatt vs. Airbnb Britannica vs Wikipedia

Connected producer to Connected producer to

crowd orchestrator P2P network

Price-per-night to Selling books to crowd

referral model sourcing
Introduction to Connected Strategy
Conclusion

Professor Christian Terwiesch and Professor Nicolaj Siggelkow

Conclusion

• Connected strategies are not all about Automatic Execution

• Customer want help in making better decisions; not necessarily someone
who makes decision for them
Conclusion

• Connected strategies fundamentally rely on trust

• Trust can be easily lost, so treat your customers’ data very carefully and
use it responsibly
Conclusion

• Connected strategies are business-model innovations

• They require not only new technologies but also operational and
organizational changes
Conclusion

• Connected strategies allow firms to both increase the customers

willingness-to-pay and reduce costs
• Connected strategies are truly disruptive