Digital Technologies | ISYS1021

ISYS 1021: Final Exam Study Guide

Exam Format

This exam is worth 100 points and accounts for 30% of your final grade.

The final exam will take place on Thursday December 16th at 4pm in Fulton 511. The final is 90
minutes (1.5 hours) in length. This is an individual closed-book, closed-notes exam.

The final is cumulative. All material in the assigned readings will be fair game, but most (not all)
questions will focus primarily on the material emphasized in lectures.

Types of questions include:

True/False or Multiple Choices
Fill in the blank and short answer questions

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 Technology & Strategy Topic Sheet for Final Exam

1. Setting the Stage: Technology and the Modern Enterprise

- Initial Public Offering – the process by which a private company can go public by sale of its
stocks to general public. It could be a new, young company or an old company which decides to
be listed on an exchange and hence goes public.
- Recognize the extent to which technology has catalyzed major changes for business and society,
for better and for worse (and to what extent remains to be seen).
• Society has become increasingly dependent on Internet technology for virtually all
aspects of communication and handling information, opening new frontiers for
collaboration and knowledge. We have used technology to tackle problems that once
seemed impossible to solve. Yet it introduced an unprecedented amount of security
and privacy risks. Cheaper technology has resulted in opening computing and
telecommunications to billions of people in ways that open entire new market
opportunities.
- Name 1—2 specific developments/trends in the past decade have helped to lower barriers to entry
for tech entrepreneurs?

2. Strategy and Technology: Concepts and Frameworks for Achieving Success

- Value Chain: Set of integrated activities that bring a product or service to market
- Vertical Integration: When a single firm owns several layers of its value chain
- Maintaining a sustainable competitive advantage
- Prevent imitation by controlling strategic (VRIN) resources
• Valuable: Does the asset yield value to the firm/customers?
• Rare: Is the asset in limited supply or difficult to acquire?
• Inimitable: Is the asset impossible / hard to imitate?
• Non-Substitutable: Is the asset without comparable substitutes?
- DWDM
• Dense Wavelength Division Multiplexing
• A technology that increases the transmission capacity (and hence speed) of fiber-optic
cable
• example of perils of relying on technology as a resource
• back in the day, when .com bubble was happening, a lot of companies
invested in optical cables, but when DWDM came about, the optical cables
became less valuable and rare
• optical cables didn't pass VRIN, and as a result it set up a lot of companies to
fail
- Key strategic resources
• Imitation resistant value chain organization – a way of doing business that
competitors struggle to replicate and that frequently involves technology in a key
enabling role
• Brand
• Scale

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 • Data – differentiation and switching costs
• Network effects
• Distribution channels
• Patents (Arrow’s disclosure paradox)
- Strategy Terminology
• Sustainable Competitive Advantage: Financial performance that consistently
outperforms their industry peers. The goal is easy to state, but hard to achieve.
• Economies of scale: when a firm can spread costs across increasing units of
production. Example: Netflix incurs a cost of $300 million for 25 million
subscribers while Blockbuster incurs the same cost for 1.3 million subscribers
• Scale Advantages: advantages related to size.
• Operational Effectiveness: performing the same tasks better than rivals perform them
same activities (and resources) done better (Fedex v. UPS) Strategic positioning:
where you perform same tasks in a different way or perform tasks differently, operational
effectiveness is performing same tasks but just better different activities (and resources)
(Netflix, Zara)
• Straddling: When a firm adopts more than one method of doing business (occupies
more than one position) yet fails to gain the full advantages of any of these efforts.
• Six ways in which switching costs allow companies to hold onto their customers
despite strong market competition: 1) learning costs, 2) information & data, 3)
financial commitment,4) contractual commitment, 5) search costs, 6) loyalty
programs. (should be able to come up with at least 4 of these)
- Porter’s Five Forces
• Price transparency – the degree to which complete information is available
• Information asymmetry – When one or more party has more or better information
than its counterparty
• -The rivalry among existing competitors
-The threat of potential new entrants
-The threat of substitute and complementary products
-The power of suppliers
-The power of buyers
Categorize all forces into high or low, or strong or weak

3. Fresh Direct
- Product-market fit – the degree to which a product or service satisfies the demands of the market
(Fresh Direct started in Manhattan, where there is high demand for grocery deliveries due to high
traffic and stuff)
- Inventory turns – Number of times inventory is sold or used during a given period, higher figure
means company is selling products more quickly (Fresh Direct had fresher food due to their high
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 inventory turns)
- Brand, data, switching costs – Fresh Direct co-brand their products with suppliers, share their data
with suppliers to establish and strengthen supplier brand
- Straddling - When a firm attempts to adopts more than one method of doing business, or occupies
more than one position, yet fails to gain the full advantages of any of these efforts (Traditional
grocers can’t copy Fresh Direct’s delivery business because it would leave them straddling)

4. Zara: Fast Fashion from Savvy Systems

- Contract Manufacturing – outsourcing production to third-party firms (these overseas
manufacturers, that manufacture for companies such as GAP, require hefty lead times, so these
companies have to guess what customers want months in advance, unlike Zara, due to their “in-
house manufacturing, can distribute inventory to stores every two weeks)
- Vertical Integration – a single firm controls the entire process of a product, from raw materials to
distribution (Zara’s vertical integration allowed them to reduce lead time and change up their
designs whenever they need to)
- Value chain – ZARA has a inimitable value chain because of things like their vertical integration,
in-house manufacturing, lower writeoffs, etc (other companies have to COMPLETELY rebuild a
their business to get to be like ZARA)
- Inventory – ZARA has fewer markdowns and sales, 85% of ZARA inventory sold at full price
- Data-driven decision making – use PDAs, Point of Sales, and RFID tags (
- Personal digital assistants (PDAs) – hand held, iOS devices, tells you what customers want to see in
stores
- Stock keeping unit (SKU) – ZARA has many SKUS due to their inhouse manufacturing and low
lead times
- Radio frequency identification (RFID) – lets ZARA know where products are, so if customers ask
for like different size of shirt, employees can immediately let you know if its in stock, in store, or
can be ordered online
- Point-of-sale (POS) systems – cash register linked to inventory systems, tells you what customers
bought and what they didn’t
- Pure play - a company that focuses exclusively on a particular product or service in order to obtain
a large market share, such as a company that operates only on the internet, but ZARA uses an
omnichannel (An approach to retail that offers consumers an integrated and complementary
- set of shop, sales, and return experiences) approach effectively to get more orders/sales and give a
better customer experience
- Questions and Exercises:
- What are the five components that make up an information system (IS)?
• hardware, software, data, procedures, and the people who interact with and are impacted
by the system
- Understand the basics of Zara’s operations and be able to provide a few specific examples of
sources of competitive advantage
• Zara’s vertical integration chain, data driven decision making, in-house manufacturing
- Summarize Zara’s strategic approaches to defying fashion industry conventions and developing an
imitation-resistant value chain.
• They use an Omnichannel approach for their “Service”, don’t use contract
manufacturing in their “Operations” and for when designing clothes, they use data

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 driven decision making, and due to this they are able to ship new inventory every two
weeks for “Outbound Logistics” (way faster than rivals, due to vertical integration),
- Apply the value chain model to Zara’s case
• Look at Above
- How does marketing differ at Zara relative to that of other large fashion companies?
• They have lower marketing expenses as they have lower markdown prices, since they
mostly sell all of their inventory
- How are design decisions typically made at Zara?
• They use data that they pull from customers
- What are the differences between a push and a pull model?
• marketing involves pushing your brand in front of audiences (usually with paid
advertising or promotions). Pull marketing on the other hand means implementing a
strategy that naturally draws consumer interest in your brand or products. ZARA is pull
- Explain Zara’s Data-Driven Decision Making process.
• Using the data from POS and PDA, they were able to design clothes that customers
wanted (they aren't guessing like GAP), the data helps them design clothes that
customers actually want
- What are the benefits for Zara to have limited production runs?
• They are able to have low markdowns as they have lower stock and can sell all of it
- How does Zara incentivize employees to use in-store technology?
• The company ties compensation to sales (70%), so if employees use these systems they
get more money
- What are the limitations of Zara’s Spain-centric, just-in-time manufacturing model?
• ZARA will be heavily affected by any disruption to the Spain region, as they distribute
inventory every two weeks from here, such as natural disasters, terrorism, etc.
Additionally, ZARA will be negatively affected during periods when the Euro
strengthens relative to the U.S. Dollar, which would raise ZARA’s costs compared to
competitors. There are also rising transportation costs in the area which are a concern
for ZARA.

5. Netflix: Sustaining Leadership in an Epic Shift from Atoms to Bits

- Collaborative Filtering and recommendation systems – technology that monitors trends among
customers and uses this to personalize a given customer’s experience (Netflix was able to provide a
better customer experience by using data to predict what customer wants)
- First Sale Doctrine: Firms can distribute (sale, rent, lend) legally acquired physical products of
trademarked or copyright goods. Does not apply to streaming! (so it was easier for Netflix to get a
bigger variety of content to its users in their app) Netflix controls DVDs that it buys but needs to
negotiate rights to stream.
- Netflix response to supplier (studio) power:
• Original content/exclusives (guided by customer data)
• Long enough tail – Netflix is actively curating its service rather than just carrying as
many titles as they can (long tail - businesses that can profitably offer a great volume of
less popular products)

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 • There is a lot of scale here as well - more customers, more content (more money to create
exclusives)
- Marginal costs of digital products – pricing strategies – cost associated with producing one
additional product or service, Digital goods have no marginal cost, but only for content owners
- Bandwidth caps – a limit imposed by ISPs (like Cable or Telephone company) on the total amount
of traffic that a given customer/subscriber can consume (higher fees for faster, direct
communication)
- Atoms to bits – We are going from “physical” goods (made from atoms such as Newspapers or
CDs) to “digital” goods (made from bits such as LinkedIn for Newspaper job listing and
Spotify/Apple Music instead of CDs), and this is realigning nearly every media industry
- Brick and mortar store - Brick and mortar refers to a physical presence of an organization or
business in a building or other structure, Netflix doesn’t need it?
- Economies of scale - when a firm can spread costs across increasing units of production, Netflix
had a large userbase over which they could spread the costs of their distribution centers
- Initial public stock offering (IPO) - the process by which a private company can go public by sale
of its stocks to general public. It could be a new, young company or an old company which decides
to be listed on an exchange and hence goes public.
- Windowing - content is available to a given distribution channel for a specified period of
- time (window), Netflix doesn’t own most of its content, cost to license
Questions and Exercises:
- Describe basics of the two separate Netflix business models: DVD-by-mail and digital streaming
 Mailed DVDs to people, use Brand, Scale, and Data to gain competitive advantage, and had a
strong economy of scale by spreading its distribution center costs over its large userbase
- What downsides might a firm experience from “going public” early?
 Once public, a firm has to disclose its financial position, so if there is a huge growth trajectory,
other firms will try to copy/follow it (happened with Stage 1 DVD company Netflix)
- Understanding how Netflix sustained competitive advantage and won the DVD-by-mail business is a
useful example of effective tech-enabled strategy. Know the three critical (and mutually reinforcing)
resources that DVD-by-mail rivals failed to imitate: brand, scale, and a data asset
 Brand – brand is built through customer experience, Netflix initially had brand through
delivering DVDs, now have the brand of large streaming company
 Scale – Netflix has a strong economy of scale, Netflix had a large userbase over which they
could spread the costs of their distribution centers
 Data/Switching Costs – collaborative filtering, Netflix used (technology that monitors trends
among customers and uses this to personalize a given customer’s experience) this to get data on
customers to create the best customer experience possible
- How did Netflix build brand strength? How is brand strength built in general?
 Netflix had the best customer experience (ranked number one), which helped them build brand
strength. In general, brand strength is built through customer experience.
- How does the “long tail” concept relate to Netflix’s ability to offer the customer a huge selection of
movies (DVDs)?
 Netflix offered a huge selection of unique DVD titles. 75% of DVDs shipped by Netflix were
back-catalog titles, whereas 70% of Blockbuster rentals came from new releases. A traditional
video store had only about 3,000 titles on its shelves, whereas Netflix offered about 125,000
titles And customers saw the advantage in having choice.
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- What role did economies of scale play in Netflix’s strategies in the DVD-by-mail model? How did
these scale economies pose an entry barrier to potential competitors?
- How does streaming potentially strengthen the Netflix data asset (relative to data collection with the
DVD-by-mail business)?
 More data can be gathered on the internet in relation to things like which titles to display on the
home screen of a user’s streaming account and related
- What are the various key issues and challenges facing the video streaming models?
 There are legal issues based on content by country (French law requires a wait time of three
years after film release before it can be streamed online), Licensing issues limit available content
that can be provided to customers.
- What are some popular pricing models adopted by streaming service providers?
 Single Monthly Subscription Fee (Netflix), pay-per-view, commercially supported (but free)
content, and subscription for additional premium offerings (Google, Amazon, Hulu)
6. Moore’s Law: Fast, Cheap Computing and What This Means for the Manager
- Define Moore’s Law. To what industry does it apply?
 The phenomenon of “faster, cheaper” computing (Chip performance per dollar doubles every
eighteen months), it applies to the semiconductor industry
- Price Elasticity. Are tech products typically price elastic?
 Price Elasticity - how quantity demand fluctuating with change in price
 Price Inelastic - things that demand won’t change on price, such as getting heart surgery
 Price Elastic - if price changes, it can open new markets (many/most digital goods are
elastic)
- Describe one main implication of Moore’s Law for managers (not just managers at computing
firms)
 Moore’s Law makes possible the once impossible. And as a manager, you have to
predict the future. But managers are often blindsided by unanticipated rate and
disruptive capabilities of technology change.
- What are a few ways that Moore’s Law has impacted developing economies?
 It opens up newer markets for cheap cell phones, allowing more people in developing
economies have cell phones and digital communication
- Moore's Law: chip performance per dollar doubles every eighteen months. Think twice as fast, or
storing twice as much info. (Applies to the semiconductor industry / transistors)
- Moore’s Law over the years: We can build a computer that does something useful; a large business
or university can have one; any business can have one; everyone has one; everyone can carry one
around with them; things can have their own computers.
- Similar improvements in cost per performance: Optical Fiber – new material that increased chip
performance way more than the “every 18 months it doubles” Law; Data storage – some are
experimenting by crafting computing components using biological material (think a DNA-based
storage device.
- Triple Threat to Moore's Law: size (limit to how small you can make chip), heat (if you cram too
many things in a small space you can't control the heat), power (you need a lot of power to cool
down the chips, and this power can be costly)
- Moore’s Law Terminology

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  Semiconductor - in a business context refers to ‘computer chips’ (e.g. the semiconductor
industry is the chip business)

 microprocessor - the calculating brain of a computer. Intel dominates this market in PCs,
ARM (licensed) dominates smart phones

 volatile memory - requires a charge to hold its value (e.g. the RAM in your PC, which loses
data when the power is cut)

 non-volatile memory - retains value even when not charged (e.g. the flash memory in your
camera)

 solid state - electronics without moving parts (e.g. ‘chips’)

7. Disruptive Technologies
- Key Characteristics of Disruptive Technologies
• Come to market with a set of performance attributes not initially valued by existing customers
• Performance attributes that customers do value improve to the point where the new tech invades
the established market
- Examples: ARM, Blockchain – right now (not many people see it as a serious thing), Kodak –
(Kodak Film Cameras) company had tech for digital cameras, but at the time nobody valued (thus
didn’t want) digital cameras, Apple Music
- Bitcoin – solves the problem of double spending, an open-source decentralized payment system that
operates in a peer-to-peer environment, without bank or central authority. Cryptocurrencies - a
digital asset where a secure form of mathematics is used to handle transactions, control the creation
of additional units, and verify the transfer of assets, take advantage of blockchain technology, all
cryptocurrencies will involve blockchain, Blockchain – a distributed and decentralized ledger that
verifies transactions and ownership, making it difficult to tamper with or shut down, underlying
technology of Bitcoin, may or may not involve cryptocurrencies
 Wallet – no one can transfer the asset (bitcoin) without a special password (private key),
which is often stored referred to as a wallet, Ethereum - , mine – miners donate their
computer power in exchange for the opportunity to earn additional tokens in
cryptocurrency, awarded to the quickest miner (“solving a puzzle”)
- Mitigating the risk of disruptive technologies
• Identify technologies - external and internal conversations
• Managing an Option Portfolio of Innovations of emerging technologies, investing in firms,
startups, etc so it has the “right”, not obligation, to make an investment, can invest more
resources in more promising technologies/firms

8. Amazon

- Three pillars driving growth:

 Customer Experience (convenience) – fuels a strong brand that makes Amazon the first place
for most people to shop online
 Selection – have lots of selection (through things like getting more third-party sellers) which
also leads to Amazon getting more customers
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  Low Prices – larger customer base allows Amazon to vertically integrate and keeping costs
down while speeding delivery
- Negative Cash Conversion Cycle (CCC)
• Collects $ from customers before paying suppliers.
• 33 day shelf life at Amazon v. 70 day shelf life at Brick and Mortar store. (don’t need to
know exact numbers)
• Shorter shelf life because separate inventories don’t need to be forecast and maintained for
each store. A few large fulfillment centers can ship anywhere.
- Long Tail
 A firm makes money by selling small quantities of many less popular products. Huge
selection. Hard to do in “brick and mortar” store because of shelf space limitations.
 A/B testing – A randomized group of experiments used to collect data and compare performance
among two options studied (A/B) Amazon is able to gather so much more data than competitors
(due to such a large customer base)
 Amazon Warehouse v. Walmart Warehouse – doesn’t put similar items together
 Low cost of adding a new digital product (ebook, etc.) – digital goods have low/mow
marginal cost
 Dynamic pricing – pricing that shifts over time, usually based on conditions that change
demand (Amazon monitors the availability of products at competitor websites and using
stockouts as an opportunity to charge and earn more)
 Affiliate marketing program – a practice where a firm rewards partners who bring in new
business, Amazon has the biggest program of this, allows others to market for them

9. Platforms, Network Effects, and Competing in a Winner-Take-All World

- Network Effects (also known as Metcalfe’s Law or network externalities)
- The value derived from network effects comes primarily from what three sources?
 Exchange opportunities – Ebay, (buyers and sellers exchange assets/products, more people
join Ebay to “exchange”
 Staying power – users don’t want to buy a product or sign up for a service that’s likely to go
away, fear of being stranded with unsupported service
 Complementary benefits
- Provide or recognize an example of a tech-enabled product or service characterized by network
effects
 eBay
 What are platforms? How do they support value creation from complementary benefits?
• Allow for the integration of third-party software products and other
complementary goods. They allow Nike + iPod/iPhone things, where you get
additional benefits through your phone with the technology from Nike, so they
“complement” each other
- APIs - Programming hooks, or guidelines, published by firms that tell other programs how to get a
service to perform a task such as send or receive data (firms do this often for platforms)
Application Programming Interface
- How does competition in markets with network effects differ from competition in conventional
markets?
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  Network markets experience early, fierce competition, and once a leader becomes clear,
bandwagons form and new adopters mainly prefer the leader. These markets are winner
take all, exhibiting monopolistic tendencies, where one firm dominates all rivals.
- Monopoly and Oligopoly
 Monopoly – a market where there are many buyers but only one dominant seller
 Oligopoly – a market dominated by a small number of powerful sellers
- Congestion effect – when increasing the number of users lowers the value of a product or service,
usually due to over-consumption of a finite resource (too many users on a serve causes server to be
slow or crash, as what happened with Sim City (people couldn’t join server at all)
- Explain why markets governed by network effects might be described as “winner-take-all”.
 Once a leader becomes clear in a network effects market, new adopters overwhelmingly
prefer the leader, thus the winner takes all.
- What are some specific strategies that may be useful for firms competing in markets characterized
by network effects? There are twelve strategies outlined in 8.5. You do not need to memorize them
- Move early
• Subsidize product adoption
• Leverage viral promotion
- Network effects and Innovation: Lowers competition against an established standard. Decrease the
number of innovative offerings (competition) that compete against a strongly established standard,
but it increases innovation within the standard
- Characteristics of markets with network effects:
• Strong: more extreme profit/mkt shre, high prices, earlier competition (high
subsidies, low royalties at first)
- Strategies for Competing in Network Markets
• Move early
• Subsidize product adoption
• Leverage viral promotion
• Redefine the market or leverage convergence
• Alliances and partnerships
• Distribution channels
• Seed the market with complements
• Encourage the development of complimentary goods
• Maintain backward compatibility
• Rivals: be compatible with larger networks
• Incumbents: consistently innovate to create a moving target
• Large, well-known followers: Preannouncements!

10. Social Media (10.5 and 10.8)

- Rise of microblogging – you don’t need to tweet to get value, you can follow updates without
having to “request”
- Twitter API - make its data available via an API, and this helped the firm grow a rich ecosystem
of Twitter-supporting products and services
- IFTTT – If This Then That, a program that combines two services so that when something
changes in one service, it would trigger an action on another service.
- Trolls and Bots – using algorithmic filtering to flag for troll or bot behavior
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 - Social Media Awareness and Response Team - Customer conversations are happening and
employees are using social media. Even firms that aren’t planning on creating a social media
presence need to professionalize the social media function in their firm (consider this a social
media awareness and response team, or SMART).

11. Sharing Economy

- Market conditions – far greater reach and efficiency than traditional markets, not all m
- Social proof – rise of social media allowed people to trust Uber drivers or AirBnb hosts, through
reviews and stuff
- Pivot – altering a product offering, business model, or target market in hopes that the change will
lead to a viable business
- Product-market fit – the degree to which a product meets the demand of the market or area
- Examples: Airbnb, Uber
- Types of sharing economy: Shared inventory – Zipcar, has an inventory of cars that they share with
users, citizen services – Uber, Lyft, Task Rabbit, your customers are providing services to other
customers, rent assets – AirBnB, where you are renting out your assets to customers, peer finance -
Kickstarter
- Characteristics: tech powered, efficient matching supply & demand, supplier/customer pooling,
lower costs, more efficient resource use
Questions and Exercises:
What are the characteristics of the sharing economy / collaborative consumption?
 They are tech powered, are efficient at matching supply and demand, good at customer pooling,
lower costs, more efficient resource use
Recognize firms often categorized as part of the “sharing economy” or participating in “collaborative
consumption.”
 Uber, Lyft, AirBnB
What is the role of network effects in sharing economy markets?
 In order to be successful, since two-sided network effects are in place in these markets, firms
must offer value to both buyers and suppliers
What roles do trust and reputation play in the sharing/collaborative economy?
 People need to trust their uber drivers and AirBnB hosts in order for them to use this service
(thus also good reputation), but if you build up too much trust with people, they just move the
transaction of the platform (disintermediation)
What millennial travelers are looking for when deciding where to stay?
 Cheaper travel accommodations?
Describe Airbnb’s tech-enabled business model
 It charges guests a fee that varies by property and other factors that can scale from zero to 20
percent, and hosts a 3 percent fee, paid after the first night.
What are Airbnb’s strategic resources? Why they are important?
 Data is a major one, helps hosts set competitive prices and tweak them for optimal occupation,
helps guests find best match, available to be used to see trends and insights
 Switching costs, hosts can gain a reputation on Airbnb and then are less likely to move away to a
competitor business
What are the risks and challenges of running new businesses such as Airbnb and Uber? Think about
regulation etc.
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  Regulatory challenges - are Uber drivers contractors, employees, etc?
 Bias - hosts don’t wanna rent out certain places to certain groups of people
 Disintermediation - if you build up a lot/too much of trust with people, they just move the
transaction off of the platform

13. Rent the Runway

- reverse logistics business - process of implementing, controlling, and planning the cost-effective
flow of finished goods, raw materials, and in-process inventory
- MVP – minimum viable product, a smallest set of activities needed to disprove a hypothesis or a
barebones offering that allows entrepreneurs and developers to test and validate concepts and to
collect customer data
- product/market fit - SEE ABOVE
- CLV – customer lifetime value, predicted future profits that will accrue from acquired customers
- social proof - The positive influence created when someone finds out that others are doing
something.
What are the risks and challenges of running a business like Rent The Runway? What are some
potential solutions?
 One risk was that they weren’t sure whether other women would’ve been comfortable seeing
other people in their dresses they would rent. An MVP was a potential solution for this.

Rent the Runway: had hypothesis was problem (people buy so much clothing but only wear half of it, so
there was a need for rentable clothing), their MVP was wear they went to a campus, asked students
whether they would rent dresses, and 37% people said yes, so it confirmed there was a need, they also
tested whether people would be comfortable renting dresses online (sent out a PDF via email), turns out
there was a need so they got user feedback and proceeded

14. Software (14.4 and 14.5)

- distributing computing – a form of computing where systems in different locations communicate and
collaborate to complete a task
- Web services – small pieces of code that are accessed via the application server, and permit
machine-to-machine interaction over a network
- Formats
o EDI – electronic data interchange, a set of standards for exchanging messages containing
formatted data between computer applications
o XML – extensible markup language, tagging language that can be used to identify data fields
made available for use by other applications. Most APIs and Web services send messages
where the data exchanged is wrapped in identifying XML tags
o JSON – JavaScript Object Notation – a popular data interchange format, JSON is a
technology standard often used to format data when being sent or received via APIs
- Programming language - Provides the standards, syntax, statements, and instructions for writing
computer software
- IDE – Integrated Development EnvironmentAn application that includes an editor (a sort of
programmer’s word processor), debugger, and compiler, among other tools
- Compile – program code written in a language that humans can more easily understand, is then
converted into a form (expressed in patterns of ones and zeros) that can be understood and executed
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 by a microprocessor

15. Cloud (15.6 and 15.10)

- Server farms - massive network of computer servers running software to coordinate their collective
use. Server farms provide the infrastructure backbone to SaaS and hardware cloud efforts
- SaaS – software as a service, where a firm subscribes to a third-party software-replacing service that
is delivered online
- PaaS – often to referred to as utility computing, platform as a service, delivers tools so an
organization can develop, test, and deploy software in the cloud
- IaaS – often referred to as utility computing, infrastructure as a service, offers an organization a
more bare-bones set of services that are an alternative to buying its own physical hardware,
resources are instead allocated and made available over the Internet and are paid for based on the
amount of resources used
- Cloud computing - replacing computing resources—either an organization’s or an individual’s
hardware or software—with services provided over the Internet
- Questions and Exercises:
- What are the three service models for cloud computing?
o SaaS, PaaS, IaaS
- What are some of the biggest cloud computing service providers?
o Microsoft, Amazon
- What are some examples of the SaaS model?
o Amazon AWS, Microsoft Office 365
- What are the revenue models for SaaS?
o Pay for the amount of cloud computing you are using
- What are some benefits/risks of adopting SaaS (for providers and users)?
o Benefits are its cheaper (cost savings) as you don’t need to upgrade infrastructure or hire
more people to maintain more services, and its scalable, as if you need more, you can easily
ask for and get more, and for providers, it turns resources from capital spending into
profitably and innovation, but it has significant latency, as it takes time for you to get
information from cloud to your computer, and thus for example prevents you from running
games through the cloud
- What are some implications of cloud computing for small businesses?
o Lowers development time (sophistication of these tools/services)
- How does cloud computing impact the competition among computer manufacturers?
o Business focused technologists (employees) that know cloud computing and the competitive
environment can create systems that add value and differentiate the firm from its competition

17. Online Advertising (17.1-17.2, 17-4)

- Cookies
- Ad networks – an effort that links advertisers to websites and other content providers that are willing
to host advertisements, typically in exchange for payment
- Retargeting
- Geotargeting

18. Broadband Technologies (18.4)

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- Internet backbone – high speed data lines provided by many firms all across the world that
interconnect and collectively form the core of the internet
- Last mile technologies – Technologies that connect end users to the Internet. The last-mile problem
refers to the fact that these connections are usually the slowest part of the network
- Bandwidth – Network transmission speeds, typically expressed in some form of bits per second
(bps)
- Net neutrality – principle that all Internet traffic should be treated equally, and ISPs should not
discriminate, slow down access, or charge differentially by user, content, site, platform, application,
type of attached equipment, or modes of communication

20. Google
- Understand the extent of Google’s rapid rise and its size and influence when compared with others in
the media industry. Recognize the shift away from traditional advertising media to Internet
advertising
o Online advertising represents the only advertising category that, over the last several years,
has been consistently trending with positive growth.
- How does search engine work? (How does Google index the Web and rank its organic search
results?)
o SEO, Three Steps, Crawling, Indexing, Displaying
- Spiders, Web crawlers, software robots
o Traverse available websites to perform a given task. Spiders discover documents for indexing
and retrieval
- SEO
o Search Engine Optimization process of improving a page’s organic search rankings
- Deep Web – Internet content that can’t be indexed by Google and other search engines.
- How Google’s search advertising revenue model work?
o
- PPC, CPC, CTR, quality score
o PPC – pay per click, advertisers don’t pay unless someone clicks on the ad
o CPC – a maximum cost per click an advertiser is willing to pay
o CTR – clickthrough rate, the number of clicks that your ad receives divided by the number of
times your ad is shown
o Quality Score – a broad measure of ad performance
- Geotargeting
o IP Address/GPS/WiFi/CellTower Triangulation used to find your location
- Cookies, retargeting/remarketing
o Track what you search and give you ads personalized on it
- Contextual advertising - Advertising based on a website’s content, lucrative, but has content agency
problem
- Content agency problem - A situation where ads appear alongside text the advertiser would like to
avoid, like an article where body parts were hidden in a suitcase while ads for suitcases were shown
- Negative keywords – words that when searched don’t want your search result to pop up (prevents
your ad from being triggered by a certain word or phrase)
- Recognize how technology is a catalyst, causing the businesses of many firms in a variety of
industries to converge and compete, and that as a result of this, Google is active on multiple
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 competitive fronts.
-

Dropbox
Freemium model – paying customers cover the costs of the free customer costs
Viral marketing - Leveraging consumers to promote a product or service
Questions and Exercises:
What are the four components we focus on when analyzing a new venture (e.g., Dropbox)?
 Is it valuable, rare, inimitable, and non-substitutable?
Does Dropbox exhibit network effects?
 Yes, as since they offered free trials and more users discovered how convenient the product
was, Dropbox gained its network externalities through word of mouth and referral programs as
the customer base rapidly increased after offering these free trials
What are the risks of relying on search advertising to reach customers in a competitive market?
 Since there are much bigger companies that can (and will) pay a lot more for the keywords for
this market, and Dropbox might get pushed way down in the search results
What are the challenges for a startup like Dropbox to sell their products/services to
organizations/corporations?
 Dropbox must accommodate the needs of larger corporations while still maintaining the
simplicity and accessibility of the platform. But to offer a more advanced version that would
greater meet the needs of larger corporations, they would be abandoning the simplicity of the
platform. (need two different versions)
How did Dropbox do viral marketing? Why viral marketing can be very effective in terms of Return on
Investment (ROI)?
 Dropbox gave people free trials, through which people discovered how convenient the product
was and told their friends, who discovered the same thing, who told their friends, etc. and they
leveraged other people through free trials to promote their product. It is very effect of ROI
because it costs nothing as opposed to paying for ads
Why cloud computing can be an appealing option for startups and small firms?
 Lowers development time (sophistication of these tools/services) and is cheaper and easily
scalable as your firm grows
Is the freemium model suitable for Dropbox? Why?
 Yes, because even after free trials, Dropbox operated with "freemium" as it understood that
operating services with freemium would naturally drive the customers who are willing to spend
their money on the platform (by enough people knowing about it you know someone will want
to pay), surpassing the maintenance cost of "free" users. And eventually, the paying users would
cover the costs of the free users.

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