ImplementationImplementation

CPS 181s

Feb 20, 2003

QuestionsQuestionsQuestionsQuestions

What is online implementation? Why does implementation matter? What is the deliver system? What are the categories of offline innovation? What is the offline innovation process? What is the new logic behind eCommerce innovation? What are the eCommerce innovation processes?

ImplementationImplementationImplementationImplementation

Delivery of the Offering to Target Customers

PeopleSystemsAssets Processes Supply chains

Innovation - Internet Requires Continual Revision of:

StrategiesOfferingsInterfaces

Change Driven ByChange Driven ByChange Driven ByChange Driven By

Evolution of technologyNew competitorsChanges in customer preferences

(and demographics) New collaborators

eCommerce Evolution and Need for Continuous InnovationeCommerce Evolution and Need for Continuous InnovationeCommerce Evolution and Need for Continuous InnovationeCommerce Evolution and Need for Continuous Innovation

BRAND PROMISE Branding Marketing Communications Customer Interface

BRAND PROMISE Branding Marketing Communications Customer Interface

IMPLEMENTATION

Deliver on the promised

experience

Renew/Innovate thecustomer experience

Source: Monitor Analysis

Objectives Achieve strategic goals Adjust product offering

and delivery system to rapidly changing ecommerce environment

INNOVATION PROCESS

DELIVERY SYSTEM

Does Implementation Matter?Does Implementation Matter?Does Implementation Matter?Does Implementation Matter?

Source: Modified version of materials in The Marketing Edge by Thomas V. Bonoma. 1985. New York: The Free Press.

Why Implementation MattersWhy Implementation MattersWhy Implementation MattersWhy Implementation Matters

Success

All that can be done to assure success has been done

Success

All that can be done to assure success has been done

Roulette

Good execution can mitigate poor strategy, forcing management to success

or Same good execution

can hasten failure

Roulette

Good execution can mitigate poor strategy, forcing management to success

or Same good execution

can hasten failure

Trouble

Poor execution hampers good strategy - Management may never become aware of strategic soundness because of execution inadequacies

Trouble

Poor execution hampers good strategy - Management may never become aware of strategic soundness because of execution inadequacies

Failure

Difficult to diagnose - bad strategy masked by poor execution

More difficult to fix - two things are wrong

Failure

Difficult to diagnose - bad strategy masked by poor execution

More difficult to fix - two things are wrong

Poor

Good

Appropriate Inappropriate

Strategy

Implementation

Customer Driven

Customer Driven

Organization Driven

Organization Driven

More visibility of errors = stronger

competitive implications of errors

More visibility of errors = stronger

competitive implications of errors

Lower switching barriers = increased importance of good

implementation

Lower switching barriers = increased importance of good

implementation

More complex linkages = increased

complexity of implementation

More complex linkages = increased

complexity of implementation

More fluid organizational boundaries =

increased complexity of implementation

More fluid organizational boundaries =

increased complexity of implementation

More dynamic market environment =

increased complexity of implementation

More dynamic market environment =

increased complexity of implementation

Challenges of On-Line Challenges of On-Line ImplementationImplementation

Challenges of On-Line Challenges of On-Line ImplementationImplementation

The Effects of Poor ImplementationThe Effects of Poor ImplementationThe Effects of Poor ImplementationThe Effects of Poor Implementation

For ecommerce, fulfillment is the top complainteBay’s network shutdown

> largest online trading community> network shutdown caused 20% decrease in stock and loss

of significant revenues> lost of listing fees for items offered during the outage due

to outraged customers> caused loss of confidence

Buy.com Pricing and FulfillmentBuy.com Pricing and FulfillmentBuy.com Pricing and FulfillmentBuy.com Pricing and Fulfillment

Sells at low or no margins with a model to advertise to customer base

Outsources most of its infrastructure (customer support, fulfillment)

Developed poor reputation of backordering products due to lack of delivery control

Law suits for intentionally mispricing products Significant stock price decrease

Buy.com

What is the Delivery System?What is the Delivery System?What is the Delivery System?What is the Delivery System?

Must deliver total customer experience that the brand communication has promised

Must correctly execute transaction initiated through the customer interface

Delivery system is most detailed and concrete expression of the company’s value proposition

The Five Components of the The Five Components of the Delivery SystemDelivery System

The Five Components of the The Five Components of the Delivery SystemDelivery System

People (key for successful internet companies)SystemsAssets (physical and information-based)Processes

Resource allocation processHuman-resource management processManufacturing and distribution processesPayment/billing processingCustomer support/handling processes

Supply chains

ProcessesProcesses

AssetsAssets

SystemsSystems

PeoplePeople

Source:Christensen, Clayton M. 2000. Meeting the Challenge of Disruptive Change. Harvard Business Review 78, no. 2 (March-April).

MAPPING THERESOURCE SYSTEM

DELIVERY SYSTEM

Supply ChainsSupply Chains

The Delivery System Needs to Support The Delivery System Needs to Support and Reinforce the Resource Systemand Reinforce the Resource System

The Delivery System Needs to Support The Delivery System Needs to Support and Reinforce the Resource Systemand Reinforce the Resource System

B2C - Business to ConsumerB2C - Business to ConsumerB2C - Business to ConsumerB2C - Business to Consumer

Stock it Yourself.

Outsource Warehousing

Drop Ship

Fulfillment intermediaries

Stock it Yourself.

Outsource Warehousing

Drop Ship

Fulfillment intermediaries

Four Types of Supply Chains Found In Four Types of Supply Chains Found In B2C eCommerceB2C eCommerce

Four Types of Supply Chains Found In Four Types of Supply Chains Found In B2C eCommerceB2C eCommerce

Business-to-Consumer (B2C) Business-to-Consumer (B2C) Supply ChainsSupply Chains

Business-to-Consumer (B2C) Business-to-Consumer (B2C) Supply ChainsSupply Chains

Online retailers do not need to have physical inventoryProvides flexibility in designing supply chainsMore complex than offlineMany web deliveries are time-sensitive and small packageDifferent from periodically fulfilling standard ordersNo predictable routes and volumesFulfillment is weakest linkReturns cost four to five times offline

Consumer-to-Consumer (C2C) Consumer-to-Consumer (C2C) Supply ChainSupply Chain

Consumer-to-Consumer (C2C) Consumer-to-Consumer (C2C) Supply ChainSupply Chain

eBay serves as platform for community of buyers and sellers to interact

Income from sliding scale of transaction fees

e-Commerce Innovation e-Commerce Innovation ProcessProcess

Labs Primary

Activities Time

Frame Innovation

Type

Division Labs

Product development

Product control

Technical service

Today’s business 0–3 Years

Line extension

Sector Labs Sector

technology development

3–10 Years

Changing the basis of competition

Central Research New

technology development

10+ Years

New industries

3M’s Research Paradigm

Key TakeawaysKey TakeawaysKey TakeawaysKey Takeaways

Source: Gundling, Ernest. 2000. The 3M Way to Innovation. Tokyo: Kodansha Int. Ltd. And New York, New York: Kodansha America, Inc.

Traditional off-line innovation took years and emphasized sustainable / gradual innovation

eCommerce still offers room for incremental innovation, but emphasis shifts to more drastic innovations

High information content of innovation objects increases speed of innovation: from years to months or even shorter

Short history of eCommerce means new collaborators / complementors become available frequently

Traditional off-line innovation took years and emphasized sustainable / gradual innovation

eCommerce still offers room for incremental innovation, but emphasis shifts to more drastic innovations

High information content of innovation objects increases speed of innovation: from years to months or even shorter

Short history of eCommerce means new collaborators / complementors become available frequently

Innovation Used to Be Slow and Innovation Used to Be Slow and Gradual in the Off-Line WorldGradual in the Off-Line World

Innovation by DoodlingInnovation by Doodling

Innovation by DesignInnovation by Design

Innovation by DirectionInnovation by Direction

The Off-Line Innovation Process Was The Off-Line Innovation Process Was Internal To The FirmInternal To The Firm

The Off-Line Innovation Process Was The Off-Line Innovation Process Was Internal To The FirmInternal To The Firm

What is the New Logic Behind the What is the New Logic Behind the eCommerce Innovation?eCommerce Innovation?

What is the New Logic Behind the What is the New Logic Behind the eCommerce Innovation?eCommerce Innovation?

Fundamentally shaped by the online nature of online businessNew innovation frameworks try to incorporate the new focus on co-evolving

technology and customersNew innovation processes that are emerging as applied version of these new

innovation frameworks High investment costs as key constraint in innovation selection process – higher in

offline relative to onlineLocus of innovation selection moving outside the firm’s boundaries – focus moves

from inside to outside the company and the market, and can get direct customer feedback

Adaptive innovation instead of trying to “guess it right the first time” – “sense and response,” online eager to innovate and tolerate imperfections

Off-Line Trade-Offs/Principles Supporting Funnel Approach:

Off-Line Trade-Offs/Principles Supporting Funnel Approach:

On-Line Principles

On-Line Principles

Investments required to launch new innovation very high

Limited resources force tradeoffs / choices which innovations to pursue or not

Trade-offs / choices are made inside the organization before product hits the market

Time-to-market / first mover imperative needs to be traded off with extensive time required to gather customer input

Launching early increases risk of flops and flops need to be avoided at all times:

– Costs of flops very high– Significant damage to brand-equity

Investments required to launch new products and services very moderate

Choices about future of new innovations can easily be made by markets, no need to make these choices internally

First mover imperative can be aligned with gathering (more) customer input

Launching beta-versions allows for revisioning / customization, actually benefiting innovator

Keys drivers determining success of innovation / implementation are:

– Customer base– Customer data analysis– Knowledge management

Off-Line Innovation Process vs. On-Line Innovation ProcessOff-Line Innovation Process vs. On-Line Innovation ProcessOff-Line Innovation Process vs. On-Line Innovation ProcessOff-Line Innovation Process vs. On-Line Innovation Process

What are the eCommerce What are the eCommerce Innovation Frameworks?Innovation Frameworks?What are the eCommerce What are the eCommerce Innovation Frameworks?Innovation Frameworks?

Disruptive technologiesCreate entirely new market through the introduction of a new kind

of service or productTighter link between technological innovation and performance

demanded by customers

Source: Christensen, Clayton M. 1997. The Innovator’s Dilemma. Boston, MA: Harvard Business School Press.

TIME

PR

OD

UC

T P

ER

FO

RM

AN

CE

Disruptive Technological

Innovation

Performance Demanded at the Low End of the

Market

Performance Demanded at the High End of the

Market

Progress Due to Sustaining

Technology

Progress Due to Sustaining

Technology

New Innovation Frameworks Addressing New Innovation Frameworks Addressing Co-Evolution Have EmergedCo-Evolution Have Emerged

New Innovation Frameworks Addressing New Innovation Frameworks Addressing Co-Evolution Have EmergedCo-Evolution Have Emerged

Beta 1Initial Input

Initial Input

Evolution of Customer PreferencesEvolution of Customer Preferences

Product Release

Product Release

Evolution of Technical PossibilitiesEvolution of Technical Possibilities

Integrating eCommerce with Integrating eCommerce with Customer PreferencesCustomer Preferences

Integrating eCommerce with Integrating eCommerce with Customer PreferencesCustomer Preferences

Beta 2 Beta 3

Source: Iansiti, Marco and Alan McCormack. 1998. New product development on the Internet. In Sense & Respond. Boston: Harvard Business School Press.

The Development of Navigator 3.0The Development of Navigator 3.0The Development of Navigator 3.0The Development of Navigator 3.0

FebJan AprMar May Jun Jul Aug

OBJECTIVES

Input from User Feedback

Beta 0 Internal

Beta 1

Beta 2

Beta 3

Beta 4

Beta 5

Beta 6

STABILIZE

INTEGRATION

FEATURE DESIGN AND CODING

FullRelease

SpecificationsCompleteStart

Source: Iansiti, Marco and Alan McCormack. 1998. New product development.

Distributed InnovationDistributed InnovationDistributed InnovationDistributed InnovationCUSTOMERS COLLABORATORS

ENABLERSSUPPLIERS

COMPETITORS COMPANY

. .

..

.= Boundaries of the firm

= Feedback loop