Digital Business E-Book

Jens Christensen

• Herausgeber: Books on Demand
• Kategorie: Fachliteratur
• Sprache: Englisch
• Veröffentlichungsjahr: 2015

Seitenzahl: 605

Beschreibung

This book provides a holistic picture of the digital age as it emerges in the 2010s. On the background of business analysis concepts from firm to megatrends and all business sectors of the World, the digital age of information systems and digital drivers are thoroughly laid out.

Leseprobe

Contents

Abbreviations

Chapter 1 Introduction

Chapter 2 Business Analysis

Business

The Firm

The Value Chain

Sustained Competitive Advantage

Functions of the Value Chain

Manufacturing

Procurement/Supply Chain

Marketing and CRM

Corporate Finance

Human Resources

Communications

R & D

Data Center

Strategy

Business Model

The Organization

Definition

Importance of Organizations

Organizational Design

Organizations and IT

Project Management

The Industry

Positioning

Clusters

Nations

Stages of National Development

Megatrends

Globalization

Digitization

Biotechnology

Nanotechnology

Resources and Sustainability

Economic Growth

Demographic Change

Urbanization

Individualization

Supplementary Methods

PESTLE

SWOT

Four Corners

Early Warning

Case Studies

Chapter 3 Business Sectors

Business World

Food

Agriculture

Food Industries

Dairy Cluster

Beverages

Forest, Paper & Packaging

Textiles, Clothing & Accessories

Minerals and Metals

Construction

Energy

Chemicals

Healthcare, Pharma & Medical Equipment

Personal Care

Transportation

Automotive

Aircraft

Shipyard

Trains and Infrastructure

Airline Passenger Service

Freight

Bicycle

Wholesale

Retail

ICT

Finance & Insurance

Business Services

Facility Services

Tourism, Leisure, Entertainment & Media

Military

Police and Courts

Social Care

Education & Research

Government

Non-Governmental Organizations

Crime

Household and Family

Chapter 4 Digital Systems

IT Infrastructure

Eras of IT Infrastructure

Infrastructure Components

New Hardware Platforms

Networking

Databases

Business Intelligence

Analytical Tools for Structured Data

Analytical Tools for Unstructured Data

Databases and the Web

Enterprise Systems

Core Business Processes and IT

Information Systems of the Value Chain

Enterprise Software

Supply Chain Management Systems

Customer Relationship Man. Systems

Digital Strategy

Chapter 5 Digital Drivers

The Digital Age

Mobile

History of Mobile Technology and Usage

Mobile in the Broad Electronic Picture

Mobile Sector

Mobile Enterprise

Cloud Computing

Social Media

Social Media Industry

Social Media in Organizations

Competition in the Sharing Economy

Big Data

Accelerating Data Production and Traffic

The Gap between Data Growth and Value

The Internet of Things

Smart Manufacturing

Security

Interface

Gamification

Games in the Value Chain

Digital Business Models

Ecosystem

Social Media Business

Freemium

E-Commerce

Chapter 6 Conclusions

Index

Abbreviations

ABC

Activity Based Costing

B2B

Business-to-Business

B2C

Business-to-Consumer

BI

Business Intelligence

BPM

Business Performance Management

BYOD

Bring Your Own Device

CAD

Computer Aided Management

CAM

Computer Aided Manufacturing

CAN

Controller Area Network

CEO

Chief Executive Officer

CFO

Chief Financial Officer

CIM

Computer Integrated Manufacturing

CIO

Chief Information Officer

CMS

Content Management System

CPU

Central Processing Unit

CTO

Chief Technology Officer

DBMS

Database Management System

EDI

Electronic Data Interchange

EMM

Enterprise Mobility Management

ERP

Enterprise Resource Planning

EVA

Economic Value Added

FMS

Flexible Manufacturing System

FTP

File Transfer Protocol

DGP

Gross Domestic Product

GE

General Electric

GM

General Motors

GPS

Global Positioning System

GPU

Graphics Processing Unit

HANA

High Performance Analytics Appliance

HP

Hewlett-Packard

HR

Human Resources

HRM

Human Resources Management

HTTP

Hypertext Transfer Protocol

HVAC

Heating, Ventilation, and Air Conditioning

IaaS

Infrastructure as a Service

ICT

Information and Communications Technology

IoE

Internet of Everything

IoT

Internet of Things

IP

Internet Protocol

IT

Information Technology

KPI

Key Performance Indicator

LED

Light-Emitting Diode

LTE

Long-Term Evolution

MAM

Mobile Applications Management

MCM

Mobile Content Management

MDM

Mobile Device Management

MES

Manufacturing Execution System

M-form

Multi-functional/divisional

MIT

Massachusetts Institute of Technology

M2M

Machine-to-Machine

MRI

Magnetic Resonance Imaging

MRP

Manufacturing Resource Planning

NGO

Non-Governmental Organization

OLAP

Online Analytical Processing

OS

Operating System

PaaS

Platform as a Service

PLC

Programmable Logic Controller

PLM

Plant/Product Lifecycle Management

PESTLE

Political, Economic, Social, Technological, Environmental, Legal

RAM

Random Access memories

R & D

Research and Development

RFID

Radio Frequency Identification

ROI

Result Of Investment

SaaS

Software as a Service

SME

Small and Medium Sized Enterprise

SMS

Short Message Service

SOA

Service Oriented Architecture

SWOT

Strengths, Weaknesses, Opportunities, Threats

UPS

United Parcel Service

XML

Extensible Markup Language

Chapter 1

Introduction

In the 1990s and 2000s, computers and the Internet became part of people’s work and daily life in developed and increasingly developing countries. This became even more so as were entered the 2010s. Digital technologies took hold of all devices and information processes. In our vocabulary, digital replaced information and communications technology and signaled a new transformation of societies. Digital economy became titles of books and research to capture a more profound change of the economy. Some even talked about the arrival of the digital age.

In this context, we shall use the concepts of ‘digital business’ and ‘digital age’ to denote recent transformations. The prevailing economy of the world is a market economy or capitalism, which is based on the activities and competitiveness of businesses and their applied technologies. Although national governments are important and necessary for the economy as well as its organizations and people (such as, infrastructure, rights, and order), the wealth and values of society are created by companies. That is why we start by laying out the principles and drivers of business in the first part. In addition, we outline the subsectors of the global economy and their leading and consolidating companies. In the wake as well as the front of new technologies and economic drivers, we see thousands of innovative firms arise throughout the world. They are important characteristics of contemporary developments, but they cannot replace the dominant position of consolidated businesses. In order to remain leaders of their industries, they also tend to merge with the most advanced and successful start-ups. That is why big business form and continue to form the core of modern capitalism.

The concept of ‘digital age’ is used to signal that we are entering a new age. Not only are digital technologies becoming ubiquitous, they are also making their way into the heart of business and social activities. In this context, we focus on how digital technologies are developing and transforming business in the contemporary world of the 2010s. In the second part of the book, we seek to present the nature and developments of new digital technologies which are increasingly affecting business. This includes the core enterprise systems as well as the rapidly new and influential mobile, cloud and social technologies and businesses. In addition, recent new trends of embedded systems in things are likely to rise in importance during the second half of the 2010s. That is the case with new interfaces and the use of games in business activities.

Multiple sources are used in order to create a meaningful and holistic picture of contemporary developments. First of all, I draw on a general understanding of drivers and trends in global business and technology, as they have taken place in recent decades. Next, a palette of research in books and articles has been applied to lay out the details of business and new technologies. Finally, many kinds of market research, white papers, reports, and company websites are indispensable for an updated and practice near coverage of realities.

Chapter 2

Business Analysis

Business

Market economy is the primary driving force and contextual framework of all societies of the world. It is based on the relationship between firms that supply goods and services and firms and consumers that demand these goods and services. While firms and consumers choose products or services from the companies that meet their needs in the best way, firms compete to gain a profitable position by being the preferred supplier of these goods or services. Firms and markets are segmented in matters of product and geographic scope, and the business world is divided into numerous industries and markets. Understanding the dynamics and structure of business is based on fundamental concepts of competitiveness on the one hand and overall market trends that drive consumers and businesses on the other.

Government and governmental agencies and institutions, the state, are not directly part of the market economy. Indirectly the state is based on the market economy through taxes. As current taxes and the use of tax funds represent a large proportion of national GDPs, they affect businesses and societies in many ways. It influences the way companies make investments and the level of salaries. By social payment transfers, it increases the purchasing power of unemployed and disabled people. The state invests in and supports functions such as military, security, police, justice, education and research as well as health and social care. Governments are heavily involved in infrastructure building, including roads, ports, airports, energy, sewers, and telecommunication. So, they are important customers for many sectors of the economy. Generally, the state affects business and firms by way of laws and regulations, securing property rights, standards, etc. Accordingly, there is a strong interrelationship between business and state, but business always comes first.

In this context, we shall mainly focus on the private sector, because that is where the fundamental wealth and values are created and the drivers of society are working. Governmental organizations just exist in the wake of business and on the basis of taxes drawn from the value creating market economy. The firm is the core unit of business, and the crucial challenge to any business is to become and stay competitive in a dynamic business environment. In the following, we outline the rationale of the firm, the industry, and the broader context of clusters, nations, globalization and other megatrends. The purpose is to understand how a company develops and sustains a competitive advantage, focusing on its sources and drivers as well as the nature of these drivers. In addition, a whole section presents the various business sectors of the global economy.

The Firm

The Value Chain

Competitive advantage results from the way firms organize and perform discrete activities.1 Firms create value for their buyers through a unique organization of these activities. This value is measured by what buyers are willing to pay for a company’s products or services and how many buyers who are willing to do so. A firm is profitable if this value or income exceeds the total cost of performing all the required activities. A firm gains competitive advantage over its rivals, either by providing value more efficiently than its competitors (lower cost), or perform its activities in a way that creates greater buyer value at a premium price than its competitors (higher value).

The Value Chain

Source: www.wikpedia.org.

The activities of any firm can be divided into a series of operations that might be called the value chain. Activities can be divided into two groups. One group might be named ‘primary activities’, which include supply, production, marketing and sales, and after-sale service, i.e., the actual production of products and services. Another group might be called ‘support activities’, which include the management and support of the primary activities and thereby the whole company, such as procurement, IT, HR, finance, R & D, communications and marketing, and overall strategy.

Strategy determines the way a firm performs its activities and organizes its value chain. The activities’ importance to competitive advantage varies in different industries. In most production industries, for instance cars, technology is crucial as well as supplies. Service industries such as marketing and architecture depend in a higher degree on professional skills. Generally speaking, recent developments have clearly upgraded the importance of IT and strategy.

The Value System

Source: www.wikipedia.org.

A firm is more than the sum of its activities. A firm’s value chain is a system or network of connected activities. The connection or linkage means that the way one activity is performed affects the cost or effectiveness of other activities. In order to achieve competitive advantage from such connections, they must be integrated according to its strategy. For instance just-in-time delivery without costly inventory requires careful coordination of supplies and sales. Competitive advantage arises from managing the value chain as a system. Improvement of a company’s competitive position is often the result of reconfiguring the value chain, for instance outsourcing of varies parts of the value chain in order to be able to focus more on the core competence. The task of strategy is to create a unique organization of the value system enabling the firm to provide unique values to its customers.

A firm’s value chain is part of a larger stream of activities that may be termed the value system or more often called the supply chain. The supply chain includes suppliers of products and services, who provide inputs to the firm’s value chain, and distribution channels to reach end users. As a result of globalization and digitization, competitive advantage is increasingly depending on how a company can manage this entire and growing system and network of interrelated companies (see below, the section on globalization).

Firms create competitive advantage by devising and marketing new and better ways of competing in an industry. This is what is meant by innovation. Innovation includes both improvements in technology and products as well as better ways of doing things. It might include product changes, process changes, new approaches to marketing, new forms of distribution, new markets. Much innovation is incremental, rather than radical. Incremental innovation depends more on organizational learning than from technological breakthroughs or R & D efforts. Incremental innovation is based on investments in skills and knowledge and other assets.

Innovations often create competitive advantage that brings about changes in the strength of rivals in an industry, particularly if some firms fail to respond to new initiatives. For example Swiss watch producers overcame the challenge of electronic watches by upgrading design and specialized functions. New technology can even reconfigure an industry, as was the case with the advent of the smart phone. The most typical causes of innovations that shift competitive advantage are the so-called megatrends (see below, the section on R & D).

Sustained Competitive Advantage

It is vital for companies to make competitive advantage lasting. The sustainability of competitive advantage depends on three conditions. The first is the order of advantages. Lower-order advantages, such as cheap labor or materials, are relatively easy to imitate. In this case, companies primarily compete on costs, including low-cost countries or economies of scale using easily available technology. Cost advantages disappear, however, when undermined by even lower-cost labor countries and new technology.

In contrast, higher-order advantages are more durable. They include for example unique products and services, brand reputation, and high barriers of entry for newcomers, based on advanced skills and capabilities. They make up the second condition. These higher-order advantages depend on history. I.e., they are the result of often many years of sustained investment and continuous development of core competences, located in specialized facilities and unique innovative knowledge capabilities. Unlike low-cost, such special and dynamic competencies are very difficult for competitors to copy.

The third condition of sustained competitive advantage is constant improvement and upgrading. The source of this advantage is the mentioned higher-order core competencies, but such superiority might vanish if management rest on its laurels and continue to upgrade capabilities according to market developments. To do so, any company must be able to change and adapt to its business environment. In times of radical transformation as in recent years, this might require a ‘creative destruction’ of old advantages in order to carry out a needed upgrading of a company’s competitive advantage. Such change of strategy and business model is difficult, because a company’s strategy is embodied in its core competencies, including skills, specialized facilities, and brands. A general reorganization of businesses has taken place during the past couple of decades, eventually turning them into market oriented, flexible, and innovative organizations. As a result of rapid technological developments, this process is speeding up during the 2010s, causing much disruption and change of business models.

Functions of the Value Chain

Each function within the value chain is developing according to a combination of its basic purpose and the external dynamics of business and technology.

Manufacturing

Manufacturing has experienced two radical transformations in the past century.2 The first and fundamental change came with the introduction and breakthrough of the so-called ‘American system’. It consisted of the following methods: standardized interchangeable parts, a high division of labor as a basis of the assembly line, mechanized and eventually automatic machine tools, electricity, mass production, and professional manufacturing management. In addition to this manufacturing system, all other parts of the value chain developed similar professionalized functions, creating the new management paradigm of a multifunctional organization.

History of manufacturing systems

This original American system dominated American manufacturing during most of the 20th century and spread from the USA to Western Europe, Japan and other advanced economies after the Second World War, and eventually to newly industrialized countries. Furthermore, the rationality of professionally managed functions diversified into governmental organizations, too, as the modern bureaucracy.3

Since the 1960s and 1970s, electro-mechanical and computer-based tool-makers gradually entered production technologies. Single machines were combined into whole automated factories, so-called computer-aided manufacturing (CAM), and technical design, called computer-aided design (CAD), during the 1980s. This saved costs and labor, but it did little to really increase productivity.

The true revolution of the original American system, or perhaps better its radical transformation, did not occur until the 1990s and beyond. This was the so-called ‘lean manufacturing’ system. It was a management philosophy derived from the Japanese ‘Toyota production system’ or Toyotism.4 Toyota and other Japanese manufacturers focused much on reducing waste. A key concept in Toyotism and Lean Management is the identification of which steps add value and which don’t. By classifying all process activities into these two categories, it is possible to start improving value creation and eliminating non-value activities. Wastes to be removed in order to realize lean management (and other similar methods, for example Six Sigma) include: overproduction, inventory, waiting (for the next step in a process), extra-processing (more work or higher quality than demanded), defects, motion (unnecessary movements by people), non-utilized talent, transportation (unnecessary movements of products and materials). A business process reengineering project was carried out to achieve the primary goals of heightened productivity.5

All leading organizations of advanced economies and all companies striving for international competitiveness reorganized their business accordingly. In the end, all firms had to follow suit in order to survive. Lean management spread to all kinds of organizations, even governmental ones. Globalization of the economy and the liberalization of markets had created new business conditions characterized by rapid development and intensive competition. These changes called for organizational transformation.

Four other dimensions were included in this radical business change. First, the organization should focus determinedly on its core competence and eventually outsource all non-strategically important activities. Second, the value chain as well as the supply chain must be coordinated in a continuous flow connected to the marketplace and focusing on customers, i.e., a demand-driven firm contrary to the supply driven organizations of the previous age. Third, IT and business had to be aligned. An adequate IT infrastructure and relevant software must be adapted to business strategy and integrated into the organizational infrastructure and value chain, taking advantage of new non-legacy technology and common standards. Otherwise neither higher productivity nor globalization could come true. Fourth, the organizational culture had to be changed. The traditional we-and-them contradiction between management and employees was incompatible with the new change management objectives. Everybody and all activities of the organization must focus on core competence and value creation, creating a new organizational culture.

In this way, the radical change of manufacturing led the general transformation of business that took place in the 1990s and beyond.

Operations management and IT

Operations management is the more practical dimension of managing manufacturing. It is concerned with overseeing, designing, and controlling the process and costs of production and redesigning of business operations in the production of goods and services, i.e., manufacturing and the process that converts inputs (raw materials, components, labor, and energy) into outputs (goods and services).6

Historically, around 1900, operations management originated in large American corporations’ use of systematic analysis and measurement of work performance, materials, machines, and logistics.7 Plans were refined in the following decades with the spread of mass sourcing, mass production and mass distribution (material resource planning). During the Second World War, operations research was widely used to optimize production and logistics. The next step in the development of manufacturing management came with the rise of modern computer systems in the 1960s and beyond. Systems of material requirements planning for supply and master production schedule plans for manufacturing were developed by IBM on its mainframes, first separately and next integrated and run on a database management system. In the 1980s, these so-called MRP II-systems on mainframes emerged as tools for the integration of all aspects of the manufacturing process, including materials, finance, and labor, based on a centralized database. The technology of the 1980s, however, was not advanced enough to provide the speed and capacity to run these systems in real-time. Furthermore, high prices made them prohibitive for most businesses.

The reorganization of the 1990s along with rapid advances in technology led to the more affordable enterprise systems that most companies of all sizes use today, i.e., Enterprise Resource Planning (ERP). Continuous advances in technology and the breakthrough of the Internet since the 2000s have made ERP systems increasingly advanced – and integrated with connected systems of suppliers (SCM) and customers (CRM). These systems do not deal with the proper manufacturing process, requiring more technical systems.

One is embedded technology or system, i.e., dedicated or programmable computer systems in physical products such as machine tools, assembly lines, robots, transportation vehicles, medical equipment, durable goods, energy, etc.8 With the rapid spread of wireless sensors, people and companies are being able to measure, monitor and regulate more and more parts of the physical world, creating the so-called ‘Internet of things’ and the potentials of Augmented reality. While ERP systems are developed by software companies, embedded technology mostly is provided by industrial firms as crucial parts of their machinery products.

The other technology in addition to ERP is Product lifecycle management (PLM).9 PLM is the process of managing the entire lifecycle of a product from inception, through engineering design and manufacture, to service and disposal of manufactured products. PLM managers the total lifecycle of companies’ products by integrating people, data, processes and business systems.

A third system is ‘Manufacturing process management’ (MPM) and related systems.10 MPM is a collection of technologies and methods used to define how products are to be manufactured. MPM differs from MRP and ERP, which is applied to plan the ordering of materials and other resources, set manufacturing schedules, and compile cost data. MPM is used to make assembly lines more efficient with the aim of reducing lead time to product launch, shorter production times and reduced work in progress and inventories as well as allowing rapid response to product changes. MPM include several fields of technology and functions. Production process planning, or scheduling, is an information system that coves the planning and analysis of work flow and assembly. In manufacturing, the purpose of scheduling is to minimize the production time and costs, by telling a production facility when to make, with which staff, and on which equipment. Computer-aided manufacturing (CAM) is the use of computer software to control machine tools in manufacturing components or more generally, the use of a computer to assist in all operations of manufacturing plant (planning, management, transportation, and storage). CAM is a subsequent computer-aided process after computer-aided design (CAD).

CAD is the use of computer systems to assist in the creation, modification, analysis, and optimization of a product design. It creates a database for manufacturing. CAD has seen radically technological advances and is used in many contexts and industries during recent decades, including rapid prototyping, 3D modeling, scanning, rendering, printing, simulating, and films animating. Leading suppliers of CAD systems are Autodesk, CATIA (Dessault Systèmes), and NX (Siemens PLM Software).

In addition to CAM and CAD systems, Computer-aided engineering (CAE) systems have been developed for engineering analysis tasks. CAE is used to analyze, validate, simulate and optimize, for example, the robustness of components and assemblies, casting, fluid flows, the dynamic behavior of interconnected bodies, such as engines and aircraft, and safety in nuclear reactors. CAE systems are important supporters for design teams.

Today, all these manufacturing-oriented systems are completely integrated as computer systems control the entire production process, creating computer-integrated manufacturing (CIM) and flexible manufacturing systems (FMS) as well as rapid manufacturing (using 3D printing).

3D printing is various computer methods of making three-dimensional objects, where successive layers of material are laid down.11 A 3D printer is a type of industrial robot. 3D printable models may be created with CAD or via a 3D scanner and even a digital camera. 3d scanning is a process of analyzing and collecting digital data on the shape of a real object. Based on this data, three-dimensional models of the scanned object can be produced. In the 2010s, 3D printing seems to move from an emerging to almost a mature technology, used in prototyping, design and manufacturing of objects based on polymer, metal, and other materials in industries such as, architecture, construction, automotive, aerospace, defense, medical, fashion, etc. Still an emerging technology, 3D printing will most likely have disruptive consequences, as it enters a more mature stage.

Except for IT providers of ERP, PLM, CAD and other supporting systems, strategic embedded computer systems in all manufactured products and manufacturing plants are part of the core competences of industrial competences. I.e., producers of cars, airplanes, tractors, heavy machines, weapons, computers, and production plants, etc., also provide the crucial information systems to run the machines. As a result, the manufacturing sector and its technology and organizations form the core of all industrialized societies and include a huge number of industries and the leading corporations of the global economy, such as GM, GE, Ford, VW, Toyota, Boeing, Airbus, Lockheed, Caterpillar, Kawasaki, John Deere, Mitsubishi, IBM, GE, AT&T, etc. (see the section on business sectors below). The growing importance of software as well as data in manufacturing and after-service is starting a transformation process of these industries, as their focus move from physical objects to software and data, approaching the ICT sector, too.

Procurement/Supply Chain

Procurement is the acquisition of goods and services from external sources. Factors of cost-benefit, value, and risk are involved in procurement decisions. Procurement may be divided in two: direct procurement, which is production-related procurement, and indirect procurement, which is non-production related procurement. Today, direct procurement has been replaced by the concept of supply chain management (SCM).12 SCM is the vital part of a firm’s relationships with suppliers, but it is more than this. While procurement more or less is considered a separate function originating in past organizational structures, SCM includes new business thinking and practice. A holistic and value creating perspective is applied to encompass all activities from raw material to consumption.

SCM is the management of the flow of goods. It includes the movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption. It is the object of SCM to create net value, build a competitive infrastructure, and synchronize supply with demand. The full vertically integrated supply chain with upstream suppliers and downstream customers began to spread in the 2000s and even more in the 2010s. Integrated supply chains are highly dependent on IT. It started with the development of electronic data interchange (EDI) in the 1990s, but real integration did not take-off until the spread of resource planning systems (ERP) across the internal value chain and the rise of the Internet, which enabled electronic interchange and integration beyond organizational boundaries.

Except technological developments, what really triggered the breakthrough of SCM was the rise of globalization. Globalization was the result of liberalized international trade and reorganized companies in advanced economies, now focusing on their core competence and outsourcing non-core activities. Global sources were integrated into core competence, creating global supply chains that had to be controlled and managed as a whole. Suppliers, too, must control their own supply chain. Global supplier relationships depended on smooth and just-in-time delivery of raw materials and components.

The era of primary vertical integration dominated the late 1990s and early 2000s. A new era emerged during the 2000s and is breaking through in the 2010s. Supply chains are increasingly being outsourced to specialized companies in the field, i.e., large transportation and logistics companies such as UPS, FedEx, Deutsche Bahn, DHL, and DSV, as well as ship container (Maersk, and others) and air cargo corporations (in addition to UPS and FedEx, all leading airlines).

Collaborative platforms have enabled automatic information and money supply chains following the movement of physical goods, benefitting from Web 2.0 and the ability to share and collaborate among users. SCM 2.0 is combining processes and tools to manage through a growing complexity and speed of the supply chain in an increasing global competition with rapid price fluctuations, short product life cycles, and growing specialization. To realize the benefits of integrated activities and technologies, SCM has to be part of a totally integrated system.

Marketing and CRM

Marketing

Marketing is all activities used to communicate the value of a product or service to customers, for the purpose of selling it.13 Marketing includes methods to target markets through market analysis and market segmentation, as well as understanding consumer behavior and advertising a product’s value to customers. Marketing is an applied social science, which increasingly makes use of IT. Until the 1990s, marketing was primarily a push activity, using all kinds over means to persuade the customer to buy a product. Since the 1970s, marketing gradually began to orient itself towards customer needs. This so-called pull perspective broke through in 1990s and has been predominant ever since.

Customer orientation in marketing is not only prevailing and growing. With globalization and the digital revolution, marketing has become a holistic as well as an interactive activity. A broad and integrated approach is necessary. In doing so, marketing is taking advantage of two important developments among customers. One is the rapid and ubiquitous digitization of communication by way of the Internet and mobile devices, which makes people available everywhere at all times. Two is the breakthrough of social media as a widespread means of communication. As a result, the pull perspective of marketing has turned interactive and holistic in order to meet customers in their electronic environments. At the same time, customers’ social media activities have deposited huge numbers of personnel data that allow companies to streamline marketing more individually and precisely. By analyzing these so-called ‘big data’, businesses can more exactly create patterns of customer behavior and needs.

The advertising industry is not only based on internal company marketing departments. Marketing campaigns and market research are largely run by a globally consolidated industry, which is led by WPP, Omnicom, Publicis, Interpublic, Dentsu, Havas, and Hakuhodo – placed in New York, London, Paris and Tokyo. They encompass hundreds of subsidiary agencies. Although challenged by the Internet and social media, creating new start-ups and convergence as well as customer demands, these large agencies have managed to keep their globally leading positions in the advertising industry. In the wake of these global leaders, nationally consolidated and innovative advertising agencies manage to reap part of the marketing market. Market research in certain technical and manufacturing fields are often dominated by specialized agencies, such as IDC, Gartner and Forrester Research in IT.

CRM

Computer-based marketing systems have been developed since the 1990s, based on shifting customer relations.14 As a result of the breakthrough of the Internet and new digital and mobile devices, what used to be a push activity has been turned into a pull driven relationship with customers.

Customer relationship management (CRM) is a system for managing a company’s interactions with current and future customers. It involves using technology to organize, automate and synchronize sales, marketing, customer service, and technical support. CRM systems track and measure marketing campaigns over multiple networks. These systems can track by clicks and sales, record, store in databases, and then data mine the information in a way that increases customer relations. CRM is used in call centers, social media, direct mail, data storage files, banks, and customer data queries. By analyzing the interactions between a company and its customers (key performance indicators), CRM systems can be used to maximize sales and profits. CRM is primarily used in B2C relations, but may also be applied in B2B relations.

In the 2010s, a true CRM system includes the use of Big data, i.e., the analysis and real-time use of millions of unstructured data being produced every minute on social media and other external media, which is not controlled by a company. As a result, the integration of CRM into organizational activities as well as the other major systems (CIM, SCM, and ERP) is no simple case, but might include organizational changes in order to benefit from these advanced customer relations and systems. Software market leaders are Salesforce.com, SAP, Oracle, and Microsoft. All are moving into cloud-based applications, which during the 2010 will be covering 90% of systems.

Corporate Finance

Corporate Finance

Corporate finance is no longer just a matter of bookkeeping and budgeting. In a large corporation, the chief financial officer (CFO) is responsible for financial planning, record-keeping, accounting, investment, investors, cost and profit analysis of data, cash flow, budgeting, forecasting, funding, managing financial risks, and compliance across the entire operation and based on international and national standards.15 The CFO reports directly to the Chief executive officer (CEO) and assists the CEO in shaping the company’s strategy. Globalization and the financial crisis have increased the critical role of the CFO.

Methods such as Economic value added (EVA) for profit measuring and Activity-Based Costing (ABC) developed since the 1990s to improve profit- and cost measuring.16 They have recently been supplemented by lean accounting methods to support lean management, focusing on value creation, while separating between value- and non-value creating activities. Balanced Scorecard (BS) is a more strategically oriented performance management tool. BS is measuring actual performance when a company’s strategy is implemented. It includes financial as well as non-financial data. BS’ measures are compared to a ‘target’ value. It is not a replacement for traditional financial and operational reports but a summary that captures the information most relevant to implementing the strategy of a company: combining financials measures, customer success, efficiency of internal business processes, and improvement and innovation into strategic perspectives, strategic objectives, and strategic results.

A financial service industry has developed to support large corporations and governmental agencies of the world. This industry is led by four American companies: Deloitte, PWC, EY, and KPMG. Small and medium-sized companies are serviced by nationally based audit firms, increasingly being consolidated on a national and partly international basis.

Corporate Finance IT

Accounting and reporting has long been based on IT.17 An accounting information system of the 2010s is organized in layers, separating the presentation to the user, application processing, and data management.18 The presentation layer manages how the information is displayed to and viewed by users (through client application, web browsers, or mobile devices). The entire system is backed by a centralized database that stores all data, the database layer. As transactions occur, the data is collected from the business events and stored into the system’s database, where it can be retrieved and processed into information that is useful for making decisions. The application layer retrieves the raw data in the database layer, processes it based on business logic and analytical tools and passes it onto the presentation layer for display to users. Today, much of these processes are automated, from invoicing to reports. Several modules are included in finance and accounting software, mostly for operation activities (billing, sales, purchase, inventory, book keeping, etc.), supplemented by planning, controlling, analyzing, and optimizing as well as compliance and risk modules.

SAP and Oracle in large corporations and partly Microsoft in mid-sized corporations lead the global industry providing information systems for corporate finance. In mid-sized and small companies, multiple IT companies provide financial systems.

Human Resources

HRM

Human resources management (HRM) is the organizational function seeking to maximize employee performance in support of a company’s strategy.19 HRM is typically responsible for activities such as employee recruitment, training and development, talent management, performance appraisal, and rewarding, as well as industrial relations.

Historically, the nature and importance of HRM has changed since the 1990s. Globalization, advances in transportation and communications that greatly facilitated mobility and collaboration, and the rising importance of knowledge made corporate management begin viewing employees as assets rather than as cogs in a machine. As a result, HR functions came to work with aligning HR and business strategy and managing corporate change and transformation. In aligning HR and business strategy, talent management has moved to the top of the agenda. Much lower follows the importance of cost, engagement, networking, business focus, and culture.

A human resources consulting industry addresses HRM tasks. Leading consultancies include American Aon Hewitt, Mercer, Towers Watson, and Hay Group.

HRM IT

Since the 1960s, basic personnel activities such as payment and an employee database were handled by internally developed information systems. SAP and other package software providers began marketing specialized HR software modules in the 1990s, which since the end of the decade have been integrated into the ERP business suite.20 In the ERP system, modules such as financial and human resources are integrated through one database. Current HRM systems include fields such as payroll, time and attendance, performance appraisal, recruiting, learning, employee self-service, analytics, work-force planning, and HR management.21 In the 2010s, most HR functions have migrated to IT and has driven information systems to take a more strategic and performance-based approach. The breakthrough of the Internet and social media have challenged HRM IT, too, and have also given rise to new and innovative companies, such as US SuccessFactors.22 It is telling that SuccessFactors was acquired by SAP in 2011. Acquisitions are one of the means by which company leaders keep their leading business position.

Communications

Corporate communication is activities involved in managing all internal and external communications aimed at creating a positive and coherent view among external stakeholders (investors, media, etc.) and employees.23 Corporate communications help organizations explain their strategy, mission and values to its stakeholders, creating and sustaining a strong brand towards investors, customers, suppliers, employees, and media. Crisis management is part of corporate communications, too. Increasingly, corporate social responsibility is included in communications and even company strategies, showing involvement and respect for broader society interests. In recent years, communications, or a diverged department from communications, are being more and more involved in handling the relationship between the corporation and social media.

Together with the IT department, communications have developed unified communication systems, integrating real-time communication services such as IP telephony, e-mail, video conferencing, and instant messaging into a unified electronic communication system based on the Internet. Unified communications are provided by many companies, such as IBM, Microsoft, AT&T, etc.

R & D

Research and development (R & D) is a specific group of activities within a company.24 The primary function of an R & D group is to develop new products, but in large corporations there are also activities dealing with developing new knowledge that can lead to new products, processes, and services. While the former dimension is mainly instrumental, the latter one is more analytical. In both respects, R & D is a form of applied science.

In the pre-1990 multifunctional and hierarchic organization, the R & D department tended to be a function separated from the other functions of the corporation. This has changed since the 1990s.25 Innovation activities are spreading to include all parts of the organization, because sourcing and realization of innovation involves the whole value chain. Since the breakthrough of globalization and digitization, companies tend to increase their investments in R & D in order to adapt to a still shorter product lifecycle. Furthermore, companies more and more acquire R & D from various external sources, such as spreading its R & D activities into a global network, via licensing, contracts, alliances and joint ventures as well as acquisitions, and even customers and social media, i.e., open innovation and crowdsourcing.

The need to increase efficiency and throughput in the organization as well as to speedup time-to-market of new products and intensify customer and supplier relations have made innovation a company-wide activity. The importance of innovation increases, even to equal the level of operations in industries with very short product life-cycles, especially in ICT. Furthermore, innovation activities sources input from a growing number of external sources, such as suppliers, universities, and crucial global clusters. Closed and open innovation goes hand in hand, as do user and customer involvement as well as crowdsourcing.26 Crowdsourcing is the process of obtaining knowledge or investments from a large group of people, especially from an online community, rather than from traditional sources such as employees and banks.27

Globalization and increasingly digitization have upgraded the importance of more radical innovation compared to the widely used incremental approach. Since the 2000s and even more in the 2000s, new technologies such as the Internet, smartphones, and cloud computing increasingly disrupt existing technologies and business models. The response to disruptive technologies is disruptive innovation.28 Disruptive innovations help creating new markets and value networks that replace previously dominant technologies. The ability to understand and exploit business, technology and market developments in order to be at the edge of these changes must be integrated into the strategy and organization of the value chain. In many ways, the disruptive technology and innovation thinking builds on Schumpeter’s concept of ‘creative destruction’, leading via Sombart back to Marx.29

External innovation consulting is primarily performed through management consulting agencies, i.e. as part of strategic and reorganization efforts.

Stages of Product Life Cycle

Source: www.wikipedia.org.

In practical terms, all products go through stages of a life cycle, moving from development to introduction, possible growth, maturity, and decline. Some classical design products stay more or less permanent in the maturity stage.

Another way of expression the product life cycle is the different market share of a product. It might be low or high, with either a growing or declining trend. On the basis of your product’s position in the market, you decide upon whether to invest or liquidate the product, including cash cow effects (figure).

Growth Share Matrix

Source: www.wikipedia.org.

All kinds of laboratory, design, and statistical IT tools are being used in R & D functions, combined with general IT and Internet tools for internal and external relations.

Data Center

A data center includes a facility and a group of employees that house and manage computer systems, such as servers, clients, databases, and telecommunications.30 The main purpose of the data center is running the applications that handle the core business and operational data of the organization, whether outsourced or managed internally. The data center has passed through three eras.

In the mainframe and analog telecommunication era c.1960 to c.1990, huge data centers or IT departments emerged in large corporations and governmental agencies, handling computer and telecom operations and application development and maintenance.31

With the spread of the client/server platform of the 1990s and 2000s, PCs connected to the server and central database became the working tool of practically all employees throughout the organization.32 Communications were digitized on the basis of the IP Internet protocol and legacy applications were replaced by purchased software packages. Many corporations outsourced their IT operations to third party companies such as IBM and CSC. Data centers were downsized and cost reduction prevailed, although business and IT alignment grew in importance as well as user support and the need to connect to the Internet.

In the late 2000s, a new platform emerged that during the 2010s are beginning to replace the client/server platform.33 That is the rise of cloud computing, i.e., Internet-based computing, and the ubiquitous spread and use of mobile devices as well as social media. A unified and open infrastructure began to be predominant. At the same time, the importance of the data center increased, as digitization spread to all corners of society and as companies turned to a state of data driven and open organizations based on data analytics and Internet communication. As a result, digital technologies rose to strategic importance in all functions of the firm and put the data center in a role closer to strategic considerations. IT became more than a matter of transactions and reporting. IT has become an intelligent and ubiquitous tool for business. At the same time, the data center was being transformed by: consolidating and virtualizing data equipment moving into the cloud; standardizing, automating and unifying all hardware, software, and communications; total and integrated security systems; and reducing energy consumption.

Strategy

Historically, the practice and concept of strategy is ancient, and especially used in matters of war.34 In business, the rise of vertically integrated, multi-functional and multi-divisional (M-form) corporations around 1900 - first in the USA and then in Europe, based on mass production and mass distribution as well as management hierarchies to coordinate these functions - required a more systematic approach to corporate strategy.35 A focus on the long-term goals of an enterprise and the allocation of resources to achieve these goals came to dominate corporate strategy.36 As business expanded and internationalized and turned into the crisis of the 1970s and 1980s, executives and academics began more determinedly to elaborate on practical dimensions of strategic management. That included such fields as how to minimize cost and maximize profit, benefit from experience curves, portfolio analysis, and strategic business units.37 A diversity of theories developed, some of a more general economic nature, others taking the microeconomic road, and still others along social behavior.

In the 1980s, industrial organization economics emerged as a new field of study. While one line of study focused on the idea of some industries being more attractive and profitable than others, another line took a more structural approach to understand the competitiveness of businesses. The Japanese success and the failure of American business in the 1970s and 1980s encouraged Michael E. Porter to create his pioneering work on competitive advantage. Since the 1980s, he became the leading figure of this way of thinking, which came to dominate business thinking in practice and eventually academic thinking, too.

What is strategy? In the mid-1990s, Michael E. Porter asked this question on the background of much confusion among academics, journalists, and executives.38

The intensified competition as a result of globalization and emerging digitization made people think that competitive advantage was just temporary and continuously being undermined by rivals. Although barriers to competition lowered as markets globalized and liberalized and companies reorganized to become leaner, the rules of competitiveness did not change. The confusion was due to the failure to distinguish between operational effectiveness and strategy.

Operational effectiveness is essential to superior performance. It means that a company performs similar activities better than rivals. Strategy is different. A strategic lead depends on performing different activities from rivals or performing similar activities in different ways. Constant improvement in operational effectiveness is necessary to achieve superior profitability, but it is not sufficient. The distinction between effectiveness and strategy is probably being blurred by the rapid rise in productivity as a consequence of global mergers, reorganization and new IT. This does not change the fact that competitive strategy is about being different. A successful strategy rests on creating a unique mix of activities in the value chain, i.e., its core competences. It is the strength of these core competences and their continuous upgrading that make and preserve the competitiveness of a company, whether customer positioning is narrow or broad.

In order to make a strategic position sustainable, company management has to choose. It cannot do two different things. A strategic position must align with the core competences of a firm. A company can only compete in one way and in delivering on kind of value, because all its activities are focused on a certain strategic approach, for example either low cost or high value. To do so, internal activities have to be combined in a unique way managing the organization as a system. Competitive advantage comes from the way a company’s activities fit and reinforce each other. Its core competences must be seen as a whole, i.e., how they fit uniquely into all internal and external activities and create the reinforcing benefits of synergy. So, strategy is creating a fit among a company’s activities and a successful strategy depends on a systemic integration of its activities. Creating and sustaining this fit and integration while adapting the company to a changing business environment is the task of leadership. Adaption might even include a change of business model and strategic position as a result of radical changes in its industry. No matter what, a sustainable competitive advantage requires a system of complementary activities that forms a unique system.

In which way has the breakthrough of IT and the Internet as well as recent rapid digitization changed the conditions of business strategy? Three times over the past half century, IT contributed to a radical transformation of competition and strategy.39 The first wave of IT, during the 1960s, 1970s and 1980s, automated activities in the value chain from salaries and invoice processing to manufacturing resource planning and computed aided design. In the organizational silos and hierarchies of the time, it raised the question of how to capture IT operational benefits and adapt strategies in order to increase productivity as well as flexibility towards markets (the so-called ‘Solow computer paradox).40

With its ubiquitous connectivity, the rise of the Internet and the digitization of communications since the second half of the 20th unleashed the second wave of IT-influenced business transformation. Based on radically reorganized and market-oriented business organizations as well as new IT business-suites, this enabled coordination and integration across the activities of the value chain, including relations with suppliers, distribution channels, and customers, even on a global scale. The combination of reorganization and Internet transformed the value chain and led to significant productivity gains and economic growth. However, it did not fundamentally change the sources of business and competitive advantage. It primarily speeded up processes and intensified competition. It gave business a more global reach, and tended to empower customers. At the same time, opportunities increased in many industries. So what the Internet did was to stress the importance of gaining a more sustainable competitive advantage. Strategic positioning became all the more important, but it did not alter the fundamentals of a competitive strategy: the right goal; value proposition (unique benefits for customers); a uniquely organized value chain; trade-offs (you cannot do all things to all customers); a mutually reinforcing fit of all activities; and continuity of direction.

The third wave of It-influenced business transformation stepped up digitization and the importance of digital technology. While the early 2000s started a process of moving IT to the Internet level and continued its trend to create ubiquitous connectivity, this was certainly accelerated since 2010. The breakthrough of broadband-based mobiles and especially smartphones - in combination with the widely used social media and expanding cloud technology to gradually replace client/server systems – opened a new era of deeper digitization in developed and emerging societies of the world. In addition, IT is becoming an integral part of the product itself. This includes embedded sensors, software, and radios in products (in effect, integrated in what are small computers), coupled with cloud-based applications and data storage and analysis.

As a result, product functionality and performance are greatly improved. Real-time analysis of massive amounts of product-data, so-called ‘big data’, enables many of these improvements as well as create new business opportunities. This brings manufacturing into the center of digitized societies, but it also affects the other parts of the value chain. The whole value chain is being reshaped once more. It drives another wave of value-chain-based productivity improvement. Thus, the third IT-influenced transformation of business has the potential to be the biggest yet, triggering even more innovation, productivity gains, and economic growth than the two previous ones.

Does that change the rules of competition and competitive advantage? No, they remain the same. But new and smart technologies will have a more transformative effect on industry structure and competition. Still, to achieve competitive advantage, a company must be able to differentiate itself. Based on operational effectiveness, a company must define a distinctive strategic positioning, i.e., it delivers unique value to the set of customers it chooses to serve.

What new and smart technologies do is that, they raise the bar of best practice across the value chain and allows for radical changes of business models, such as a move from products sale to product-as-a-service model, i.e., from customer ownership to rent and pay for usage. Another change of business model includes upgrading from selling products to combine the sale of products with data-based knowledge about these products. Finally, companies are increasingly moving from industry and product leaders to platform leaders of ecosystems. Smart technologies, such as smartphones and a growing number of other physical products being opened to user programming and development, create a new interaction between companies, customers and developers. In order to thrive in these relationships, companies focus on making themselves an attractive platform of a wide ecosystem.

To stay competitive, firms still have to identify a clear value proposition, based on its core competencies. The new thing is that: competencies across the value chain have to be much upgraded, as new technologies are applied to increase productivity; that strategy must be based on an improved understanding of the global business environment; that the capability to adapt to changes must be upgraded; that firms will have to interact more directly and closely with customers, suppliers, and leading knowledge centers of the world; and that implementation and performance are closely monitored.

Strategic Management Framework

Source: www.wikipedia.org(2015): Strategic management.

In the ‘value chain’ of strategic management, the importance of strategic formulation is highly increased, as well as the focus on implementation and performance, including a tighter integration between the various links of the process.

Business Model

A fundamental part of a company’s business strategy is its business model.41 A business model is the way an organization creates, delivers, and captures value, i.e., how a company organizes to stay competitive. A business model can be seen as a combination of the following elements:42

- The customer segments you serve;

- The value propositions by which you satisfy customer needs;

- The sales channels through which you deliver value propositions to customers;

- The customer relationships maintained with each customer segment;

- The revenue streams resulting from successfully offered value propositions to customers;

- The key resources or assets required to offer and deliver value and gain revenue from customers;

- The key activities required to succeed in the previously described elements;

- The key partnerships for outsourced and acquired external resources;

- The cost structure resulting from the business model.

Just a decade ago, few managers, publishers and researchers occupied themselves with the issue of business model. What happened since then is an accelerating change of business conditions and business responses, which enforce executives to regularly evaluate and even alter their business model. This has become most prominent in the 2010s. Certain business models seem to prevail, as we pass through the 2010s.

Business models move along one or more of three roads. One is the shift from product to platform or ecosystem business models. What Apple and Google did in 2008 was to make their smartphone operating system a platform for external application providers. By doing so, they created an ecosystem of hundreds of thousands of applications that were stored in their respective online app-stores. These apps may be downloaded by users for free or at a cost. Including, other suppliers and hundreds of millions of customers, Apple and Google have turned their business model around, becoming the center of an ecosystem and taking advantage of the network effect, i.e., the value of a product or service increases with the number of users. As Apple and Google are extending their product portfolio to meet users on all digital media, other leading digital companies have followed suit and introduced a similar business model, such as Amazon and Facebook.

A second road taken in new business models is the Freemium model. According to this business model, you give your product or service away for free, possibly acquiring a lot of customers through word of mouth, and then offer premium priced value added services or an enhanced version of your product or service. For instance, this model is applied by LinkedIn, New York Times paywall, and Amazon’s cloud services. Another and more widely used variant of the freemium business model is to generate revenue on third party ads, whenever users perform searches and click display ads. This is Google’s business model, which is copied by many companies. The ‘razor and blades’ business model might be considered a variant of the freemium model, too. According to this model, named after Gillette, you sell the item at low price (razor) in order to increase sales of complementary goods (blades).

A third road of business models, which is occurring more often than it used to do, is a shift in the value chain. A firm might feel the competitive pressure so overwhelming in for instance the retail link that it prefers to move to the wholesale link, becoming a b2b supplier instead of a b2c end-user retailer. A different change of business model includes a forward move from manufacturing only to increasingly focusing on after-service. The latter is what happens when manufacturing companies upgrade to software and data driven businesses, profiting from large volumes of data originating from their products. When manufacturing corporations outsource production, they upgrade to knowledgeable dimension of their business, such as logistics, marketing and design. Finally, a company might cut out the middleman and sell directly to end-users, such as manufacturers, airlines, and large retailers taking over the whole supply chain.

A fourth kind of business models is spreading in many retailer industries, such as fashion, electronics, and food. This is the so-called ‘Bricks and clicks’ model’, where companies integrate both offline (bricks) and online (clicks) presences. According to this model, users can search the website of a company and decide upon a product to be picked-up at the store or to be delivered on their home. A user might also turn up in a shop and buy the product, having previously searched on its website.

A fifth sort of business models have been around for some time, namely the ‘low-cost’ business models. With the liberalization of airlines in the 1990s, low-cost carriers caused serious disruptions in the traditional airlines industry. Other industries soon followed suit, such as food and textile retailers, automobiles, electronics, and gradually almost all industries. As a result, markets of mid-priced products tended to fall, whereas the luxury category separated itself more clearly.

A sixth kind of business models include subscription or fees, where a customer pays a price to have access to the product or service. It is an old model, pioneered by newspapers and magazines, but is now used by many industries, such as access to the Internet, TV, software, financial services, journals, concerts, fitness clubs, trades, etc. In several industries, the subscription model is under pressure from the freemium model.

A seventh kind of business model is franchising. As a franchiser, you use another firm’s successful business model, for instance a chain store, to distribute goods.