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Chapter 13

Creating Innovative Organizations

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LEARNING OUTCOMES

1. Compare disruptive and sustaining technologies and explain how the Internet and WWW caused business disruption

2. Describe Web 1.0 along with ebusiness and its associated advantages

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DISRUPTIVE TECHNOLOGIES AND WEB 1.0

• Digital Darwinism – Implies that organizations which cannot adapt to the new demands placed on them for surviving in the information age are doomed to extinction

• How can a company like Polaroid go bankrupt?

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Disruptive versus Sustaining Technology

• What do steamboats, transistor radios, and Intel’s processors all have in common?

– Disruptive technology – A new way of doing things that initially does not meet the needs of existing customers

– Sustaining technology – Produces an improved product customers are eager to buy

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Disruptive versus Sustaining Technology

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Disruptive versus Sustaining Technology

• Innovator’s Dilemma discusses how established companies can take advantage of disruptive technologies without hindering existing relationships with customers, partners, and stakeholders

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Disruptive Versus Sustaining Technology

• Companies that capitalized on disruptive technology

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The Internet – Business Disruption

• One of the biggest forces changing business is the Internet

• Organizations must be able to transform as markets, economic environments, and technologies change

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Evolution of the Internet

• The Internet began as an emergency military communications system operated by the US Department of Defense - 1969

• Gradually the Internet moved from a military pipeline to a communication tool for scientists to businesses

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What is the Internet?

- A world-wide network of computer networks (some are not computer at all, like network printers)

- Since 1982, all connections between computers use a low-level communication protocol called TCPTCP( Transmission Control Protocol)/IPIP( Internet Protocol)

- TCP/IP hides the differences among devices connected to the Internet

- In most cases a higher level protocol runs on top of TCP/IP

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Internet network architecture

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No one owns the Internet.

It has no formal management organization.

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The Internet and World Wide Web – The Ultimate Business Disruptors

• World Wide Web (WWW) – Provides access to Internet information through documents including text, graphics, audio, and video files that use a special formatting language called HTML – hypertext markup language

• Hypertext Transport Protocol (HTTP) – The Internet protocol Web browsers use to request and display Web pages using

• URL – universal resource locator or web address

• Web browser – Allows users to access the WWW13-13

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The Internet and World Wide WebThe Ultimate Business Disruptors

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Evolution of the Internet

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Internet Growth Trends

• 1977: 111 hosts on Internet• 1981: 213 hosts• 1983: 562 hosts• 1984: 1,000 hosts• 1986: 5,000 hosts• 1987: 10,000 hosts• 1989: 100,000 hosts• 1992: 1,000,000 hosts• 2001: 150 – 175 million hosts• 2002: over 200 million hosts• 2004: over 800 million hosts• 2010, about 80% of the planet are on the Internet

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What is the difference between the Internet and the Web?

• The Internet is a physical network

• The World Wide Web is an Internet Application

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Web or Internet?

• The Internet supports variety of protocols, but the most common one is HyperText Transfer Protocol (HTTP)

• There are several others application and protocols (telnet, FTP, mailto, file, news, VoIP etc.)

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The WWW: What and How

Like all Internet applications, WWW is fundamentally made up of two components:

• A Client (Web Browser)

• A Server (Web Server)

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The Browser and The Server

• The original static model of Web Serving:

• The HyperText Transfer Protocol (HTTP) enables web pages to be requested and transferred between the browser and server

WebBrowser

WebServer

HTTP Request

Web Page

FileSystem

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Evolution of The World Wide Web

• File formats offered over the WWW

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Web Browsers

• Web Browsers are clients - always initiate, servers

react • First browsers were text-based

• Mosaic - in early 1993

– First to use a Graphical User Interface (GUI), led to explosion of Web use

• Most common Web browsers are: MS Internet Explorer, Google Chrome, and Mozilla FireFox

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Web Servers

• They are computers running programs that provide documents to requesting browsers. They are slave programs.

• Provide responses to browser requests, either existing documents or dynamically built documents

• The most commonly used Web servers are Apache, MS Internet Information Server (IIS)

• Other servers include FTP server, Telnet server, e-mail server.

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Web 1.0 – The Catalyst For Ebusiness

• Web 1.0 – A term to refer to the WWW during its first few years of operation between 1991 and 2003

• Ecommerce – Buying and selling of goods and services over the Internet

• Ebusiness – Includes ecommerce along with all activities related to internal and external business operations ( ex. Web-based CRM, SCM, ERP,…)

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Web 1.0 – The Catalyst For Ebusiness

• The Internet has had an impact on almost every industry including

– Travel (Travelocity)

– Entertainment (iTunes)

– Publishing (LuLu)

– Financial services

– Retail (Amazon)

– Automobiles ( Auto-trader)

– Education and training (Cisco)13-25

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ADVANTAGES OF EBUSINESS

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Expanding Global Reach

• The Internet’s impact on information

– Increased richness

– Increased reach

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Expanding Global Reach

Richness: The amount and quality of information that a business can supply to and collected from customers

Reach: Measure of how many people a business can connect and how many products it can offer those people.

• There are tradeoffs between Richness and Reach

• The Internet eliminates the tradeoff between richness and reach of information

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Reach & Richness

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Opening New Markets

• Intermediary – Agents, software, or businesses that provide a trading infrastructure to bring buyers and sellers together

– Disintermediation

– Reintermediation13-30

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Opening New Markets

• Disintermediation: the removal of organizations or business process layers

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Reintermediation

• Reintermediation – using the Internet to reassemble buyers, sellers, and other partners in a traditional supply chain in new ways

INFORMATION SYSTEMS @ XINFORMATION SYSTEMS @ X

ReintermediationReintermediation

• Reintermediation:Reintermediation: The shifting of the intermediary The shifting of the intermediary role to a new source ( role to a new source ( e.g. Information Brokerse.g. Information Brokers))

Auto DealerAuto DealerInfo BrokerInfo Broker

(Edmonds.com)(Edmonds.com) ConsumerConsumer

Auto DealerAuto Dealer ConsumerConsumer

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Generating revenue on the Internet

• Generating revenue on the Internet

– Online ad (banner ad) - Box running across a web page that contains advertisements

– Pop-up ad - A small web page containing an advertisement

– Associate program (affiliate program) - Businesses generate commissions or royalties (Google)

– Viral marketing - A technique that induces websites or users to pass on a marketing message (Hotmail)13-34

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Measuring E-Business Success

• Most companies measure the traffic on a Web site as the primary determinant of the Web site’s success

• However, a large amount of Web site traffic does not necessarily equate to large sales

• Many organizations with high Web site traffic have low sales volumes

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Measuring E-Business Success

• Web site traffic analysis can also include:– Clickstream

• Counts the number of users visited a website and clicked on an ad

– Cookie• Small file saved on local client machine sent by the

business server

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Measuring E-Business Success

• Clickstream data tracks the exact pattern of a consumer’s navigation through a Web site

• Clickstream data can reveal:– Number of page views– Pattern of Web sites visited– Length of stay on a Web site– Date and time visited– Number of customers with shopping carts– Number of abandoned shopping carts

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Website Visitor Tracking

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Opening New Markets

• Mass customization – The ability of an organization to tailor its products or services to the customers’ specifications

• Personalization – Occurs when a company knows enough about a customer’s likes and dislikes that it can fashion offers more likely to appeal to that person

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Web Site Personalization

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More web personalization

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Interactive Marketing/Personalization

How do web How do web sites know sites know it’s you?it’s you?

Answer: Answer: using a using a

“cookie”“cookie”

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How a cookie worksA cookie is a tiny file A cookie is a tiny file deposited on the user’s deposited on the user’s computer hard drive computer hard drive when an individual visits when an individual visits certain Web sites; used certain Web sites; used to identify the visitor and to identify the visitor and track visits to the Web track visits to the Web sites.sites.