Digital Strategy (MGT 857) Yale School of Management Fall-2 2015 Tuesday / Thursday 4:10 pm 5:30 pm Course Syllabus Version: October 24, 2015 Course Staff Instructor Vineet Kumar Evans Hall 5469 T: (203) 436-9657 E: vineet.kumar@yale.edu Teaching Fellow Jai Subrahmanyam E: jai.subrahmanyam@yale.edu Faculty Assistant Camille Costelli Senior Admin/Faculty Support T: (203) 432-8911 E: camille.costelli@yale.edu Course description Digital Technologies are changing the business world in a variety of different ways, and the design, creation and marketing of digital products is of increasing importance to many industries, not just limited to those commonly thought of as high-tech. This course will provide a structured framework developed by the instructor to examine how managers should think about the impact of digital on their business models. The course will involve a number of case discussions to illustrate these ideas, along with lectures. How are digital products and services fundamentally different? How should mangers think about the strategic choices they face in response to changing technology? How should firms transform themselves in response to digital disruption? Can digital technologies be leveraged effectively to provide a competitive edge? How does digital technology change the competitive structure of industries? Note: This course will not examine Internet or Social Media Marketing, which is covered extensively in MGT 552, Internet Marketing & Social Media Analytics. The course will introduce a new framework created by the instructor to structure our understanding of how digital technology is transforming business. The framework features a number of modules, with distinct lessons: Digital Natives and The Freemium Business Model Digital Disruption Digital Complements Digital Transformation
Course Website: Reading material for this course will be posted on Classesv2. As an experiment, I ll use Twitter to post articles and commentary related to the course. If you follow me and tweet me an article, I ll retweet it so everyone else can see that. @_vineetkumar (note the underscore _ before my name) We ll use the hashtag #MGT857 to mark tweets connected to this course. Grading Your course grade will be made up of the following components. Class participation (15 points) In-class Group Presentation (20 points) Individual Homework Assignment Write ups (40 points) Final Exam (25 points) You will be required to air your views in class, and will be evaluated on the quality and to a lesser degree, the number of comments you make. Please come prepared to each class by reading the assigned material and preparing for the discussion questions. The instructor might cold-call you at any time during class discussion to ask for your input, so please expect that. You are required to choose a combination of 4 assignments out of 5 to write up and submit through Classesv2. If you are unable to do this for any reason, please e-mail it to all the course staff by 3pm the day we discuss the material in class. No extensions or exceptions are possible. Course Expectations You are expected to read the required readings before the class session where we discuss the material. Readings are required, except for those marked optional. Your class participation grade will be adversely affected if you do not abide by the class norms. Specifically, the class norms include the following: Arrive on time and stay throughout the class. Walking into or leaving class during the lecture or discussion can be quite disruptive to everyone s learning experience. Only lie flat electronic devices in class unless pre-approved by instructor. No laptops allowed, except in case of disability certified by Yale SOM. Participate actively, but be courteous to your fellow students and course guests. If you have more than one violation, your class participation grade will be adversely affected. Please check with the instructor if you need more details regarding any aspect of these expectations. If you need an exception, you must ask the instructor in advance. The course will feature guest speakers from a number of companies in the industry. You are welcome to interact professionally with the guest speakers, please do check if you have questions. Final Exam The final is designed to test your comprehension of the major concepts and frameworks covered in class, and your judgment in applying them to new situations. It will require you to analyze situations, and make choices, like you are expected to do in analyzing each case.
Schedule of Class Sessions # Date Topic Notes (A) Introduction to Digital Strategy 1 Tuesday, October 27, 2015 Introduction to Digital Strategy CASE: Amazon, Apple, Facebook and Google 2 Thursday, October Digital Strategy in Practice Guest Speaker 29, 2015 (B) Digital Natives 3 Tuesday, November 3, 2015 CASE: Dropbox 4 Thursday, The Freemium Business Model November 5, 2015 (C) Digital Platforms: Disruptors & Complementors 5 Tuesday, Theory of Digital Disruption November 10, 2015 6 Thursday, Disrupting Marketing Communications November 12, 2015 (Inbound Marketing) Assignment 1 due (3pm) Assignment 2 due 7 Tuesday, November 17, 2015 Theory of Digital Complements 8 Thursday, November 19 Disrupting Money? CASE: BitCoin 9 Tuesday, Creating Complementarity in a Platform December 1, 2015 CASE: Zillow 10 Thursday, Complementing Professional Relationships December 3, 2015 CASE: LinkedIn, 2012 OR Guest Speaker (D) Digital Transformation 11 Tuesday, Digital Transformation of a Firm December 8, 2015 CASE: The New York Times 12 Thursday, Digital Transformation of an Industry December 10, 2015 Uber/Lyft and Real-Time Pricing 13 Tuesday, December The future of digital technology & 15, 2015 Course Wrap December 18, Final Exam Assignment 3 due Guest Speaker Assignment 4 due Assignment 5 due
(1) Introduction to Digital Strategy CASE: Amazon, Apple, Facebook and Google 1) Define the contested boundaries among Amazon, Apple, Facebook and Google. 2) For each contested boundary that you have identified, how is the contest likely to play out? How many contests give rise to winner-take-all markets? How many to always-a-share markets? How will the complex ecosystems, in which online businesses are built on top of other online businesses, and third-party sellers that rely on platforms, evolve? 3) Identify a firm that you know something about, for example a media company, a retailer, or manufacturing firm, with some involvement in the online economy. Which, if any, of the big four firms does it currently rely on? Might that reliance change? How might that firm hedge the risks it will face if there is a transition to one of the others? (2) Digital Strategy in Practice This session will feature a guest speaker who will discuss what digital strategy means to the CEO and others in a firm, and how it is implemented in practice. Digital Strategy Does Not Equal IT Strategy, Mark McDonald, Harvard Business Review https://hbr.org/2012/11/digital-strategy-does-not-equa/ Digital Strategy, McKinsey Quarterly http://www.mckinsey.com/insights/business_technology/digital_strategy (3) Digital Natives: Dropbox Case CASE: Dropbox: It Just Works 1) Dropbox is a late mover in a crowded space. What opportunity did Houston see? 2) What are the key elements of Dropbox s current business model? 3) When he applied to Y Combinator (see case Exhibit 2), what hypotheses did Houston hold about key elements of Dropbox s business model? As of June 2010, which of these hypotheses have been confirmed, and which have been discarded? 4) Imagine that at the same time Dropbox was founded, Google decided to target the opportunity that Houston had identified. How would Google s approach to pursuing G-Drive have differed from the approach that Dropbox s team followed? 5) What should Houston do about the decision posed at the end of the case, i.e., creating a separate version for small and medium-sized business (SMB) customers? What process should he use to make this decision? (4) Digital Natives: The Freemium Business Model The Complete Guide To Freemium Business Models, Uzi Shmilovici, TechCrunch URL: http://techcrunch.com/2011/09/04/complete-guide-freemium/ The Freemium Business model is the most commonly used model for digital products and services.
1) What s the typical fraction of paid users in freemium models? Is this lower or higher than you would have expected? Why? 2) Does the Freemium model require zero marginal costs to succeed? Why or why not? 3) What are the risks with adopting a Freemium business model? 4) Is there a link between product innovation and the freemium model? (5) Digital Disruption Introduction and Chapter 1 from Clay Christensen s book The Innovator s Dilemma. 1) What is a disruptive innovation? How is it different from a sustaining innovation? 2) Describe the disruption process. 3) What are the barriers to disruption succeeding? 4) What is surprising about disruption? 5) Did disruption typically come from within the industry or from the outside? Choose a couple of markets, and examine whether we will witness disruptive innovation over the next few years. Identify who and what are being disrupted, and by whom. (6) Disrupting Marketing Communications Chapter(s) from book on Inbound Marketing (posted under the session in Resources") TBD 1) What is Inbound Marketing? How is it different from outbound marketing? 2) When would inbound marketing be more or less likely to be useful? 3) Do you agree with HubSpot that the "rules of marketing" have changed? 4) Is Inbound Marketing a disruptive technology? Do you expect that it will disrupt traditional marketing? Why or why not? What criteria would you use to judge whether disruption has occurred? (7) Theory of Digital Complements Complements Questions: 1) What is a digital complement? Try and define it. How can you tell if a product or service is complementary or disruptive? Can you come up with a test? 2) We ve talked about the process of creating digital value. Is this process different for a complement compared with a disruptor? 3) How do these differ in terms of the business model? (8) Disrupting Money (Bitcoin Case) CASE: Bitcoin: The Future of Digital Payments Additional "Bitcoin: A Peer-to-Peer Electronic Cash System" by Satoshi Nakamoto. http://nakamotoinstitute.org/bitcoin/
"Why Bitcoin Matters", by Marc Andreesen: http://dealbook.nytimes.com/2014/01/21/whybitcoin-matters/?_r=0 "Why I'm Interested in Bitcoin", by Chris Dixon: http://cdixon.org/2013/12/31/why-iminterested-in-bitcoin/ "The Dawn of Trustworthy Computing", by Nick Szabo: http://unenumerated.blogspot.com/2014/12/the-dawn-of-trustworthycomputing.html "We Deserve Better Payment Products", by Nick Tomaino: https://medium.com/@ntmoney/we-deserve-better-payment-products- 24f661ad20cf#.24inkuy5j 1) Is Bitcoin the future of digital payments? 2) As an investor, which type of Bitcoin startup (business model) do you view as most promising? a. One-sided provider of merchant services (e.g. BitPay) b. One-sided provider of digital wallet services (e.g. Circle, Xapo) c. Two-sided provider of both merchant services and digital wallets (e.g. Coinbase) 3) For your preferred business model, what are its key sources of competitive advantage? (9) Creating Complementarity in a Platform CASE: Pricing and Partnership at Zillow 1) Why have U.S. residential real estate agents managed to sustain a 5%+ commission on home sales? Will the 5%+ fee withstand Internet competition? 2) If you were a residential real estate agent, would you view Zillow as friend or foe? Would you list your homes for sale and advertise on Zillow? 3) If you were on the board of a regional MLS, would you recommend that the MLS make available to Zillow a feed of your listings? Why or why not? 4) Is this a zero sum game? 5) What actions, if any, should Zillow management take to keep interested parties happy? (10) Complementing Professional Relationships CASE: LinkedIn (A) 1) What kinds of problems did LinkedIn set out to solve? 2) How successful has LinkedIn been in solving these problems? 3) Which of the options in the case help provide a better solution going forward? (11) Digital Transformation of a Firm CASE: The New York Times Paywall 1) Is the Paywall working? 2) How would you evaluate the current Paywall compared with the two prior ones? Do you think it is appropriately designed compared with the Financial Times or the Wall Street Journal? 3) Why are newspapers in trouble? What is the goal of The Times in creating the Paywall? 4) Should The Times actively manage its transition from print to digital? 5) Does the paywall seem like a good strategy for newspapers in general?
(12) Digital Transformation of an Industry Is Uber s Surge-Pricing an Example of High-Tech Gouging?, The New York Times http://www.nytimes.com/2014/01/12/magazine/is-ubers-surge-pricing-an-example-of-hightech-gouging.html In Praise of Efficient Price Gouging, MIT Technology Review http://www.technologyreview.com/review/529961/in-praise-of-efficient-price-gouging/ 1) How do Uber, Lyft and other firms in this space create value? 2) Do the firms have differentiated positioning 3) Is this a Winner-take-all market? Why or why not? 4) Is dynamic pricing fair to consumers and providers? (13) Digital Strategy: Course Summary and Exploring the Digital Future