Uleashing the Killer App Book Essay Example

thousands of dollars and requiring significant physical space. However, due to Moore's law, the expense of storage has dropped to $200 and its size has decreased to that comparable with a credit card. This continuous advancement in processing power will serve as the basis for the future prosperity of killer apps. Businesses that neglect to invest in these technological solutions for their obstacles will soon discover themselves lagging behind in the market.

Metcalfe's Law is the explanation for the rapid spread and acceptance of technology. It was coined by R. Metcalfe, who is also the founder of 3Com.

As stated by the law, the value of new technologies relies on how they are used by individuals. The idea is straightforward: when only a small group can use a technology like email, its impact is restricted since communication is limited to these individuals. Nevertheless, if every person in an office can access email, its significance grows immensely. The greater the number of people who utilize a technology, the more valuable it becomes, ultimately promoting wider adoption.

A clear illustration of the applicability of Metcalfe's law is seen in the Internet, where its attractiveness increases as more people utilize it. The Economic Theories of Ronald Coase have enabled smaller companies to effectively compete with larger established firms by reducing transactional costs and facilitating the establishment of firms. Economies of scale enable larger corporations to efficiently produce goods such as steel, but they are now facing competition from digital economies within cyberspace.

The economies of cyberspace have greatly reduced transactional costs compared to traditional firms, thanks to the significant cost reductions in land, labor, and capital. An online bank can provide

the same benefits as traditional banks because their transactional costs are much lower. Their website serves as their "land" and their employees usually work part-time. It is evident that Moore's Law, Metcalfe's Law, and Ronald Coase's economic theories have created a fertile environment for the success of killer apps in modern society.

Killer apps offer opportunities for firms to leverage digital technology and revolutionize their markets by finding new niches or providing new services.

Digital Strategy: What is it?

Traditional strategic planning techniques, like those outlined in Michael Porter's Competitive Advantage in 1980, are inadequate for thriving in the digital realm. To succeed in today's digital world, companies must adopt a digital strategy, as defined by Downes and Mui. Digital strategy is a fresh approach to strategic planning, consisting of twelve design principles that guide the process of discovering and developing killer apps. It also encompasses techniques applicable to organizations of any size and industry, enabling them to achieve market dominance.

It can be done by all companies, not just companies whose actual goods and services are already digital. Strategic Planning versus Digital Strategy In traditional strategy, the plan produced is mostly static. A team goes off for a period, performs its analysis, and returns with a document, which remains the plan until the next planning cycle. This team is usually made up of only senior executives or the staff of a specialized department. Digital Strategy is much different. A digital strategy is a dynamic plan that requires constant rethinking.

The development of digital strategy involves various contributors, typically line managers or functional heads, depending on the size

of the organization. Traditional strategy typically spans a period of three to five years. However, with the rapid emergence and widespread adoption of killer apps in the market, influenced by Moore's Law and Metcalfe's Law, critical mass is now achieved in less than two years. A notable example of this trend is electronic commerce, which was not initially part of any company's strategic plan, including Microsoft's, but has now become popular across industries. Currently, the implementation of digital strategy takes around twelve to eighteen months, but this timeframe is gradually decreasing.

According to Michael Porter's book Competitive Advantage, a company needs to establish an advantage over at least one of the "Five Forces" - customers, suppliers, competitors, new entrants, and substitutes. However, in today's business landscape, we also need to consider three additional forces: digitization, globalization, and deregulation. These "New Forces" have become the primary focus of planning, replacing the old forces. Traditional strategy is executed through value chains.

According to Michael Porter, the value chain is the set of activities an organization performs to create and distribute its goods and services. Each of these activities adds value to the product, referred to as "margin" by Porter. The presence of new forces is pushing companies to no longer focus on improving today's value chain, but instead consider completely destroying it.

The Twelve Principles


Reshaping the Landscape

The first four principles of killer app design aim to reshape the competitive environment of a company. These principles include outsourcing to the customer, cannibalizing markets, treating each customer as a unique market segment, and creating communities of value.

Outsource to the Customer

A company can outsource

to its customers by granting them access to the company's information sources and allowing customization.

The Web provides an excellent means to achieve this. Customers can use their own equipment, phone lines, office space, and electricity to connect to a company's systems, leading to substantial cost savings for the company. Moreover, customers are now able to handle activities such as customer service and order entry and tracking that were previously managed by the company. A prime example of this is Holiday Inn's website, where users can locate the nearest hotel to their desired location, check for availability, explore a virtual tour of the hotel, and make their reservation.

Cannibalize Your Markets

Implementing hybrid strategies can be a cautious approach for companies who fear sudden transitions. A case in point is GM, which has achieved success with its Saturn division, but at the cost of acquiring customers from other GM units. Hybrid strategies are worthwhile only when they prioritize customer satisfaction. Companies should consider completely abandoning their current market and venturing into new ones for the best outcome.

According to the book, cannibalizing your markets involves recognizing that old channels will mature or disappear naturally, but by taking proactive measures, you can enter new channels early. The principle of treating each customer as a market segment of one refers to the concept of "mass customization," which means providing a unique product or service to each customer consistently. An example is Pointcast, which transformed a basic screen saver into a popular application by delivering personalized content. Even the public utilities industry is adopting this approach, such as the gateway proposition that allows utility customers to monitor

and optimize power usage through device and rate adjustments.

The concept of community is crucial in the creation of communities of value

Companies can establish communities of value by recognizing the importance of community. People take pleasure in engaging with and being entertained by one another. To facilitate this, companies like America Online (AOL) have developed technologies that enable customers to communicate with each other. AOL provides a "People Connection" service where members can create personalized rooms based on their individual interests. Furthermore, this system incorporates "Buddy Lists," which inform members when their friends log in or out.

Encouraging new connections

The section that focuses on encouraging new connections is based on design principles 5, 6, 7, and 8.

They specialize in creating interfaces between you and your business partners, which can include customers, suppliers, and even competitors.
Transform Impolite Interfaces into Educational Interfaces
Customer service has changed over time. The New York Times reports a decline in customer service. However, with the advent of digital technology, organizations are now ready for what Michael Treacy and Fred Wiersema refer to as "customer intimacy." Achieving this objective requires offering exceptional customer service. To provide satisfactory customer service, organizations need a means of obtaining feedback. They must provide you with the opportunity to provide input on their services and be prepared to utilize this feedback to implement necessary improvements.

Digital interfaces are improving customer service in industries that currently have subpar service. They offer cost-effective and high-quality solutions while eliminating unfriendly customer service encounters. These interfaces create superior customer experiences by facilitating quick and efficient automated assistance that is customized to the customer's preferences.

Additionally, these systems are able to adjust to the user's expertise level and know when to seek human support.

The learning interfaces are known as systems that prioritize customer sacrifice. Customer sacrifice refers to the gap between what a customer settled for and their ideal choice. Pepod, a company that provides a web-based service for ordering groceries, exemplifies the benefits of capitalizing on customer sacrifice.

Peapod initially had a successful business, with a customer satisfaction rating of 96 percent. However, when analyzing Peapod's records, it became evident that only 70 percent of Pepod shoppers were receiving what they wanted. This revelation was unexpected but crucial in identifying the issue and finding a solution.

Ensure Continuity for the Customer, Not Yourself
Managing continuity for customers and other business partners is about ensuring their protection. Many people have a fear of electronic interfaces, but what they don't realize is that they use these interfaces in their everyday lives. The telephone, television, ATMs, and grocery scanners are just a few examples of the various interfaces we regularly utilize. These interfaces are intentionally designed to resemble familiar technology.

However, electronic commerce is the future and many individuals still exhibit concerns because it cannot be designed to resemble traditional systems. The following table from the book compares the differing perceptions of electronic commerce held by both customers and merchants:

• Electronic Commerce - Continuous Consumers and Disruptive
• ConsumerMerchant
• Location - The best of catalog and TV; Electronic access supersedes physical placement
• Shopping - Stores become showrooms and warehouses
• Marketplace - An expanded horizon; The market becomes global
• Intelligence - The store now understands consumers; Consumers are part of the database
• Purchasers - Junk mail becomes smarter; Buying is done by agents
• Branding - Shopping
  

becomes a social experience; Word of mouth grows in importance

• Designing products and services that eliminate customer burden and address issues can ensure customer loyalty. An E-cash user in the book stated, "Convenience is addictive."
• Provide as much information as possible. "When developing killer apps, the interface should always be designed to be highly accessible and to freely share information rather than keeping it to oneself." The main drivers of this shift are once again Moore's Law and Metcalfe's Law.

The combined effects of Moore's Law and Metcalf's Law are reshaping the business world by enabling the spread of new applications across global computing networks and increasing innovation possibilities. Moore's Law allows for the cost-effective and efficient distribution of new applications, leading to reduced switching costs. On the other hand, Metcalf's Law expands the number of individuals who can contribute to system innovation, ultimately adding value to it.

When new groundbreaking applications emerge, corporations and organizations must adapt by restructuring their activities. This adjustment is seen in the current trend of businesses becoming smaller, driven by the influence of the Law of Diminishing Firms as a direct response to these new forces.

Firms are shrinking in size when it is not needed or competitive. Today, firms operate without physical offices, permanent employees, or any physical presence. Instead, they utilize the Internet and similar technologies to compete against traditional firms. Both large and small organizations are expanding their network of relationships. To create a successful app, it is crucial to quickly identify potential partners, determine the appropriate

level of closeness, and ensure the necessary commitment with minimal difficulty. Microsoft serves as an example of a company that possesses this capability.

Bill Gates has developed partnerships to acquire technologies, which has made him the wealthiest individual globally. Microsoft understands the importance of a comprehensive portfolio.

Redefining the Interior

The final four principles of creating successful applications focus on constructing a new internal corporate entity that can seamlessly transition between physical and digital realms.

Treat your assets as liabilities

The real worth of an organization lies in its information rather than its physical resources and equipment. Companies should transition to a digital existence that requires fewer physical assets.

Destroy Your Value Chain

Companies must acknowledge the forthcoming changes that will render their infrastructure outdated, relegate them to a commodity role, or eliminate them altogether.

Companies should shift from managing innovation as separate projects to managing it as a portfolio. Senior executives need to be part of the decision-making process for technology investments and take responsibility for managing the portfolio. Young people have a better understanding of digital technology than older individuals. Organizations don't have to wait for the next generation of managers to learn from them; they can start learning from young people now.

Therefore, in order for a company to thrive, it is essential to recruit younger individuals who can help unleash the killer app. Organizations must be open to learning, embracing new ideas, and being adaptable. They should prioritize creativity and experimentation over extensive planning and predictions. It is crucial for organizations to have the ability to anticipate future developments and be prepared for any potential challenges.

McDonald's and VEBA AG, a German conglomerate, are examples of organizations that have

pursued similar strategies. McDonald's aims to continue expanding while focusing on three key strategies: enhancing value for customers, improving internal communication, and optimizing store operations for increased quality and efficiency. McDonald's also envisions offering additional services to customers in the future. During a workshop, several ideas were proposed to enhance McDonald's, such as replacing human order takers with learning interfaces and automating food production to allow store staff to interact more with customers. In contrast, VEBA is preparing for emerging competition by making significant investments in telecommunications, as they aim to transition from traditional industrial companies to information-age enterprises.

The executives of VEBA initially expressed no concern for the future. However, after witnessing demonstrations of e-commerce and virtual reality products aimed at eliminating intermediaries, they chose to establish a digital readiness group with a direct reporting line to the CEO. All departments within VEGA acknowledged that the future posed both a significant threat and a potential opportunity, necessitating their preparedness. These companies comprehended the impact the future could exert on them.

VEBA recognized the importance of staying up-to-date with emerging technologies, so they decided to create a corporate intranet to facilitate communication between their companies. McDonald's viewed the future as an opportunity to improve operational efficiency and enhance customer value.

The authors often receive inquiries from clients about how to generate income on the internet. Those who earn money online are essentially conducting business, aiming to reduce expenses or reach a wider audience. Developing a prototype is a beneficial initial step. The key advantage of prototyping is the ability to test and refine the product.

When McDonald's and AOL collaborated to create a pilot website, their initial focus was

on adults, but the response was limited. After six months, they created their official corporate website. Based on what they learned from the pilot, they realized the need to incorporate more activities for children, so they added games and a coloring book. To successfully develop killer apps, it is essential to consistently progress in the process by making prototypes increasingly targeted and advanced.

For instance, if you have launched a web page, it is important to frequently visit it in order to ensure that all the links are functioning properly and to incorporate new features and updates as necessary in order to maintain the interest of your customers. You don't have to be a tech-savvy company in California to benefit from the internet, intranets, and other cutting-edge media. BP was exposed to a presentation by HP which showcased the benefits of implementing a unified operating environment (COE) for their desktops, resulting in enhanced speed and reliability. This impressed BP, and they recognized the need for restructuring their organization with compatible and robust hardware and software in order to seize this opportunity.

They built a small development team and transformed one of BP's three divisions in approximately one year. Users are astonished by the speed and reliability of the new system. Thanks to the open-mindedness of upper management, BP now possesses a killer app in COE.

Lightning Out for the Territories

The recent technological advancements have proven to be highly advantageous not just for business, but also for social and political purposes. Like the exploration of the New World centuries ago, cyberspace is the new frontier, driven by computing power and bandwidth. Even if

you are not prepared to migrate to cyberspace for conducting business, it is an opportunity that everyone should at least contemplate.