How It Creates Value and How Can Companies Capture That Value.

Course objectives

How IT creates value and how can companies capture that value.

Team case assignment

1. an excel file 2. A brief report 2 pages

Midterm

Session 8

Cover all sessions 1-7

Paper based open book exam

Final project

Project plan is due in session 4 and the final report(7-10 pages) is due before the start of session 10.

Class 1 10/02/13

Elements of a business model

* value disciplines

* profit model

* logic(what business process you put in)

Elements of Business Model

Value Discipline

* Operational Excellence---Cost, reliability, timeliness, etc

Product Leadership(focus on product and service performance)

* Deliver best products/services

* Development speed and time-to-market

Customer Intimacy

* Tailor products/services to customers’ unique needs

* Collection, management and use of customer data

EXAMPLE

Profit Model

1. Revenue Models

Transactional

* Metered

* Outcome-based

Subscription

Licensing

2. Cost Structure

* Fixed cost vs. variable cost

How has IT changed the revenue models and cost structures in some business?

1. Online shopping instead of traditional stores. Eliminate fixed cost, you don’t have to hire many sales persons.

2. Pandora and ITunes (subscription based model)

IT-enabled profit models

1. Revenue Model

* Create new sources of revenue

e.g, digital/virtual products

* Enable new revenue models

e.g, outcome-based( most online media don’t need to pay if customer didn’t click it, not like traditional newspaper model)

* Improve traditional revenue models

Dynamic or personalized pricing

2. Cost Structure

* Digitation of products and business processes

Wal-Mart Case

Amazon.com case

Operational excellence

---low cost

---Timeliness

Role of IT

Justin time---own inventory---inventory outsourcing (become intermediary)

Customer intimacy

---Personalized recommendation

Benefit:

1. Lower search cost...