1. ImplementationImplementation CPS 181s Feb 20, 2003

2. QuestionsQuestions  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?

3. ImplementationImplementation  Delivery of the Offering to Target Customers  People  Systems  Assets  Processes  Supply chains  Innovation - Internet Requires Continual Revision of:  Strategies  Offerings  Interfaces

4. Change Driven By  Evolution of technology  New competitors  Changes in customer preferences (and demographics)  New collaborators

5. eCommerce 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 the customer experience Source: Monitor Analysis Objectives Achieve strategic goals Adjust product offering and delivery system to rapidly changing ecommerce environment INNOVATION PROCESS DELIVERY SYSTEM

6. Does Implementation Matter?

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

8. Customer Driven Organization Driven More visibility of errors = stronger competitive implications of errors Lower switching barriers = increased importance of good implementation More complex linkages = increased complexity of implementation More fluid organizational boundaries = increased complexity of implementation More dynamic market environment = increased complexity of implementation Challenges of On-Line Implementation

9. The Effects of Poor Implementation  For ecommerce, fulfillment is the top complaint  eBay’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

10. Buy.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

11. 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

12. The Five Components of the Delivery System  People (key for successful internet companies)  Systems  Assets (physical and information-based)  Processes  Resource allocation process  Human-resource management process  Manufacturing and distribution processes  Payment/billing processing  Customer support/handling processes  Supply chains

13. Processes Assets Systems People Source:Christensen, Clayton M. 2000. Meeting the Challenge of Disruptive Change. Harvard Business Review 78, no. 2 (March-April). MAPPING THE RESOURCE SYSTEM DELIVERY SYSTEM Supply Chains Supply Chains The Delivery System Needs to Support and Reinforce the Resource System

14. B2C - 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 B2C eCommerce

15. Business-to-Consumer (B2C) Supply Chains  Online retailers do not need to have physical inventory  Provides flexibility in designing supply chains  More complex than offline  Many web deliveries are time-sensitive and small package  Different from periodically fulfilling standard orders  No predictable routes and volumes  Fulfillment is weakest link  Returns cost four to five times offline

16. Consumer-to-Consumer (C2C) Supply Chain  eBay serves as platform for community of buyers and sellers to interact  Income from sliding scale of transaction fees

17. e-Commerce Innovation Process

18. 3M’s Research Paradigm Key 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 Gradual in the Off-Line World

19. Innovation by Doodling Innovation by Design Innovation by Direction The Off-Line Innovation Process Was Internal To The Firm

20. What is the New Logic Behind the eCommerce Innovation?  Fundamentally shaped by the online nature of online business  New innovation frameworks try to incorporate the new focus on co-evolving technology and customers  New 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 online  Locus 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

21. 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 Process

22. What are the eCommerce Innovation Frameworks?  Disruptive technologies  Create entirely new market through the introduction of a new kind of service or product  Tighter link between technological innovation and performance demanded by customers

23. Source: Christensen, Clayton M. 1997. The Innovator’s Dilemma. Boston, MA: Harvard Business School Press. TIME PRODUCT PERFORMANCE 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 New Innovation Frameworks Addressing Co-Evolution Have Emerged

24. Beta 1 Initial Input Initial Input Evolution of Customer Preferences Product Release Product Release Evolution of Technical Possibilities Integrating eCommerce with Customer Preferences Beta 2Beta 3 Source: Iansiti, Marco and Alan McCormack. 1998. New product development on the Internet. In Sense & Respond. Boston: Harvard Business School Press.

25. The Development of Navigator 3.0 FebJanAprMarMayJunJulAug 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 Full Release Specifications Complete Start Source: Iansiti, Marco and Alan McCormack. 1998. New product development.

26. Distributed Innovation CUSTOMERS COLLABORATORS ENABLERSSUPPLIERS COMPETITORS COMPANY..... = Boundaries of the firm = Feedback loop