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1 School of Business Administration
Binnj on the Apple iPad Jason C. H. Chen, Ph.D. Professor of MIS School of Business Administration Gonzaga University Spokane, WA USA

2 Topics and Pre-Assignments
Topics covered: PM, Entrepreneurship, Decision making, SDLC (traditional waterfall model) vs. Agile development methodologies. Others: 1) disruptive technology vs. sustaining technology 2) First mover advantage

3 The Case Learning Objective: The teaching objectives are to: Introduce students to the key enablers for information technology (IT) entrepreneurship (i.e., leadership, emergent technology, scarce resources, people resources and related key decisions); Have students contrast the traditional systems development life cycle (SDLC) (i.e., the waterfall model) and agile development methodologies; Encourage students to explore approaches and tools for virtual project management and experimentation; Expose students to the need to prioritize decisions, including those related to existing and emergent growth opportunities. stry; 2001

4 The Case Subjects Covered: Entrepreneurship; Information technology; Small & medium-sized enterprises. Project management, Decision Making Setting: Geographic: India Industry: Professional, scientific & technical services Event Year Begin: 2010

5 The Case Scenario Description: In this dialogue-styled situation, Binnj's CEO has assembled a team of people for a 100-day "science experiment" to determine whether a new high-tech business venture is worth pursuing. He is focused on an untapped market - a new kind of restaurant menu service built on the Apple iPad platform. Members of the team are excited and have been furiously working on the project while retaining their full-time jobs. They have developed a prototype of the technology and business offering, pitched the idea to several clients, and generated significant interest. This case introduces students to information technology entrepreneurship, technology development approaches, service pricing issues, virtual project management techniques and tools, brainstorming revenue generation opportunities, and the challenges of prioritizing decisions. Prototype:原型,樣板

6 IS/IT Strategy Triangle
Each group: Complete the case using “Strategy Triangle” model

7 Organizational Strategy
Business Strategy IS/IT Strategy Business Strategy: IS/IT Strategy: Organizational Strategy: Fail to balance these three strategies IS fail to support business goals IS fail to support organizational system Misalignment between business & org. strategies A business strategy is a well-articulated vision of where the business seeks to go and how it expects to get there; An organizational strategy is the organization’s design, as well as the choices it makes to define, set up, coordinate, and control its work processes; IS strategy is the plan the organization uses in providing information systems and services. IS strategy can itself affect and is affected by changes in a firm’s business and organizational strategies. Moreover, IS strategy always has consequences – intended or not – on business and organizational strategies. Business strategy business decisions; -- Objective and direction; -- Change; Organizational strategy -- A plan that answers the question: How will the company organize in order to achieve its goals and implement its business strategy? Thus, it is a plan for organizational design, and choices the firm makes that define, set up, coordinate, and control its work processes. business based; - Demand oriented; - Application focused IS/IT strategy activity based; -Supply oriented; -Technology focused Gain strategic advantage by using IT … It consists of four major elements: 1) Architecture/Infrastructure, 2) MIS Organization, 3) Funding and 4) Project Management

8 Information System Strategy Triangle
~Innovation ~Revenue growth ~Frist mover advantage Business (Firm) Strategy Organizational Strategy IS/IT Strategy ~Apple iPAD ~PM tools ~Team work (virtual team) ~Agile development process N

9 See the pre-Q’s on the next slide
1. What key enablers have allowed Binnj to engage in this “science experiment”? See the pre-Q’s on the next slide IT does not force, but, it does ________new alternatives. ENABLE

10 Pre-Questions for #1 Q1: Do you believe that IT was a strategic enabler for Binnj? Q2: If yes, what made IT strategic? (see chapters 1 & 2) Q3: What is “strategy”? Q4: Strategic Management Model Q5: Disruptive vs. sustaining technology Q6: First-mover advantage

11 Note that the term strategy originated in the military (from the Greek work strategos).
A strategy is A systemic plan of action designed to achieve a particular goal. A good strategy is Adaptable to changing conditions (e.g., in the gam of Chess, strategic players continuously evaluate current conditions and develop long-term plans to win against their opponent). A strategy is a conceptual long-term plan that focuses on the “war,” and is distinguished from tactics which are more applied short-term activities that focus on te particular “battle’.

12 Figure: System Hierarchy
System’s Architecture Oversee Develop Information/DB Requirements Strategies Design and Structure Management Infrastructure Information System People – Who Technology – what Process - How Technology Process People

13 Planning is everything ... What are Two Major Outputs for an organization?
Vision develop Mission Customers, market, competition guide Strategy create Vision statement: one that a company (or projects) would like to be Mission statement: is about where and what they portray today Knowledge ---> Intelligence ---> Wisdom Attention economy: Time and attention are the scarcest resource. The completion for available attention is heating up; investing it wisely became a competence of increasing value. Only wisdom can guide effective decisions on how we invest our attention. Experience economy: Today’s customers are looking for more than products/services; they want to have a memorable experience of buying and using them for achieving their aspirations. One of the largest buying powers in the US, “cultural creative” value transformation higher than other types of market offers. Tactic Products, Services N

14 In the context of the Binnj startup, IT was extraordinarily strategic, since it provided the very platform on which the company’s value offering was based. When it came to menus, the restaurant industry had not yet begun to consider using digital menus to replace traditional paper-based menus. The LiveMenu service was potentially disruptive, as it could directly influence many aspects of the customer buying experience while in the restaurant. Of course, technology was not the only strategic variable.

15 Disruptive versus Sustaining Technology
Disruptive technologies – a new way of doing things that initially does not meet the needs of existing customers Disruptive technologies redefine the competitive playing fields of their respective markets Disruptive technologies tend to open new markets and destroy old ones Disruptive technologies typically cut into the low end of the marketplace and eventually evolve to displace high-end competitors and their reigning technologies Sustaining technologies – produces an improved product customers are eager to buy, such as a faster car or larger hard drive Sustaining technologies tend to provide us with better, faster, and cheaper products in established markets Sustaining technologies virtually never lead in markets opened by new and disruptive technologies Economist Joseph Schumpeter used the term creative destruction to describe what happens in an industry when disruptive innovations threaten the established players. Newcomers find ways to capitalize on the new technologies, while many incumbents resist the change and seek ways to protect their old business models. Digital music, downloaded one song at a time, is one of those disruptive innovations made possible by the internet that led to sweeping creative destruction in the music business. Napster’s file sharing technology first made it widespread. Since sharing copyrighted songs is illegal, the record labels fought it fiercely with lawsuits, eventually making Napster close down. The labels were rightfully concerned about piracy, but they also had an urgent desire to protect the extremely lucrative business model based entirely on CDs. As long as consumers were forced to pay $15-$20 for a complete album on CD, even if they only wanted one song, profits soared. The industry did offer some single song CDs and tapes at $3 or $4 each, but these cumbersome formats never caught on. Allowing online sales of single songs would wreak havoc on the whole industry, from the labels and artists to the retail stores and jewel case manufacturers. The Record Industry Association of America (RIAA) battled to the bitter end.

16 Key Enablers for Binnj Elicit and capture internal and external enablers and their sources, as summarized in diagram below. Internal enablers represent capabilities that exist or are developed inside of the firm. External enablers represent characteristics of the environment that exist outside of the firm and are largely not subject to direct control.

17 Key Enablers for Binnj EXTERNAL INTERNAL Binnj Enablers
Strong brand (Apple) Strong network of contacts (Hutcherson’s network)) Revolutionary device (iPAD) (category creator) “Dream team” with deeep/ complemantary skill sets Binnj Enablers Strong development platform (iOS, SDK) Visionary leadership Free project management tools (Dropbo, Skype) Committed to “agile” development processes Market inertia (no innovation e.g. paper menus) First-mover advantage Inertia:慣性,惰性 Appetite for risk

18 When Corscadden was asked whether he believed technology was a strategic enabler for Binnj, he offered the following: “Absolutely, but by no means the only one. Building in a repeatable process to continually bring in new innovations and rapidly prototype and adopt them is one of my core responsibilities. As new unthought-of technologies become available, Binnj will continually evaluate and provide compelling ways to integrate them in a simple manner for customers.”

19 Share your working experience … Googledocs and others
2. Have you ever worked on, or led, a virtual team? What tools did you rely on, and what problems did you experience? Share your working experience … Googledocs and others

20 Qs for #2: What activities can help virtual team member to establish their identity within the team and to strengthen their shared understanding and objective, which Binnj accomplished by using a weekly scrum (which they referred to as a “jam session”? Answers: Regular interpersonal meetings See LPP Cycle model on next slide Others …

21 #2 Most people today work in a virtual environment. For example, every time we send a work-related or text, update a group calendar, attach a spreadsheet or slide deck, or edit a shared document (e.g., Google Docs), we are working virtually. We use these tools to coordinate our activities, and they have become commonplace for managing day-to-day tasks. For more complex projects, other more sophisticated coordination tools exist. Even when one has access to high-quality tools and the discipline to use them, working at different places and times from other team members can be challenging. Regular interpersonal meetings can help virtual team members to establish their identity within the team and to strengthen their shared understanding and objectives, which Binnj accomplished by using a weekly scrum (which they referred to as a “jam session”).

22 #2 (cont.) The following model, which is based on research into voluntary open-source, virtual-developer teams, indicates that deep, sustained developer participation depends on an iterative combination of (a) situated learning (both conceptual “thinking” and practical “doing”); and (b) ongoing identity construction (both through regulated activities such as recruitment and promotion, and through normal work activities within the social context).

23 #2 Continuous LPP Cycle Situated Learning Initial Access Sustained
Conceptual (“thinking”) Practical (“doing”) Initial Access Sustained Participation Identity Construction Identity-regulation Identity-work Initial Motivation Through regulated activities such as recruitment and promotion, and through normal work activities within the social context Legitimate peripheral participation (LPP) describes how newcomers become experienced members and eventually old timers of a community of practice or collaborative project (Lave & Wenger 1991). According to LPP, newcomers become members of a community initially by participating in simple and low-risk tasks that are nonetheless productive and necessary and further the goals of the community. Through peripheral activities, novices become acquainted with the tasks, vocabulary, and organizing principles of the community. Gradually, as newcomers become old timers, their participation takes forms that are more and more central to the functioning of the community. LPP suggests that membership in a community of practice is mediated by the possible forms of participation to which newcomers have access, both physically and socially. If newcomers can directly observe the practices of experts, they understand the broader context into which their own efforts fit. Conversely LPP suggests that newcomers who are separated from the experts have limited access to their tools and community and therefore have limited growth. As participation increases, situations arise that allow the participant to assess how well they are contributing through their efforts, thus legitimate peripheral participation provides a means for self-evaluation (Lave & Wenger 1991). Newcomers become experienced members and eventually old timers of a community of practice or collaborative project. Figure: A Conceptual Process Model (Legitimate Peripheral Participation) of Participation in the OSS (Open Source Software) Community

24 3. Binnj seems to have embraced the “agile” development approach
3. Binnj seems to have embraced the “agile” development approach. In what circumstances might a firm choose to use the slower, more traditional “waterfall” approach to develop a new system? Also, discuss the advantages and disadvantages of both approaches. The waterfall approach can be more efficient over the long run for certain IT development projects with long lead times between each step.

25 Phases in the SDLC

26 Project Identification
SDLC Revisited Project Identification and Selection Project Initiation and Planning Analysis Analysis Logical Design Physical Design Implementation Maintenance

27 Waterfall Approach Advantages
#3 Waterfall Approach Advantages The waterfall development model is derived from the manufacturing sector, which focuses on lowering the cost per unit of manufactured project. The long lead times between each step – requirement, design, implementation, verification, maintenance – allow for suggested changes to e carefully considered before implementation. For example, a defect might require many more times the effort to be fixed after the project has been completed than if it had been fixed during the development stage.

28 Waterfall Approach Advantages (cont.)
We all might recall the many issues faced by Microsoft when it released the error-prone Vista OS. The cost to fix the errors post-release included repairing the damage to the Microsoft brand. Waterfall Approach Disadvantages The deliberate nature of the waterfall approach to development means that lead times are long. Because “requirements” are gather only in the early stages (why?), adhering to a waterfall development process will not allow developers to adjust for last-minute changes. Why? – because “waterfall” nature

29 Agile Development Approach Advantages
The agile development approach allows for rapid prototyping of software, providing access to a workable version at each step in development. Thus, developers spend a greater proportion of their time actually developing, rather than documenting. Agile development is an iterative process that requires iterations with a multi-functional team, rather than working in silos. This type of development is becoming more prevalent, especially among “startups,” which typicaly face time constraints and are eager to be first to market (first-mover advantage).

30 Figure: The prototyping (Agile) methodology and database development process
30 30

31 Agile Development Approach Disadvantages
The agile development approach requires a strong project management focus to keep communication lines open among the team members. At times, choices will need to be made between developing to meet a deadline versus incorporating yet another change request.

32 Keen’s Six-Stage Competitive Advantage Model
Stimulus for action First major move Customer acceptance Competitor catch-up moves First-mover expansion moves Commoditization N

33 When to Perform Activities
First Movers Advantages Disadvantages Build brand recognition Control scarce resources Establish networks Early Economies-of-Scale Newer technology Higher development costs Reverse engineering by competitors

34 4. Since the start of the Binnj science experiment, a plethora of new tablets have been announced (e.g., from companies such as Research in Motion, Samsung, and Hewlett Packard). Has Binnj chosen the right platform? Plethora:過多,過剩

35 The device’s operating system (OS) is important because of “lock-in” - that is, the inability to run an application designed for one OS on an unsupported OS. If a device other than the iPad were to become popular, and other software developers flocked to it, the iPad could then become a relic. Technical superiority takes a back seat to standardization. E.g., Beta vs. VHS, Firewire vs. USB, Mozilla Netscape/Firefox vs. Internet Explorer. Hutcherson referred to Binnj’s general development approach as “technology-agnostic.” By designing the cloud-based, server-side processing functions and data structures using open standards (e.g., Apache framework, ANSI-SQL), the service is flexible and agile. In other words, a new front-end OS can be created and tied into the common back end fairly easily, without having to reinvent the back end, which is what makes LiveMenu an “enterprise-class” solution. In this sense, much of the risk in choosing a particular platform (in this case, the Apple iPad) has been mitigated. technology-agnostic – unknown Relic:遺跡,廢墟 Flock:一群

36 #4 (more for Q4) Corscadden offered the following commentary regarding Apple’s strategy of making its software development kit (SDK) free of cost to developers: “The lack of cost around the SDK has definitely paid off for Apple, similar to Java’s lack of financial cost. What completes the success, however, is how well Apple has built the software frameworks around the Objective C language. Many tasks that are still difficult in other frameworks (language localization, threading, memory management, software distribution/OAM&P, user experience) are nearly trivial using Apple frameworks. As beautiful as Apple's physical products undoubtedly are, I believe their software frameworks are equivalently elegant to work in as a software developer.”

37 Other Qs for #4: Please name products became relics because the companies chose the wrong platforms.
The followings are examples: Beta vs. VHS, Firewire vs. USB, Dvorak vs. QWERTY, Mozilla Netscape/Firefox vs. Internet Explorer. The risk in choosing the wrong platform is that if another device becomes the standard, and the market rejects the iPad, Binnj could potentially lose access to the market - even if it has a technically superior product.

38 5. How should Binnj establish a price for the LiveMenu service?
Hutcherson is unsure how to price the offering. Three potential Enterprise Restaurant Group (ERG) clients are excited about LiveMenu, yet none has asked about the price, which is unsettling. Are the clients price insensitive, or have they made an assumption that the cost will be low?

39 PRICE QUALITY Pricing Strategies Matrix Skimming Premium Economy
High Skimming Premium PRICE Economy Penetration Economy pricing (經濟定價)- keep costs low and the service basic (no frills), set price low Penetration pricing (滲透定價)– looking for market share, set price low Skim pricing(脫脂定價)– no competition, go after price-insensitive customers, set price high Premium pricing(獨特的(溢價)定價) – unique product, set price high Why “penetration” pricing strategy is a correct one (by Hutcherson)? Yes, Price – low (low cost so that can attract customers and LOCK IN), especially for the new products Quality – High (difficult to substitute) Low QUALITY Low High Figure: Pricing Strategies Matrix

40 Pricing Strategies Matrix
Economy pricing keep costs low and the service basic (no frills), set price low Penetration pricing looking for market share, set price low Skim pricing no competition, go after price-insensitive customers, set price high Premium pricing unique product, set price high Economy pricing (經濟定價)- keep costs low and the service basic (no frills), set price low Penetration pricing (滲透定價)– looking for market share, set price low Skim pricing(脫脂定價)– no competition, go after price-insensitive customers, set price high Premium pricing(獨特的(溢價)定價) – unique product, set price high Why “penetration” pricing strategy is a correct one (by Hutcherson)? Yes, Price – low (low cost so that can attract customers and LOCK IN), especially for the new products Quality – High (difficult to substitute)

41 Without any strong precedents, Binnj had established a tentative price of $0.49 per day per device. This price approximates the current direct costs associated with printing restaurant menus, but essentially ignores new value creation (i.e., 70 menus per location x $0.49 per day x 365 days per year = $12,520 = the approximate annual cost for printed menus per location). Hutcherson’s reasoning was that this pricing level should be an “easy sell,” especially considering the new value-added components. According to the pricing strategies described in the model (matrix), Hutcherson’s reasoning suggests penetration pricing. Video for pricing:

42 Is “penetration” pricing strategy the correct strategy for Binnj?
Yes. Why? Price – low (low cost so that can attract customers and LOCK IN), especially for the new products Quality – High (difficult to substitute) High Skimming Premium PRICE Economy pricing (經濟定價)- keep costs low and the service basic (no frills), set price low Penetration pricing (滲透定價)– looking for market share, set price low Skim pricing(脫脂定價)– no competition, go after price-insensitive customers, set price high Premium pricing(獨特的(溢價)定價) – unique product, set price high Why “penetration” pricing strategy is a correct one (by Hutcherson)? Yes, Price – low (low cost so that can attract customers and LOCK IN), especially for the new products Quality – High (difficult to substitute) Economy Penetration Low QUALITY Low High

43 6. What other revenue opportunities might Binnj create through LiveMenu, in addition to the digital menu? LiveMenu can open up many new revenue streams for which an enterprise-class back end and touch-based front end could be applied: Business intelligence reporting, customer satisfaction surveys, back-end restaurant inventory management, payment-processing systems, restaurant reservations, social media sites and new (i.e., non-restaurant) industry verticals. The possibilities are exciting. Yet without focus, the company could easily flounder. Flounder:輾轉

44 This is to be a tough question.
7. Should Hutcherson slow down (i.e., wait another two months before making a formal product announcement, as per Philips’ suggestion) or speed up (i.e., push LiveMenu more aggressively, as per Hayes’s suggestion)? This is to be a tough question.

45 The reasons for the “science experiment” approach were:
#7 (cont.) The reasons for the “science experiment” approach were: to mitigate risk (i.e., to minimize upfront financial and reputational costs); to keep the project in stealth mode as long as possible (to avoid creating competition too early); to promote a sense of mystery and intrigue (to attract employees and, eventually, angel investors); and to create an opportunity to under-promise and over-deliver (e.g., to delight the customers and secure the sale).

46 #7 (cont.) Risks of speeding up: Risks of slowing down:
creating excessive expectations and demand, inviting competition, becoming unfocused and running out of money (employees must be paid at some point). Risks of slowing down: possible stealth competitors, missing the boat, getting bored and ongoing uncertainty (will this thing even sell?) There is not a simple answer to the question. Hutcherson chose the slower approach, and it appeared to be paying off (at least, at the time of this writing).

47 8. What is an entrepreneur? Has Clay Hutcherson “got what it takes”?

48 The authors go on to explain the key questions of interest:
Shane and Venkataraman’s scholarly definition of entrepreneurship is “how, by whom, and with what effects opportunities to create future goods and services are discovered, evaluated, and exploited” The authors go on to explain the key questions of interest: (a) why, when and how opportunities for the creation of goods and services come into existence; (b) why, when and how some people and not other discover and exploit these opportunities and (c) why, when and how different modes of action are used to exploit entrepreneurial opportunities.

49 Binnj appears to provide a significant entrepreneurial opportunity
Binnj appears to provide a significant entrepreneurial opportunity. Hutcherson has taken key actions and assembled the resources to exploit this opportunity. In addition, he has sold the idea to other people and invited them in to take some risk along with himself. Together, this group of founders appears meet the classic definition of entrepreneurialism.

50 Conclusion IT Entrepreneurship vs. Classic Form Entrepreneurship

51 The service is scalable at very little cost:
Does IT entrepreneurship differ from this classic form entrepreneurship? There do appear to be some differences between a high-technology entrepreneurial startup, such as Binnj, and a more traditional manufacturing-based entrepreneurial startup. The service is scalable at very little cost: Unlike a manufacturing concern, growing and scaling up an IT-based entrepreneurship does not require purchasing expensive equipment or massively increasing the number of workers.

52 Low-cost/no-cost “maintenance”:
Manufacturing “tools” - in this case software and hardware - are either free (provided by Apple) or available at minimal cost (hardware that is already owned). An IT-based startup has less need to train and update staff skills in terms of providing service. Improvements to the product can be immediately updated. Intellectual property protection: In a traditional manufacturing business, the factors of production are arguably more controllable and can provide more significant barriers to entry. In an IT-based startup, however, because the intellectual property resides with people, it can literally “walk out the door” every evening.

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