The Digital Transformation of Traditional Businesses - Assignment Example

Running Head: THE DIGITAL TRANSFORMATION OF TRADITIONAL BUSINESSES The Digital Transformation of Traditional Businesses Name Course Tutor’s Name Date 1. Describe the kinds of business that can use new information technologies (NIT) (3 marks) From Andal-Ancion, Cartwright and Yip’s (2003) article, it is clear that businesses that offer services and low-involvement consumer items can use NIT successfully. Additionally, businesses whose product or service offers can be delivered electronically can use NIT effectively. Moreover, businesses that need to customise product or service offers to fit specific customer needs can use NIT. Businesses that can benefit from aggregating different processes and practices to make it easier for customers to access a bundled package instead of accessing related services from different places can also make use of NIT. According to the authors, companies that can benefit from NIT also include those that can benefit from network effects while conducting business. Businesses that can standardise and synchronise specific business processes can also benefit from NIT. 2. Illustrate the reasons for the drivers of NIT that the authors have identified in the study (6 Marks) The authors have identified 10 drivers of NIT with the first being electronic deliverability. While a realtor may for example have a website where all the properties on sale are displayed and described, online transactions cannot happen unless the customer physically inspects and approves a particular property. On the other hand, movie or airline tickets are easily sold online, hence meaning that movie companies and airlines are better able to use NIT when compared to the real estate companies. Andal-Ancion et al. (2003, p. 36) have further identified information intensity as the second NIT driver. The authors’ argument could be interpreted to mean that products with less intense information will not benefit from NIT. For example, a candy vendor does not have much information to pass to the consumer and as such, would be less likely to use NIT. However, a car dealer would be interested in using NIT to transmit information to possible buyers, even though the same buyers would like to physically inspect and test-drive the car before purchase. The third driver has been identified as customisability, and according to Andal-Ancion et al. (2003, p. 36), companies that are able to utilise NIT to customise their product or service offers to fit individual customers do so. Cell phone manufacturers, for example, use NIT to target different niche markets based on different phone offers. The fourth driver has been identified as aggregation effects, whereby that firms that can benefit from combining specific processes are more likely to adopt NIT. One gets the impression that firms that can ease their business processes will adopt NIT more as they seek to enhance customer value and even reduce the cost of conducting business. Andal-Ancion et al. (2003, p. 36) identify the fifth driver as search costs. The understanding related to searching costs is that firms that can spare considerable time, effort and even costs by easing their search processes will adopt NIT. NIT adoption by such companies can be done to enhance the company’s processes, or to ease the time and effort spent by customers in identifying and acquiring a certain product. Instead of physically queuing in banking halls and waiting to have a person explain which loan offers are ideal for a specific customer, banks can publish all loan-related information online, hence enabling their customers to access the information without physically going to the banking halls. The sixth driver has been identified as a real-time interface. Clearly, businesses that need to enhance real-time communication between them and their customers must adopt NIT. The stock market is just one example. Institutions of higher learning can also be a good example, especially where e-learning has been adopted. Contracting risk is also another driver that Andal-Ancion et al. (2003, p. 36) identify. Businesses whose contracting risk is high will most likely be cautious in their adoption of NIT when compared to businesses whose contracting risk profile is low. The network effects are also another driver, which according to Andal-Ancion et al. (2003, p. 36), determines the uptake of NIT by companies. Businesses that can connect with others (e.g. suppliers and even buyers) in a network that makes business efficient are more likely to adopt NIT. The ninth driver has been identified as standardisation benefits, and it is argued that businesses which can attain such benefits from NIT will most likely adopt it. A telecommunications company can for example send the same standardised promotional message to all its customers at the same time. The final NIT driver identified by Andal-Ancion et al. (2003, p. 37) is missing competencies. Specifically, a company can use NIT to facilitate the outsourcing of activities that it lacks the capacity to perform internally. For example, some telecommunication companies have their call centres in developing countries where labour is readily available and cheap. 3. Discuss the usefulness of mediation strategies that the authors are researching (6 marks) In a business environment where new information technologies are being developed in addition to the existing ones, Andal-Ancion et al. (2003, p. 41) note that businesses have to be extremely cautious when choosing the right technologies to use in their respective cases. Each of the three identified mediation strategies offers a unique approach for different businesses, which may need to use various approaches in their utilisation of NIT. Some businesses may need to bypass distributors, hence establishing a direct connection between the producer/supplier and the customer. In such a context, the classic disintermediation type of mediation would be most ideal. In some cases, the business may need to retain the traditional value chain where the producer/supplier, the distributor and the customer are all part of the business process. In such a case, remediation would be the most ideal form of NIT mediation strategy. In other cases however, the traditional value chain may need to be re-configured to facilitate the formation of networks. This could involve a distributor as the link between the producer/supplier and the customer, but could as well enable the distributor to be bypassed hence establishing direct network links between producers/suppliers and customers. In such a case, the network-based mediation would be the most ideal strategy. There are several points to illustrate the usefulness of all the three aforementioned strategies – i.e. network-based mediation, remediation, and classic disintermediation. In classic disintermediation for example, the middleman (distributor) is removed from the value chain. As Tucker (2010) observes, middlemen consume resources, and by removing them from the value chain, the producer/supplier is able to recover some of the resources that would have been spent by the distributor. This would allow the producer/supplier to lower the cost of a product or service for the end consumer. On the other hand, the consumer is able to derive more value from a product or service when the middleman is removed from the value chain. In the travel industry for example, travel agencies acted as middlemen (distributors). However, with the wide adoption of NIT, travellers can make direct travel arrangements with airlines, hotels and even their travel destinations. Consequently, consumers are able to access better prices and services and enjoy enhanced transparency during their travel plans. Remediation is also a useful mediation strategy; especially if it helps businesses build strong relationships with the middlemen in a manner that enhances customer value and business returns. Andal-Ancion et al. (2003, p. 37) note that remediation is especially relevant where contracting risks and high and aggregation effects are significant. Amazon.com is, for instance, a distributor which is used by multiple product developers/suppliers and customers. As a large online marketplace that is frequented by millions of people throughout the world, producers are better positioned working with Amazon to market their products as opposed to directly contacting customers since that would involve a lot of marketing efforts on their part. On its part, the network-based mediation strategy is useful to businesses which are likely to get business-related benefits when working in networks. As Andal-Ancion et al. (2003, p. 39) note, consumers do not like the choice limitations that come with a single provider. Similarly, providers do not like being limited to a single consumer. A network-based mediation strategy therefore broadens the consumer choices and also broadens the options that suppliers have to access a wide consumer base. Consequently, both consumers and suppliers access enhanced value in the spaces and interactions in a network. When network-based mediation is adopted by a company, Andal-Ancion et al. (2003, p. 39) note that the company is able to utilise network effects that include a larger market as well as standardisation benefits when it is working with other players in the industry. Such a company can also access missing competencies when working with middlemen. Overall, it appears that the usefulness of each mediation strategy depends on the NIT drivers in the industry and how well each organisation understands its value chain. A company cannot, for example, be successful in attaining its business objectives if it uses a network-based mediation strategy but fails to pay much attention to the critical partners in the network. By ignoring the critical partners, the company would be ignoring a significant component in its value chain, something that would in the end lead to its failure. References Andal-Ancion, A., Cartwright, P.A., & Yip, G.S. (2003). The digital transformation of traditional businesses. MIT Sloan Management Review, 44(4), 34-41. Tucker, R. (2010). Disintermediation: The disruption to come for education 2.0. Radar. Retrieved 22 July 2015, from http://radar.oreilly.com/2010/05/disintermediation-risks-trends.html Read More