Reflections 12: Social and Regulatory Policy

In discussing about corporate social responsibility for this lecture, it was highlighted in class that it is usually considered as part of the strategy. So questions that was asked:

• Why do we have to protect our children from the Internet?
• Who is responsible for corporate safety?
  • Is it the government?
  • Corporate companies / agencies?
  • Commercial vendors?

Privacy online is already invaded on the Internet where there are data mining tools in place just collecting information which is considered private. So the point of bringing up these questions and statements made is that there is a need for a regulatory environment however everybody would need to play a part – industry players, players, public and the government. Certain industries have their own regulations in place such as the movie industry and gaming industry where the content gets classified or from a censorship board.

There were a total of three type of approaches in dealing with corporate social responsibility (CSR) that were looked at. The first figure looked at was the triple bottom line approach looking at three main aspects: societal, environmental and economic considerations also known as CSR. In the context of high tech industries, depending on their focus they can decide to either target the base of the pyramid which would be marketing to the mass public or have their products accessible to those that would originally unable to afford to (bridging the digital divide) or even respond to risks / opportunities of global climate change (having their products recycled) or navigate ethical controversies where it involves addressing issues that consumers are being affected by but may not concern the company itself.

Second figure looked at was the 3 models of approaches to CSR. It looked at focus on economic and non economic interests. So the 3 models are business case, syncretic stewardship and social values. Business case and social values are the extremes where one looks more at the financial economic goals and the other looks at solving societal problems more (respectively). Syncretic stewardship looked at a balance of both. The model approach chosen by the company is when it aligns with the business strategy.

The last figure was on the best practices of CSR considerations. Seven points were mentioned as an outline for companies who implement CSR to ensure its success. It involves involving the company and management and its partners as well as again seeing how the CSR fits with the company’s business strategy.

For the group exercise, we looked at if we were an Internet online games store how we would approach in terms of CSR and the green movement. We thought best if we adopted a syncretic stewardship approach whereby we as the company want to make money as well as cater to societal problems. So our business strategy involved looking at green technological products that we could use for the company such as green chips and servers that provided less heat. Suggestions were also placed forward of having automatic servers shutdown at non peak timings as well as use water coolant rather than the air con chemical product stuff to ensure the servers are not over heated. Our product looked at providing educational games whereby those who played would learn something by the end of it. We thought of also recycling old educational games and allow those that may not be able to afford to pay to play the games to have it opened during non peak times for cheaper whereby bridging the digital divide. We also thought of donating the old servers to schools and start up companies for setting up their infrastructure.

For the last portion of the class, there were three presentations were given which I found to be interesting. One presentation was on making real money in virtual worlds which talked about second life and how there was an ethic and policy implication because there wasn’t a lot of policies and regulations in place and to top that off it is hard to justify ethics since different geographic locations have different cultures and laws thus the common ground was not easy to find. Another presentation discussed was on the Internet and the self regulation in China where the Government stepped in and had a public pledge in place clearly stating the rules and regulations of use of the Internet. The Government steps in to act as a big brother to control online content where they held people responsible to what they may say. This restrictive way of working showed that it allowed a system where the Government wanted a fair economic system, however it was shown that for international businesses going in to China, they need to work with a local industry as a partner that is aligned with their business strategy so that the local partner could assist in dealing with local regulations. The third presentation was on the digital gods making of a medical fact for rural diagnostic software involving panel of doctors practicing medicine via the use of webcam discussion with the patient who may be miles away (telemedicine). However there were many problems such as medical misdiagnosis due to the patient not giving enough medical history and that awareness of health is really poor in the rural areas.

Reflections 10 & 11: Pricing and Promotion

Pricing
Key concepts that I took away from the session on pricing of digital goods is the 3Cs (Costs, Competition and Customers). For cost, I learnt that products have an “experience curve” in relation to its production and cost whereby as production increases over time, cost declines exponentially. However by having an organization deciding in pricing a product at the lowest, no competitor will bother to enter the market to compete. Pricing at the lowest leaves no room for innovation and expansion. It is common behavior for people to compare prices of products with competitors but sometimes the consumer’s decision is not based on the price tag but rather on branding or they are early adopters of new innovations. The last c is customers where the perception of value is again reiterated. The highest price one can put on a product is when a customer’s perception of value of the product matches it also known as the price ceiling.

Another concept that I learnt about high tech marketers was the “technology paradox” which involves how price declines at a rapid pace due to technology improvements. This then causes problems if the costs are not kept below of the price.

In one of the presentation on pricing new products, they argue that 80-90% of new products are priced too low and the common behaviors of consumers are that they want more for less. The approach taken in dealing with this matter was to know how much a customer is willing to pay and getting their feedback and educating them about the benefits. In looking back at past topics on how one needs to cross the chasm by focusing on early adopters whom are value sensitive while late majorities are price sensitive, it is understandable to conclude that price is secondary factor in what one should focus on. It is only when the product has crossed the chasm then the decreasing of the price can be done (also known as dynamic pricing).

Promotion
For promotion, what I found that was important was on the promotion pyramid. I interpreted that for each level of the pyramid, there are different objectives targeting different areas. For example when you do direct mail, it is targeting at a certain group of people however often for telemarketing calls they are cold calls to existing customers. In focusing on ways in advertising and promoting on the Internet, Web 2.0 is used to get feedback from the people about the products themselves but since one can adopt different types of tools such as viral marketing, mobile location based advertising or even affiliates, in order to measure the effectiveness it is often done via web analytics. 

For the presentation, I found that the marketing mixes  for digital products to be eye opening where E highlighted that depending on the digital products whether it is content based, utilities and tools or an online service, there are certain models that are best suited for it.

The class discussion involved looking at how we would price and promote on movies on demand incorporating other goods such as music. We came up with the idea that for every movie that the consumer buys to watch, we would also offer the service of giving free one or two soundtracks. Another way was to show free previews of old movies to attract the niche market. Promoting wise we would collaborate with the other industries in our value net.

Reflections 9: Business Eco-System

Session 9 was on the discussion of the topic of distribution. Three things I learnt by the end of the class was on channel structures (direct, indirect and hybrid), the long tail concept and the term syndication.

In class, discussion involved looking at the channel structure from producer to end user. Companies could adopt either direct, indirect and hybrid channels. Direct channeling is from the manufacturer to the customer. This can be seen via Dell’s sales via online where they skip any agencies and sell directly to the customers. Indirect channels relies on intermediaries which I understood to be the in between agents or the “middle men”. By doing so, ownership would be taken by the intermediaries however common problems can be the intrabrand competition. Hybrid channel is the mix of direct and indirect. I would have thought that in theory a direct path from manufacturers to end users was the most efficient and effective way but often hybrid channel distribution is the way to go according to the white paper, “How Channel Sales Compare to Manufacturer Direct” (http://www.gtdc.org/compare.htm).

This topic tied in with the topic of partnerships and alliances where by having an indirect channel, it allowed an establishment of strategic alliances with partners vertically or horizontally in the value net. I learnt that the long tail concept isn’t suitable to be used for brick and mortar businesses since it showed that high costs would be associated to warehousing the products. However, in looking at the Internet, the cost of holding onto a product long term can be achieved where warehousing of the product would cost less in comparison, thus the Internet would be able to leverage on this concept. An example would be Amazon who does this well where when a user looks to buy a particular book, Amazon also introduces other books that other customers also bought with the book that we are currently looking at. Basically it is recommending books that may not be best sellers yet relevant to what the customer may be looking for which allows a few hits at the tail. For the presentation, the term syndication was presented. It basically involves the packaging of content from different sources, aggregate it under one place then allowing distribution. It allows possible in providing more for the customer. It was also seen that through the Internet, it has changed the linear supply chain process and shifted where anyone could syndicate content and allow distribution and sharing of information to everyone. The balance of power shifted to the people which lead to the existence of peer to peer and an increase in piracy.

For the class discussion, we used the ADVISOR framework to understand the eco system of an online reseller of books and magazines published in Singapore. We as a team looked at what value we wanted to bring across to our customers and wanted to present ourselves as a reliable service thus involving a need to ensure that we need to work with safe well known online payment companies. We decided that an option that we could do is sell e books but also work with publishers whereby if customers like the e books that they have already bought, it would be possible to buy a printed copy at a cheaper price than outright and we would also deliver the book for free. For the delivering service we thought that we could partner with other companies who do delivery such as Singpost where we could also to tap on their customers as well.

Reflections 7: Consumer Behaviour

For session 7, we looked at comprehending how customers behaved when left to decide whether to adopt new digital media products. There were two key takeaways I got from the lecture. In the first part, I found that there requires a need which will trigger the consumer’s behavior to go through purchasing decisions. However, whether the consumer goes through with it to make the purchase is dependent on whether they believe that they will get something more out of the event. Another key take away I got from the lesson was about the concept of crossing the chasm which allowed tapping into the mainstream market. There are also 5 categories of adopters: the innovators, early adopters, early majority, late majority and laggards. For each category it looks at how businesses target and segment the market and its positioning deployed in the market. However, it could be seen that to ensure its growth, it should be targeted at the early adopters whom find value to be more important than the price tag.

For the presentations, I found Guo & Barnes’s (2007) paper fascinating. It discusses how markets give something free to the users hoping to lure them in. And in continuous playing, the human perception changes as it perceives the item to be of importance thus affecting them which causes the users to willingly pay for virtual goods with real money in order to maintain it in the virtual world. Another presentation that I enjoyed was the paper written by Heiskanen et al. 2007 presented by Shen Wanqiang. The study shows that the real reason behind customer resistance to radical innovations is not because they are not educated about the product but rather customers who understand the innovation are scared that the smart technology would take over their lives and that it would affect their social life such as their freedom to do things at their own time and pace. Having themselves more reliant on technology makes them more vulnerable when the technology fails.

The class discussion involved looking at what it would take for one of the players in Internet TV particularly Singtel’s mioTV to cross the chasm. We discussed on how we should target at the early adopters but because of the overcrowded TV marketplace in Singapore, we discussed that we needed to provide special services which would be of value to the consumers. This included perhaps in giving away free portable devices that only allowed playing of mioTV on it. The bundling of services was also discussed but this was found to be unoriginal since competitors like Starhub are already doing that.

Reflections 8: Product Development

In session 8’s lecture, I learnt that part of product strategy is by developing services. This could be then split into four different cells targeting different planned ways in approaching the market. In cell one it focuses on supplementing the product with services that complement it. It allows a continuous flow of revenue. An example of this is having maintenance services or repair services. The company can still benefit after the first one has been sold. It’s meant for long term customer relationship. The second cell is having high technology services being offered this is to include consulting or research or even outsourcing. The third cell is using technology to assist in improving service. As example of this is having restaurants such as Hans Café from Perth, WA who uses PDAs to order customer’s food rather than use paper and pens so that it would improve the ordering customer service. In cell 4, it is through the use of self service technologies. Such examples that I have encountered is the self checkout system in the supermarkets in Perth.

An analogy was given to us in class in comparing locks on doors of our houses to DRM (Digital Rights Management) placed on our CDs or DVDs to protect the content. The locks on our doors is to ensure that our possessions are kept safe and not get stolen and DRM is to protect the content of the discs. In my opinion I find that DRM is not widely accepted by companies because it’s expensive, where costs can be as much as half of their revenue but it acts like an insurance policy fighting against piracy. As for users it would cause a lot of hassle. As Seth Weintraub clearly illustrates DRM to be the following http://9to5mac.com/drm-comic-funny-2459086523. DRM causes too many inconveniences which destroys a user’s experience which would indirectly affect the sales of content at the end of the day. Would it be worth it? There is no win win situation when one destroys a user’s experience in doing a task. Thus unless they find ways to make DRM more convenient, DRM will not be accepted by consumers.

In the class discussion, we looked at how we could package and protect an IDM application or service of a multi-player game teaching children about traffic safety. We targeted at whom our consumers will be and decided that we could target at schools and government however we found it to be a better choice by going global and just giving the game for free which would allow us to reach a larger market base as each player would be required to register for free to play the game. Each player would be an avatar character child. By having made the application free, we thought of what possible product strategies to adopt and we found that cell 1 would be ideal where upgrades of the games could come out in phases and people would have to keep playing to know what adventures will be next. This is similar to facebook games and maplestory where you can earn different possessions at every stage of a game or buy items for the avatar. Better yet perhaps get the public to develop parts of the game and offer monetary rewards to the best ones that we use where we email to the registered players in the database to get them more involved. We also discussed on intellectual property on copyrighting the game. The database of the registered players would also become a trade secret.

Reflections 6: Market Research

During the lecture, techniques of marketing research in gathering information on customer needs were discussed. Depending on the type of innovation whether it is incremental, mid-range or breakthrough, different techniques can be utilized. For instance in an incremental innovation where customer needs are known, techniques that can be used are concept testing and conjoint analysis. For mid-range products, possible techniques could be customer visit programs, empathic design, lead users, quality function deployment, prototype testing and beta testing. And for any breakthrough innovation, techniques that can be applied are customer-driven innovation and biomimicry. I found two concepts very interesting: conjoint analysis and empathic design.

Conjoint analysis I found to be a more of a statistical technique clustering together customer ratings on a combination of features and functions that are appealing that will evaluate a customer’s willingness to pay. I found the empathic design to be an interesting concept because it took an insight of discovering a customer’s needs through observing their behaviour. I felt that even though that it may form a detailed mapping of how customers operate, there perhaps could be side effects since when people are watching, people tend to be on their best behaviour.

There was a diverse coverage of topics presented. One presentation was on Brit Svoen’s article on young people, mostly teenagers on their use of television and new media. Through the study there could be seen a shift towards in young people using new media and how easy they could adapt and accept it. Another presentation was on a study on the truth about baby boomer gamers. The main point taken from this was that baby boomer gamers have been overlooked and in a sense, neglected in the market of the gaming industry. They have the time, have a disposable income and willing to pay for games yet there is not much focus towards them in the industry.

At the end of the class, in the group discussion we talked about the possible techniques of market research that may be relevant to the scenario. We looked at the traditional tools such as concept testing whereby we could learn and encourage input which would provide us a better understanding of the different stakeholders through focus groups and interviews of teachers, students, working professionals. etc. We discussed how “customer visit programs” would allow us to have a better understanding of the stakeholder’s needs of whether they were satisfied with the current service. For empathic design we agreed that just asking the users to tell us was not enough and observing their behaviour was also important and having a beta testing version of having customers get the chance to feedback to us what they think about the DIY service.

Reflections 5: Market Strategies

My understanding of Market Orientation is that it’s a business approach that identifies and focuses on customer needs based on their own products/services or products/services they may acquire. By utilizing this approach, it provides a foundation for value creation in customers. I learnt that there are two types of market orientation: responsive and proactive. At any one point of time, businesses usually adopt one market orientation but it is possible that a business’s market orientation fluctuates between the two but never adopting two at once. Being responsive involves understanding the current customers and looking at the current procedure measurements. Proactive on the other hand looked at what possible needs, the evolvement of needs that customers were not aware they required yet. This involved having to anticipate future trends the market is heading into. Based on the market orientation, the cross functional interaction focus would be different. For example marketing would take a lead role in incremental innovation because it follows a responsive market orientation. As for proactive market orientation it would focus more on research and development of assessing future opportunities.

During the presentations, the main reoccurring topic discussed involved strategies. Two presentations that I found interesting was Xu Wenjing’s presentation on “Strategies for Value Creation in Electronic Market”. My key takeaway of this was that at every stage of an eMarket’s evolution; birth, expansion, authority and renewal or death, there would be different leadership, cooperative and competitive challenges. From Irvine’s presentation on “Bundling and Competition on the Internet”, the strategy explained was on bundling information goods. The main points I learnt was that by bundling goods it would give the organization a competitive advantage and decrease the chances of potential entrants or competitors from entering into the market.

For the class discussion, our team initially debated at which market orientation the firm would choose in launching a web service for exercise enthusiasts in Singapore. After deciding which market orientation to select, we could determine whether it was incremental innovation or break through. Then based on this information this allowed the design of the activities. For example we stated that if we chose a proactive market orientation, the firm could have looked at trends of how exercise enthusiasts are in Singapore. We could offer location based services of possible exercise events and activities closer to where they are currently at.

Market orientation allows a direction for a business to follow in consideration of customer needs. However having it to succeed requires cross functional collaboration between departments and have top management support. Without their support from the organization, market orientation would not work.

Reflections 4: IDM Eco System Players and Roles

Thomas Friedman has called the Internet a “flattening of the world” where the impact of the Internet has allowed the playing field to be the same level for everyone, allowing communication, collaboration and sharing of knowledge in real time disregarding the distance, language and geography. This shift has caused high technology markets to acknowledge that the competition is high, which may allow others to place their products in the market first and also that there are high development costs involved if there is only one company to bear it all. To ensure sustainability, there is a need for organizations to form partnerships and alliances which will allow companies faster entry into the marketplace and to develop at lower costs. However with partnerships, there are also risks involved which can lead to possible trade secrets being leaked, trust issues leading to legal issues or the failure to deliver and satisfy the other partner’s requirements.

In looking at the value net diagram taken from the article “The Right Game – Use Game Theory to Shape Strategy” (Brandenburger & Nalebuff, 1995), one can identify the other players in the markets and allocate them to their corresponding roles (the company itself, customers, substitutors, complementors and suppliers). Based on the value net diagram, two types of partnerships can be derived: vertical and horizontal partnerships. Vertical partnership involves the alliances between the company with customers or suppliers operating at different levels while horizontal partnership encompasses alliances between companies operating on the same level.

From my interpretation, it is through partnership that permits companies to access resources and skills that it may not have or may not be experienced in. For example the partnership between Google and Twitter in October 2009, Google wanted to integrate real time updates from Twitter in their search results. This would allow users to have the latest information when they searched about a topic someone twittered about which made their search results more comprehensive (http://googleblog.blogspot.com/2009/10/rt-google-tweets-and-updates-and-search.html). Yet depending on the product’s life cycle stage that it is currently in, different kind of partnership and strategic alliance types would be adopted.

During the presentations I found Brandenburger & Stuart’s (1996) article “Value-Based Business Strategy” interesting. It highlighted reoccurring terms from session one involving: value creation, value capturing, added value and value appropriation. It is understood that in creating value, one tries to capture a buyer’s willingness to pay and capture a supplier’s opportunity cost.

Value created = willingness to pay – opportunity cost

In capturing value it must be a positive added value to contribute towards value appropriation. Thus based on the values of one’s willingness to pay and on opportunity cost, it was possible to define and form strategies in how the company can capture value.

Reflections 3: IDM Technologies and Standards

Technology is rapidly improving and changing and because of this reason the digital world has followed suit and benefited in having more powerful processes available, more digital storage and having faster digital data transmission speeds. A shift has occurred as consumers are using the Internet to get information rather than turning to traditional media. Another shift was what Soe mentioned about the article by Alam and Prasad (2008) stating that convergence will happen where individual networks will converge onto the Internet as one network. This triggered two interesting topics that I have been following, cloud computing and the idea of Pranav Mistry’s device: Sixth Sense.

The Sixth Sense Pranav Mistry invented is a small and wearable camera / projector device around the neck. It allows the possibilities of integrating digital information to real world interaction seamlessly, pulling related information from the Internet of a particular object that may be in front of you. For example, if he looked at a flight ticket, the device will project on the ticket the real time updates of the flight details which could be about the flight delay due to weather conditions. For a full description of what the device is, see the following links at Ted Talks on youTube shown below. Convergence of networks is already happening and people can benefit as accessibility of information can be done effortlessly by having the Internet as the backbone.

Part 1:
http://www.youtube.com/watch?v=mzKmGTVmqJs

Part 2:
http://www.youtube.com/watch?v=MDFKYrSJefc

In J’s presentation on e-commerce business value matrix (Hsia et al 2008), he mentioned topics which linked back to the previous session on competitive advantage and creating value. The matrix discussed composed of dimensions of information based value creating process versus the customer decision process whereby each selected dimension provided a specific e-commerce value added experience. It provided what possible different services the business can adopt if they targeted at a specific information value and customer decision. I found this matrix intriguing that by integrating the competitive advantage and value, it allowed formulating business strategies which closely align back to the business’s e-commerce objectives and that it can be applied to any type of web store. This further emphasized the importance of the need in creating value within a business model.

Session 2 Reflections: High Tech Strategy

By the end of the lesson I learned that for a good strategic marketing plan, it involves the focus on customers and customer values addressing three things:

1) recognizing the firm’s competitive advantage,
2) identifying what value the firm is offering to their customers (value proposition) and
3) knowing how they will create and deliver this value to ultimately differentiate themselves from their competitors.

The power of creating and building customer value for a long period of time establishes a branding or reputation in the customer’s perception towards the product or service. An example that was given was the experience with Amazon’s online services of ordering of books which failed to arrive during the stated timeframe. When the person called to say they never received the books, Amazon immediately responded by sending the books directly to the customer again. It is because of how Amazon dealt with the matter that gave it a good reputation that ensures its sustainability making imitating services to lose out because they have yet to establish this relationship that Amazon has already formed.

Multiple business models were also presented. The first business framework was the entrepreneur’s business model (Morris, Schindehutte & Allen, 2003) looking at a matrix table of the three decision levels versus the six decision areas. This model allowed an in-depth analysis of the company to see whether it could be sustainable in the marketplace. A second business model discussed by (Shafer, Smith & Linder, 2004) looked at the importance of creating and capturing value and by using this model they can test and analyze the strategic choices made by the company. Other business models presented (Amit & Zott, 2001), they analyzed the novelty centered business model and the efficiency centered business model. Both strategic business models where the novelty centered business model looked at differentiated products entering early into the marketplace while efficiency centered business model focused on the reducing transaction costs giving it cost leadership which may lead to a higher customer volume base. The last business model discussed was the ADVISOR framework taken from the CISCO (2008) case study, it was a way to assess the feasibility of the services offered by a service provider again looking at creation of value proposition and capturing of value.

It could be seen that each business model discussed has its own objectives thus there is no one right business model that a company should follow. Businesses can adopt a combination of different frameworks however it should be an iterative, continuous process. The marketplace is constantly changing and for any business to succeed there is a need to analyze what approach do they plan to take, how they are going to achieve their goals and deciding whether the decisions they decide to make are viable to the market conditions. If not, changes will need to be made accordingly to ensure a business’s success.