Nicolaj SiggelkowDavid M Knott Professor
For worksheets, podcasts, case studies, and more information on the book, please see our website: connected-strategy.com
Here is the pitch.
The Internet-of-things, the sharing economy, robo investment advisors, wearable fitness devices, remote health care operations, peer-to-peer payment systems … business executives in many industries are currently buffeted by a broad range of technological developments that enable new business models. The common thread among all of these developments is that firms are creating new and richer customer experiences by connecting to customers in a continuous way, providing services and products as the needs of customers arise. Moreover, by creating new connection architectures between customers and suppliers, firms redefine the way they produce the products or services they provide.
Consider a few examples: Disneyland, often times referred to as the happiest place on earth, might also be in the race for being one of the most connected places on earth. In the old days, when you visited Disneyland, you would purchase a ticket at the entrance to the park and then decide which rides and attractions would be fun to visit. When hungry, you would head to one of the restaurants. And, when faced with a long wait at Magic Mountain, you would simply decide to come back a couple of hours later. While rides and attractions have mostly stayed the same, technology now has redefined how Disney connects with the visitors. Well before the visit to the theme park, you now get mailed a MagicBand, a wearable device that serves as your entry ticket to the park, as a digital wallet paying for food and souvenirs, and a key to your hotel room. Now, when hungry, you place an electronic order. Thanks to location sensors, your food will find you. When lines get long, technology attempts to convince you that you really don’t want to go to Magic Mountain and instead nudges you to go to another corner of the park.
Text-books for college students have gone through a similar transformation. In the old days, students would buy or rent their text-book, read the assigned chapter (or at least intend to do so) and then prepare for their final exam by tackling a set of practice problems at the end of the book chapters. Now, McGraw Hill Higher Education, for example, has abandoned the word ‘book’ and instead aims to sell digital learning experiences. Not only are books fully digital, they are also smart. As students go through the semester, technology tracks their reading. When struggling with an assignment, the book redirects the student to the appropriate chapter and potentially offers a short pre-recorded video of how to handle a similar assignment. Professors no longer have to write exams, they just specify the content they want to test – the smart book creates the exam for them. Exams then, of course, are automatically graded and grades then submitted to the university’s academic records.
To understand these new business challenges and opportunities in a systematic way, we have developed a framework that allows the reader to map the new business models according to what kind of customer experience they create and how the firm is connected to the value chain around it. We distinguish between four connected customer experiences, ranging from firms responding to customer orders (“respond-to-desire”) all the way to the firm making decisions for their customers and providing the products or services automatically. As far as the firm’s connection to the value chain is concerned, connectivity allows firms to act as connected producers (like Disney or McGrawHill), but also enable other business models such as market makers and operators of peer-to-peer platforms.
We show how our framework can be used to create new business models that exploit the new technological opportunities that have made more connected strategies feasible. Thus, we provide answers to question such as:
- How can you use connectivity to provide a better user experiences to your current and future customers?
- How can you lower your costs by creating a connected value chain?
- What new growth opportunities arise because of this increased connectivity?
- Where is your current business at risk of being disrupted by a new start-up that uses connectivity to serve customers that you currently serve using expensive capital