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Title: Unleashing the Killer App: Digital Strategies for Market Dominance by Larry Downes, Chunka Mui, Nicholas Negroponte ISBN: 1-57851-261-1 Publisher: Harvard Business School Press Pub. Date: March, 2000 Format: Paperback Volumes: 1 List Price(USD): $16.95 |
Average Customer Rating: 4.2 (148 reviews)
Rating: 5
Summary: The ROI of Innovation
Comment: I've just re-read this book and think more highly of it now than I did previously. Larry Downes & Chunka Mui define a "killer application" as "a new good or service that establishes an entirely new category and, by being first, dominates it, returning several hundred percent on the initial investment." As they explain, the primary forces at work in spawning today's "killer apps" are both technological and economic in nature. "The technology we are concerned with is the transformation of information into digital form, where it can be manipulated by computers and transmitted by networks." Digital strategies are needed to achieve market dominance.
The co-authors divide their book into three parts: Digital Strategy, Designing the Killer App, and Unleashing the Killer App. In Part I, there is a brief discussion of one "killer app" in the Middle Ages, the stirrup, which added mounted cavalry to the battle equation. The "lowly stirrup" played a singular role in rearranging the political, social, and economic structure of medieval Europe.
In The Lever of Riches, Joel Mokyr identifies countless other "killer apps" throughout history such as paved streets and sewerage disposal; the lever, wedge, and screw; the heavy plow and three-field system; the weight-driven mechanical clock; spectacles; the printing press; the steam engine; the telegraph; the bicycle; ...each of which also had a truly profound impact.
To repeat, Larry Downes & Chunka Mui concern themselves with the technology of transforming information into digital form. Thus in Part I, they examine the "killer app", explain what they call "the new economics", and then shift their attention to the nature of a digital strategy. They dully acknowledge the disruptive power of "killer apps" which can suddenly destroy the equilibrium of what appeared to be stable systems of commerce and government. For them, business change now originates with digital technology; more specifically, with "killer apps." Strategies are needed to manage (to the extent possible) their impact to achieve sustainable competitive advantage. These strategies must accommodate three new forces: digitization, globalization, and deregulation. The "dirty little secret" to which Gary Hamel has referred is that the strategy industry "doesn't have any theory of strategy creation." The success of any digital strategy may well be the result of what Hamel calls "lucky foresight." Downes & Mui seem to agree with Hamel while offering, in Part II, what they refer to as "a few rules of thumb." They suggest three stages of "killer app" design and carefully explain each. They identify 12 specific principles on which to base the design process. In Part III, they shift their attention to "Unleashing the Killer App" and correctly stress the importance of communication, one which "speaks with the language of ideas, scenarios, options, and what-ifs."
In Chapter 7, the reader's attention is directed to two major corporations, McDonald's and VEBA AG, which illustrate digital strategy in practice. These are, in effect, mini-case studies. It is important to point out, however, that effective digital strategies are not the sole province of major corporations such as these. A "killer app" can quickly increase or reduce the size of any company. Consider the fact that a single dry goods store in Kemmerer (Wyoming) can become the J.C. Penney Company which, in turn, now struggles (with mixed results) to compete successfully with a company whose own history can be traced back to the Walton 5&10 in Bentonville (Arkansas). Downes & Mui assert that "Developing digital strategy...requires components of both problem-pull and technology-push...operating together in a well-functioning organization [in which] the process becomes not only circular but indistinguishable...in a pragmatic, indeed opportunistic, response to the new digital environment."
In the final chapter of their brilliant analysis, Downes & Mui suggest that cyberspace "is fueled by free computing power and free bandwidth...and free software." Consequently, "the social conditions that resulted are raw, and the nature of the business climate, by necessity, less developed." As with The Golden Rule dry goods store (in 1902) and then the Walton 5&10 (in 1950), today's companies must seek out new areas of opportunity and start doing business there. "Those who make the transformation by developing a digital strategy are choosing to engage the frontier on its own terms, just as their counterparts from Europe did in settling the New World."
Larry Downes & Chunka Mui have outlined the process of digital strategy, explained the twelve design principles, and described the experiences of organizations that are transforming themselves so that they can unleash "killer apps." Which companies will conquer the "frontier", whatever and wherever it may be? Which companies will not? In the Digital Marketplace, we won't have to wait very long for the answers. Probably in what seems to be about five minutes. Those who share my high regard for this book are urged to read Malcolm Gladwell's The Tipping Point.
Rating: 5
Summary: A conceptually breathtaking overview of the Web paradigm.
Comment: The stirrup in the Medieval Ages, the Model T automobile in the Industrial Age, and PCs, electronic funds transfer, word processors and Web search engines in the Information Age are all examples of "killer apps" - new goods or services that establish entirely new categories and reshape existing power structures.
"Like the Hindu god Shiva, they are both regenerative and destructive," explain consultants Larry Downes and Chunka Mui in their highly compelling digital strategy manual, "Unleashing the Killer App: Digital Strategies for Market Dominance" (1998 Harvard Business School Press). The book is chock full of case studies of companies who are either riding the Internet wave to fortune and fame - or have been sidelined and marginalised.
The new forces of our age are globalisation, digitisation and deregulation. Traditional corporate strategies are getting replaced by digital strategies, which are more dynamic, intuitive, and participatory.
The Internet (along with its intra-organisational manifestation, the Intranet) has firmly occupied centre stage in the global marketspace thanks to three fundamental laws: Moore's law, Metcalfe's law, and Coase's law. Moore's law maintains that processing power doubles every 18 months while costs hold constant. According to Metcalfe's law, the utility of a network is proportional to the square of the number of users.
And economist Ronald Coase observes that as markets become more efficient, there is an increasing organisational trend towards downsizing, outsourcing, and decentralisation ("The Law of Diminishing Firms"). Killer apps are now the result of these three principles operating together in cyberspace. To these three laws, the authors add one more: the Law of Disruption, accounting for the disruption caused by exponentially-changing technology on incrementally-changing social systems.
The Internet is taking every advantage of every new advance in communications, interface design, computer architecture and information sharing software via a combination of Moore's and Metcalfe's laws. The explosive growth of the multimedia Internet is redefining business-to-consumer and business-to-business services across the globe; for instance, it enables suppliers and distributors - and even prospective mates - to directly find one another across international borders, sidestepping many intermediaries.
"The Web is currently tearing apart the financial services and telecom industries, among others, inspiring civil wars there much as the steam engine did years ago," the authors explain.
Via killer apps, cutting edge companies in the Internet age are transforming their businesses from producers of commodity goods to providers of sophisticated services. Companies like Dell Computers, Cisco Systems, Federal Express, Charles Schwab and Amazon.com are successfully re-aligning relationships with and among consumers via Internet technologies and building unprecedented brand loyalty in cyberspace.
The Web is creating "shock waves in information components of every industry," so much so that digital technologies are not just enablers of change, but disrupters of current operating models.
Digital age strategies need not be the preserve only of IT companies - Nike, for instance, is progressively divorcing itself from production, distribution, advertising, and even design; most of these operations are being outsourced. "We decided we're a sports company, not just a shoe company," CEO Phil Knight has remarked. "What Nike has kept for itself is brand management, the relentless development of the Nike world view, the Nike lifestyle, and the Nike experience," the authors explain.
To be able to develop digital strategies, a company must improve its ability to spot, internalise, shape and exploit killer apps, the authors claim. Organisations have to be become more nimble, open, fun, and take on a new incarnation.
Traditional organisations need to focus on three key areas of change for digital strategy in the network age: re-shaping the organisational environment, building new connections with business partners and customers, and re-defining their core structure and strategy.
Re-shaping the business environment can take place via features like mass customisation, user empowerment, and online communities. For instance, Federal Express is reaping tens of millions of dollars of savings in customer service costs thanks to enhanced features on its Web site such as letting customers print their own airbills, complete with bar code.
Experimenting with digital strategies may even involve "cannibalisation" of one's own products and services, a fear shared by many print publications initially venturing online. The key, the authors claim, is to use the online channel as an entry point for higher-value services, such as searchable and customisable financial data feeds. Otherwise, a competitor may cannibalise your products. "Jumpstart new markets with the credibility and goodwill you already have," the authors urge.
Notable success stories in this regard include U.S. electronics parts distributor Marshall Industries, which seemingly cannibalised its own business by setting up a Web site which put its suppliers and buyers directly in touch with one another. But in effect, it created a new global channel - it now receives 2,000 inquiries a day from 52 countries via its Web site. Thus inspired, Marshall Industries is now getting into the Extranet services business for the electronics industry.
Examples of successful online personalisation services include PointCast, the Wall Street Journal's Personal Journal, Intuit's Quicken, and Hallmark Greeting Cards' online reminder service for special anniversaries.
"The closer you can get to activities about which the community feels passionate, the greater the potential value you can capture," the authors claim (much on the lines of John Hagel and Arthur Armstrong's earlier bestseller, "Net Gain"). Sites like PlumbNet and Barter Systems are tapping into "Do It Yourself" trends - the growing desire for people to take charge of activities themselves and save money.
Successful examples of virtual community building include online gaming, ESPN SportsZone's fantasy leagues, online dating services, and America Online's People Connection service and Buddy Lists. "Brand management in cyberspace requires real engagement with customers," the authors say. Customer service is being replaced by "customer intimacy."
Forming partnerships and building new organisational connections are key in the digital age. These can cover the full gamut from strategic alliances and joint ventures to equity stakes and outright ownership - well exemplified by Microsoft's buying out of WebTV, and its 25 percent stake in cable TV giant ComCast.
Managing innovation as portfolio management using risk analysis calls for new skills, leadership, and will, the authors explain. For instance, while it was in the era of first generation spreadsheets, Lotus spun off a separate company called Iris to develop the Notes product.
Another source of new ideas and fresh inspiration can come from hiring young people, and tapping into the skillsets and aptitudes of children (probably better addressed in other books like "Growing Up Digital" by Dan Tapscott).
Acquiring the killer app mindset requires a strong degree of technology alignment. "Organisations cannot unleash killer apps until they can harness their own business and technology expertise," the authors say.
For this, organisations need to invest in IT and skillset-building. This can be aided by fostering an e-mail culture and reliable tools for document sharing and collaboration. "It becomes impossible to determine where the business stops and the technology starts," the authors explain, citing examples like Amazon.com and Cisco.
Companies also need to constantly innovate. The online mall MCI Marketplace died a slow death because it became stale; cybermalls will need to continually add new features and create new shopping experiences on the Web.
"The organisation with the healthiest environment for identifying, nurturing and redefining killer apps, whether their own or those invented by others (perhaps for entirely different purposes), is the organisation that will translate its digital strategy into market dominance," the authors conclude.
In sum, this is a conceptually breathtaking overview of the context within which the Web paradigm is changing business the way we know it. An online companion and an online discussion group would have helped extend the shelf-life of this book.
Rating: 5
Summary: Unleashing Technologies
Comment: The major principles of this module deal with ideas and methods to increase one's ability to focus on higher levels of information that began as low level mechanization concerned with bits and bytes and how they transform applications into working models. The whole scope of what and how these electronic machinated applications interface with a larger picture is understood as a disruption at best to harmonious interactions within the whole IT and corporate application structure. (Downes, Mui, 2003).
Between the middleware applications and the physical interfaces that bring us computing connectivity, there are numerous processing's, intermingled and costly, which brings us to today's computing networking.
It is the affordability equation, enhanced through Moore's implications and understanding of outcomes such as higher quality, less costly interfaces, and devices that help design interfaces, simply. The ease to operate, at blazing speeds, brought about by higher computing power, and its ideas of mass proliferation have its beginnings with Metcalfe's Law. The economics of sheer computing power, its application infrastructure, is in fact, a Coasean theory of that economics.
Because of the profundity of Moore's Law, and its ability to affect not only the realm of computing, but also industrial, automotive, and aerospace as well, that law, is the 'killer app'.
Killer apps are not just related to new application coded language transformed into cyberware, but ideas, equations, formulas, and entirely new directional thought patterns that lead to unfilled frontier process exploration. The round wheel opened the imagination and innovation of a pre-industrialized world. Watches, clocks, automobiles, gears, rollers, and most things round come from nature, our first architect, but the formula and prescience of the 'wheel', became the 'killer app' within the science of generations to come. The 'wheels' ability to survive as an innovation proves the point, that 'killer apps' must have profound and lasting disruptive affects of visionary quality to an industry or industries. (c)Lyle K'ang, 2003).
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