Business Innovation Basics

21 min readJul 6, 2020

I took this course last semester. Here are excerpt of my notes.

Physical product to product as a service. Product of a service is the technical service that can be improved and that data based. Physical products are perishable (food but be a physical product but the data is the product of a service).

Consumption to active creation. Consumption is where you are listening to a conversation and unable to contribute while active creation is where you enter the conversation as yourself. watching Netflix v participating on social media.

Points of usage to service everywhere. Expansion of access service of a company has expanded like Netflix or landlines/cell phones where you can use those everywhere or like banking (it doesn’t mean everywhere geographically, it means everywhere as a device so that when you are watching a movie on your tv, you can continue that movie onto your smartphone exactly where you left off).

Mass production to personalization. Using data inputs to create products tailored to customers where mass production is for the general population. ex-customized cars versus general cars.

Ownership to shared across community. Digital asset can be managed by shared ownership example is google docs or in the arts like threadless (art is shared across the community and still enables artist to make money).

Disconnected to enabled into ecosystem. Finding the connection among different players, different products, different implementations. alibaba-customers, vendors, transportation services, banks, platform itself.

Unprecedented convergence of business and digital technology. Unprecedented convergence of business and digital technology everybody needs to recognize that business and technology are intertwine-there is a need for urgent/unique/agile or able to adapt to each other/disruptive holes.

OmniChannel

Channel: A way that your consumer can purchase your product. Omnichannel is combing reach and richness. Offline customers provided with online value added online data and online customers with experiences relevant to being offline (does the lack of conflict). Omnichannel strategy is explicitly intended to avoid showrooming (prevent ordering in person and then ordering on amazon)

Omnichannel (all) retail. Cross channel. Content retail strategy in which the channels complement each other (not just about technology but it is agreeing about what is about your branding). The channels complement each other (before it was consistency)-this is more exciting-complement each other. Channel conflict is when one channel takes away sales from another channel (does not interface or agree with another channel). Some degree of channel conflicts exist but this can be solved (technology exists). Omnichannel consists of a cross-channel, content strategy where the different channels complement each other.

In this sense, omnichannel combines reach (engaging and integrating offline and online customers), richness (provide offline customers with an online value and online customers with offline experiences), and agility (train offline and online retailers so that they are aligned about product and data real-time).

Strategy. Omnichannel integrates both online and offline presence to add value to both the customer and the company. It does this by offering a quicker and more personalized experience to increase existing loyalty and attract new customers.

Style. Omnichannel utilizes cross-communication so that the organization can proactively adapt according to environmental scanning.

Culture. Omnichannel focuses on customer experience by promoting e-commerce and experience-oriented interactions.

Skills. Technology forward, meaning that staff can communicate with online channels to foster integration and a seamless online/offline experience.

Staff should be familiar with how the digital resources are organized and how they can provide value through these.

Structure. The supply chain should be structured so that it embraces the user’s digital channel expectations. Also, the supply chain should embrace agility so that users have the most access to the product ordered (pick up, delivery, and in-store). New information systems support these 7S requirements which support the omnichannel.

Monolithic is not optimal as the code bank might be too large for a developer to understand making changes to the larger application destructive.

If the firm is adaptive, agile frameworks would require multiple deploys for this and any issues encountered.

Microservices transform monolithic apps into loosely coupled microservices by deconstructing monolithic apps to their core functions and then deploying individual services that can function and fail without affecting others.

They can be independently deployed, organized around a business, and loosely coupled.

This enables the rapid delivery of complex applications that empowers digital transformation. This quick creation of apps empowers a more agile organization.

For example, a company that is worried about security could create an application where its employees can anonymously input data (security issues) this new data collection process makes the firm more agile and secure.

These microservice apps are plug and play where data analysts can plug in applications or remove them, allowing them to play with application features. When you stand up for the new app, the data analysts pull these components together, not coding, but application programming.

ERP

Functional area information decisions-just functional (what the department has to solve)-TPS (transactions and inventory and hourly wages)-aligning the TPS with the FAIS-like scheduling people-based purely on scheduling-decisions can’t be made with functional data (don’t need data about pass purchased behavior or competitors or transactions sold-for scheduling just need the scheduling data-the better way to do the digital transformation that is cross functional-what other data might be useful-busiest hours are (purchasing FAIS and the TPS that leads to the transaction FAIS)-cross functional decision (function of managing and function of purchasing)-only if the company feels like it is a competitive advantage-strategic advantage (bring data from multiple places)-data transferred on outlook

FAIS are functional area information decisions. TPS are transactions/inventory/hourly wages. Need a combination of FAIS and TPS because decisions cannot be made with functional data

Past seasonality-ask operations for a report (sent my email)-shows the amount of cashiers before and during (that’s the way that this typically happens today)-email or other means (as a physical document)-can occur on a slow basis (does not need to be dynamic or current)

Email is the transfer of data between the individual departments. Order fulfillment is a cross functional workflow. Every function is responsible for different pieces of the process, TPS is specific to their needs-FAIS only shows what the department needs to know

Each FAIS tailed language-accounting is different than delivery. Require re-entering data into specialized information systems/communication errors/no agreement on what data mean like customers address across functions

Team of functional managers sit down with reports from each of their own FAIS to discuss decisions-to slow for the digital world-cannot continue. Rich, reachness, agility are cross functional (data from various functional departments). TPS and FAIS cannot quickly address cross functional decision making. No single source of truth (verifiability). No necessarily agreement

ERP (made rapidly and without error)-anything that happens go into a centralized database (not held in FAIS or TPS (no separate TPS for same data in a FAIS)-no waiting for message-getting an instant message and assemble the order-communication is done through this centralized database-where is my order-it’s in the quality controlled-sharing data between function. Single view of the truth-standardized process (process flow). The manager configures (implements) who gets access to what data. Three tiered architecture

ERP moves through the data in business logic layers (standardized process flows). SAP looks at companies and in each of the industries-what is the best practice (most efficient workflow that we can bring to bear for that particular cross functional processes). This is the best workflow for this particular decision-buy ERP with this efficient workflow in it. Like how we define a customer master record (what does it mean to implement ERP). B2B customers and our customers cannot buy more than 10 post-its (this implementation is what configuring the ERP/SAP (ERP is the type of technology and SAP is the vendor) is)-with visibility comes the ability to cross-sell. Module on financial accounting, on controlling, on fixed access management (every large company has a financial accounting module-whether the other companies have the other modules-depend on the strategic)

Program the ERP so that it doesn’t allow the errors (specify visibility)-reduce errors and pinpoint errors (vendor and suppliers-know inventory orders and the amount to process). Software could be the cloud via a VPN. ERP could eliminated the messenger or the limited needs of the messenger-not using email for critical real time data

Porter’s 5 forces

Should be used with technology, 7S, and the internal analysis of the environmental scan to identify strategic business initiatives. Porter’s model is the most well-known framework for analyzing strategic competitiveness and can be used to demonstrate how IT can make a company more competitive. Porter identifies 5 major forces that can endanger or enhance a company’s position in a given industry. The point is to deal with all the forces simultaneously in your business strategy. Threat of entry of new competitors: High when entry is easy and low when significant barriers (product or service feature that customers have learned to expect) to entry exist. As a firm, you want entry costs for competitors to be high so you want to create high barriers to entry. If other competitors can simply put up a website that directly competes with your website, then what’s your competitive advantage. The bargaining power of suppliers is high when buyers have few choices and low when buyers have many choices. As a firm, you want what is of the lowest cost and highest quality from your supplier. This might be best done by integrating your supply chain, as Walmart does. What are the positives and negatives of each? So when might you want each?

The bargaining power of buyers is high when buyers have many choices with low switching costs and low when buyers have few choices (e.g., few places to buy a textbook or loyalty program). As a firm, you want low buyer power or high switching costs. Can do this with collecting lots of information on buyers so s/he doesn’t want to go elsewhere, lock-in with loyalty cards, lock-in with long contracts, lock-in with membership benefits. The threat of substitute products or services is high when there are many substitutes for an organization’s products or services and low where there are few substitutes (e.g., customers can purchase wireless telephones instead of landline telephones, internet music instead of CS, ethanol instead of gasoline). As a firm, you want low substitutability. Can reduce substitutability by increasing the number of bundled services (low cost + high quality + customization through data you already entered). The rivalry among firms in an industry is high when there is fierce competition and low when there is not.

Difference between swot and porter’s 5 forces. Swot is an overall assessment while Porter's 5 Forces focused on a single point of growth (viability of particular product, service, industry expansion-weight diversification with the 5 Forces). Swot is current position and future strategic options while 5 Forces is how to analyze competitors and how they could inhibit you (competitive industrial environment with focus on the outside world). Swot is now and in the future while 5 Forces in the future.

Difference between pestle and porter’s 5 forces. 5 Forces analysis where the influence is in a competitive industry with regard to competitors, buyers, suppliers and substitutes while PESTLE how macro-environment factors impact an organization and also its competitive position.

Firms would only perform a PESTLE (political, economic, social, technological, legal and environmental) analysis. It is important to note that environmental scanning only refers to PESTLE in fact, Porter five forces would not apply to environmental scanning as it is too narrow. For this reason Porter’s five forces is an internal analysis. Environmental scanning needs to be broad, which is perfect for PESTLE.

Ecosystem

Ecosystem is a dynamic network (players can come and go-no set of players-hub these players can collaborate-network these are working through the technology friends and talking to friends) of entities (companies, individuals, governments, crowds-crowdsourcing, ecosystem) interacting directly with each other (not exclusively through the center point) to collaboratively create new services which provide value for all players (when selecting players what can each of these players bring to complement, provide an important piece of the jigsaw puzzle, bring new ideas etc)

An exchange is a transaction of an asset with another with an equal value, and the players may not be as collaborative as an ecosystem. In ecosystems, all the participants are equal players sharing their capabilities and resources for business value. The exchange element is only a part of an ecosystem: value exchange (monetary or non monetary) is not sufficient to create a business ecosystem with various players in different roles. Exchanges typically have only two sides (with an intermediary facilitating the trades). Differently, an ecosystem has many players, many sides, and many more transactions besides just a simple trade of goods/services. Often information is used collaboratively to jointly build value

Whole is greater than the sum of the parts, in the world do digital platform ecosystem it about leveraging the ecosystem. The ecosystem is about collective companies that serve an industry not value creation. We are using ecosystem as a digital initiative that a firm decides to create as a way to attain a competitive advantage and it describes the ways which specific players to the firm’s ecosystem gain collective value from being part of this relationship

7S changes at Jinyang Oil needed to achieve success with ERP

Strategy The organization is guided by its vision of continuous technological innovation-driven through research activities. However, management conveyed (7s change) that the ERP implementation was an enabler of this, which resulted in end users actively taking ownership of the project (high level of participation), attempting to understand the cause and effects of challenges.

Style Employees and planners shared a passion for success, however, the organization waited until everyone affected by the ERP implementation fully supported the change. Jinyang Oil, also, shared a specific tangible objective (rather than lofty goals) for its proposed ERP implementation. To further improve communication, the organization matched one functional representative from Jinyang Oil to ComputerMate personnel. The project manager even built friendships and trust with low, middle, and top operational managers at Jinyang Oil. These three changes (tangible objective, one-to-one communication, and relationships that extend beyond work) resulted in employees welcoming the ERP implementation rather than resisting it. Employees understood that it would save them time and effort so they actively looked for problems to fix. This leadership style resulted in active involvement between developers and users, resulting in a successful implementation.

Skills The project manager at ComputerMate had previous work experience in the rubber industry, so he was familiar with the loud workplace. The employees saw the project manager more as one of them rather than a businessman who doesn’t understand the challenges the users face. This change, to adopt an ERP supplier with industry experience and technical knowledge, resulted in a smoother ERP implementation and an improvement in business process performance.

Structure Jinyang Oil and ComputerMate were careful in the organization of the development and implementation team: consisting of knowledgeable individuals who worked around several obstacles (miscommunication). This change resulted in a higher user understanding, overcoming cultural differences between the ERP supplier and users. Jinyang Oil adopted a bottom-up approach to end-users who suggested ideas to improve the ERP, furthering innovative technological development. This successful change resulted in high participation, furthering the organization’s vision of innovative technological development (strategy). One project manager even commented on how the planners and the users seemed to be developing and designing the system together.

Digital Innovation is achieved through RAR objectives, which are made possible with an IT architecture chosen based on managerial strategy decisions, but tradeoffs exist.

The RAR objectives that an organization’s management chooses determines its IT architecture, which prioritizes the company’s type of innovation. If the company wanted more personalization, like maybe limited features for a Chinese market, then it would need to sacrifice agility for personalization. This choice then shapes the stacks that the company builds out, in this case, the company would focus its IT architecture on having its product on different devices. Universal ecommerce, centralized database, and clean software would be prioritized while chatbots, AI features, and customer reviews might not. This series of one RAR objective over the others and the IT architecture that supports each decision determines the type of digital innovation and success that company has. The importance is that these RAR decisions align with the company’s target customers. Whatever path management chooses, requires digital innovation, which ultimately leads to a successful digital transformation.

Different 3-tiered architectures are needed for different strategic purposes. With an emphasis on agility, reach, and richness.

Companies that prioritize capturing the most amount of users require a high degree of reach. These firms focus on always providing access to users through web servers that route traffic from high-load web servers to low-load web servers.

Companies that focus on proactively introducing new products in the midst of the ever changing economy requires a high degree of agility. This involves the digital separation of servers so that each could individually update or push new features. Additionally, companies could increase the data shared between groups so that information is more readily available.

The tradeoff between agility and reach is that a higher reach (or greater amount of users sending and requesting data require a higher bandwidth). A greater reach requires a centralized set of standards while agile organizations might have different standards for each branch. Firms that target higher reach might prefer a simpler product (and thus sacrifice some of their ability to have a consistent product for users to always access). While companies that strive for more agility (where the future is unclear in some industries) would be ok with some of their products to be inaccessible to their customers while these new features are implemented.

Companies that focus on providing an interactive experience (with the most features) for their customers require a high degree of richness. These firms would structure their architecture so that the user experiences the best interactive devices for their specific device. Also, companies may provide a VPN for customers that are worried about their security.

The tradeoffs between reach and richness depends on the type of users that the company wants to target. Companies could have high agility but low richness with users that have low degrees of knowledge. This can be accomplished with mass personalization that makes it easier to proactively adapt as it is centralized and only requires thin clients.

However companies that want high richness and are willing to sacrifice agility would have decentralized individual bottom-up innovation. These users have a high degree of knowledge that enable them to operate independently (personalizing their own features) however this is challenging to capture target audiences (as it is undefined).

TPS

All firms need TPS. All firms should have an inventory of every FAIS. Each FAIS is unique to its own need. To figure out if you have the right TPS and FAIS, you need to know your data/information/knowledge hierarchy

TPS do not process data; they only collect and store data. It is correct to say there are different TPS for different types of data and do not provide the information. FAIS do not create networks that enable users to access their data. FAIS processes the data (using the C’s) and displays it for users so that it is more usable to the specific needs of the user in that specific department. Networks are a separate component of the Information Technology architecture in a firm. If there are 2 different FAIS in a firm, they do not necessarily share data with each other unless a network has been installed (probably an intranet).The FAIS does not transfer data to a company’s new order database; that is the network doing that.

FAIS, ERP, TPS. ERP is a centralized database that shares data with >1 business function (like financials, manufacturing, and human resources) without reentering data. (collection of standardized cross-functional processes and data storage). Standardized business processes that allow a single view of truth for transaction data used by other in the company (moves data in the logic layer with a standardized process flow). The same function is performed the same way-standardized. As part of the process flow diagrams ERP provides standardized language. ERP provides more visibility through cross-functional data with enables companies to cross-sell (knowing what aspect of the organization is doing with the data flow during any point in time). TPS connects the business functions to centralized database (is data gathering tool & data storage)

Cross FAIS Process Flows

Businesses need cross-FAIS process flow information to manage their inventory BUT ERP imposes standards, need for glocal templates to allow country flexibility, extensive configuration required by ERP, how to choose between configuration and customization

Cross-functional FAIS process flows support critical aspects of businesses like order fulfillment.

Limitations when managers need decisions to be quickly answered. This is because the decentralized structure prevents TPS with FAIS to provide a single source of truth via a centralized database which prevents universal agreement on the meaning behind certain data points like “customer”. ERP solves this as it enables data to be shared, creating a single source of truth with a centralized database. It does this by creating a standardized process flow that restricts user’s flexibility and knowledge.

Managers who want to reduce costs and users who want to reduce corporate interference face a tug of war: managers want users to adapt to the vanilla ERP while users want the ERP to adapt to their optimized process flows.

To effectively implement ERP, managers should choose the amount of confirmation and customization based on the process flows they prioritize.

If the ERP interferes with these process flows, it should be customized, if it does not, the users should work around the ERP.

Trace a strategic decision through DIK hierarchy

Data (IT) are the facts/figures with relay specific information (but not organized) for outside information this could be obtained outside the FAIS via a TPS otherwise the user inputs the data directly to the FAIS

Information (IS) contextualized, categorized, calculated, condensed data (what the information system does and displays)(data and information make up the structure of an FAIS)

Knowledge is the how-to understanding, experience, insight, intuition, and contextualized data (what companies want in their employees that can’t be automated) lead to recurring decisions

Different Types of FAIS

Any department would have an FAIS for example healthcare dr has FAIS for MRI then different user interface for the xray machine then temperature

Multiple FAIS in each department, focused on their decisions (electronic health records will look different for insurance claims v receptionist who prepares appointments)-database could be the same but different FAIS. Claims not need to know the appointment was schedule rather just that it was scheduled but schedule needs to know about the technically

Classic 3-tier architecture

Database has WAN (wide area network) and LAN (local area network). Bottom level of the application. Information is stored and retrieved from a database/file system the information is passed to the application (logic tier) for processing then eventually back to the presentation (user)

Application (logic tier) has application servers. Coordinates the application, processes commands, makes logical decisions, and performs calculations. Moves the data between the database tier and presentation tier

Presentation what the consumer sees-consumer (browser client is connected to the web server via a WAN, web server connected to the internet transaction server) OR employee (pc/laptop connected to the ERP via LAN). Top level of the application. Translates tasks and results into a form that the user can understand.

Lowest layer of architecture/stack. Is the IT infrastructure which creates the foundation for the architecture, the software that runs these components is the technology stack. Software/utility/systems-protocols that runs computer. Network. Database and DBMS. Hardware

API

With specialized servers and applications there are islands of automation so there is the need for application program interfaces (API) to connect these islands and send data between servers over the network

Island of automation. When the specialized servers cannot communicate with each other (bc not integrated with other systems which it interacts). Discrete/fully enclosed automated system applied in a largely manual environment.

Infrastructure and Architecture

IT architecture = IT infrastructure (IT services, IT components, IT personnel) + Applications (computer programs designed to support specific task or business process with data)

Application examples are Accounting IS Finance IS Product/Operations/Management IS Marketing IS and Human Resources IS and Business Intelligence Systems Dashboards

Technology stack

A set of software components that compose a logically complete platform for running a service or supporting an application.

Set of programming languages, frameworks, libraries, patterns, servers, UI/UX solutions, software and tools used by its developers, organized as “layers”.

Technology stacks differ in the front and back ends-this difference helps distinguish between decisions that need to be made by developers and managers

FinTech Disruptions

Disruption 1 Fintech companies developed different electronic payment mechanisms for electronic commerce and alternatives to the standard payment process. Fintech has disrupted the traditional financial industry so much so that it is forcing these leaders to innovate. Specifically, these traditional firms should follow BBVA and host hackathons, invite beta testers to new digital initiatives, develop virtual bankers, and make financial services social.

Disruption 2 Firms are turning towards monetizing or leveraging their customer’s data instead of using online advertising as revenue models.Other firms use this data to acquire potential customers (donations, events, fundraising, tier products, and subscriptions) and thus are willing to pay for customer behavior. To further accumulate this data firms could develop freemium services.

Disruption 3 Data governance is a formal set of processes that manage the transformation of information to knowledge ultimately helping inform better decisions. This is needed as more and more companies increase the volume of data and the number of sources (both internal and external) where this data is collected. Exponential increases in data availability require data governance as there are places where poor data practice could lead to inaccuracies, data changes, or wrong data (from untrusted sources).

Data governance creates policies and procedures so that the data flows through a standardized process so that there is a single view of the ground truth, the data is high quality, available at the time to those who need it, integrated with other data, and compatible with tools. It is important to note that data governance differs from data strategy.

Data strategy is the business value that the company plans to get from its data (and the value that it hopes to achieve) while data governance is how the data should be managed. Explicitly, there are several components: cloud strategy, data governance steering committees, data definitions, data quality teams, data responsibilities, data privacy, and data ethics policy.

LA City Strategy for Digital Transformation

The Smart City initiative is broken into two waves, Smart City 1.0 which involves digitizing analog processes while 2.0 involves the application of sensors across different departments so that a single system is cross-functional.

For example, the city previously restricted parking for a two-hour block as street sweepers were delayed or faced other complications.

These signs were posted to minimize the effect of cars (parking was de-incentivized) with parking tickets. 1.0 would be to digitize the enforcement of these parking tickets perhaps using cameras (like the red light cameras) that would monitor the parking blocks and then mail out tickets.

It is important to note that this only involves digitizing the analog process of having police officers check if a car is parked in the two-hour block and if so, issue a ticket to the car.

This does not involve the integration of any other departments making it cross-functional. 2.0, however, would integrate other departments making this single system cross-functional, like push notifications that let users know when to park and if they have to leave (street sweeper is arriving in 10 minutes).

2.0 would sync with the digital cameras to turn them on or off depending on the location and tell users which streets might have delays (because of the street sweepers).

It would achieve this by tracking the street sweeper and then sending that information to users, digital cameras, and traffic applications.

Ultimately this enables the city and its residents to be more agile (with regards to parking). Outdated organizations are complex and siloed.

Previously they had no single point of entry (different police officers could show up to give tickets), the technology-focused on the city itself (allowing its street sweepers a block of time rather than providing users more parking), and did not engage in new digital channels (like notification pushes to residents). The Smart City digital initiative (1.0 and 2.0) addresses these shortcomings.

Software As A Service (Software on demand)

Provision of software over the internet As a consumer, Google is a software as a service because you get gmail, google doc, drive, hangouts as a service. SaaS is purchased for a specific business process (i.e., sales, accounting, financials, forecasting). Saas Vendors use multi-tenant provisioning Saas Clients/customers (who are businesses) “rent” or “subscribe” to software rather than buy it. Applications standardize business processes so that all clients do the same process & pay on a per user per month basis. Applications are purchased and used online with files saved with the vendor rather than on individual computers. Each SAAS has to be set up and is pay by feature

Data Governance

How data should be managed. Formal set of business processes and policies for turning data to information to use knowledge for decisions. Policies ensure data is handled in a standard fashion to form a single view of Ground Truth, of high quality, available on time to those who need it Integrated with other data when need be, compatible with tools and IS used for analysis, and prioritized into Master Data (core) vs all other data.

Cloud strategy (which data goes where; which apps go where w/what data). Data Governance Steering Committees. Master Data definitions. Data Quality teams and responsibilities. Best Practice Privacy and Ethics Policies. From IT ownership to Business ownership of data. Which data to collect, keep and discard. Technology choices for data collection, storage & use

Environmental Scanning

Do environmental scan to creatively identify potential (list of opportunities and threats that could become opportunities) environmental opportunities for ANYONE in any industry might exploit-adjacent (related to but not direct competitors-broader analysis)

Do internal/external company specific analysis (think of application to industry-particular opportunities that a variety of different technologies could apply)-5 forces

Summarize the results of step 1 or 2 into SWOT

Review SWOT to identify key threats and opportunities that digital initiative should address

Create digital initiative in a manner that a future SWOT would show the firm no longer having the threat and having capitalized on the opportunities: initiative must help with reach, richness, and agility