MANAGING IT IN THE DIGITAL AGE

Christoph Mueller-Bloch

Managing the Digital Transformation—IS Strategy and the Digital Matrix

L’esprit pionnier
COURSE CONTENT—TOPIC AREAS AND SESSIONS

Part Topic

1 Introduction & Digital Transformation

1 Managing IT in the Digital Age 2 Managing the Digital Transformation:
2 IS strategy and the Digital Matrix
3 Managing IT Vendors: IS Sourcing,
Cloud Computing, and Sourcing
4 Governance
3 4 5 6 7 Managing IT projects: Classic and agile
5 IS project management I
8 Managing IT projects: Classic and agile
Managing Managing
IS project management II
of IS through IS 6 Managing through Enterprise IS
7 Managing through Analytics: Utopian
promises vs dystopian surveillance
8 Managing platforms and ecosystems I +
Exam prep
10
9 Managing platforms and ecosystems II
(+buffer)
10 Final exam

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Strategic
Importance of
Information
Systems
 PREDICTED GLOBAL BUSINESS AND GOVERNMENT SPENDING ON IT
GOODS AND SERVICES

5,000

4,430
4,500
4,206

4,000 3,816 3,872

3,677 3,716
3,573 3,618 3,564 3,539
3,500 3,393 3,402 3,396 3,396
3,228
Spending in billion U.S. dollars

3,177

3,000 2,856
2,648

2,500

2,000

1,500

1,000

500

0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* 2022*

Source: Gartner (via Statista)

Further information regarding this statistic can be found Gartner; ID 268938

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IT SPENDING HAS STABILIZED AT A HIGH LEVEL BUT PERFORMANCE
KEEPS ON GROWING

Source: Visualcapitalist.com

13
BUSINESS STRATEGY & INFORMATION SYSTEMS

A business strategy is a well-articulated vision of where a

business seeks to go and how it expects to get there (Pearlson
and Saunders 2006).

Includes decisions on:

• Products and services the company produces
• Industries in which the company competes
• Competitors, suppliers, and customers of the company
• Long-term goals of the company

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CEO QUESTIONS

• How will digital technologies affect our strategic position?

• Do “digital” companies pose strategic threats to our
company? If yes, which?
• How can incumbent companies successfully manage the
digital transformation?

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GOALS OF THIS SESSION

After this session, you should be able to...

• Explain what the terms strategy and competitive advantage
mean
• Explain and apply a general tool for strategic analysis
• Explain and apply the „Digital Matrix“ as a tool for
understanding digital transformation processes

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HOW THIS SESSION WILL HELP YOU SUCCEED IN YOUR CAREER

• Digital transformation is not

first and foremost a
technical but a managerial
problem (see the two articles discussed in session 1)
• Major importance:
Understand how new
technologies can transform
your company’s business

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Strategic Analysis & IS
 ?
What is a competitive
advantage?
COMPETITIVE ADVANTAGE

Organizations have a competitive advantage when they

implement value-creating strategies not simultaneously
being implemented by any current or potential competitor
(Barney 1991).

A condition which enables an organization to operate in a

more efficient or higher-quality manner than companies it
competes with (Porter 1985).

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 ?
Can you use information
systems to achieve a
competitive advantage?
„IT DOESN‘T MATTER!“

“No one would dispute that IT has become the backbone of

commerce … The point is, however, that the technology’s
potential for differentiating one company from the pack—its
strategic potential—diminishes as it becomes accessible and
affordable to all” (Carr 2003).

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REALLY?

25
REALLY?

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TOOLS FOR STRATEGIC ANALYSIS—FIVE FORCES

Rivalry among
existing firms

Bargaining
power of Threat of new
suppliers entrants
Level of
industry
competitivenes

Threat of
Bargaining
substitute
power of buyers

Valacich and Schneider 2016

products

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IN-CLASS ASSIGNMENT:
Digitization of Automotive
Industry
WORK WITH YOUR NEIGHBOR—DIGITIZATION IN THE AUTOMOTIVE
INDUSTRY

Rivalry among
existing firms

Bargaining
power of Threat of new
suppliers entrants
Level of
industry
competitivenes

Threat of
Bargaining
substitute
power of buyers

Valacich and Schneider 2016

products

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The Digital Matrix
 INTERNET-RELATED DISLOCATIONS

1 Heyday numbers 2 Acquisition

Introduction: Digitization of Industries 41

THE DIGITAL MATRIX

Experimentation at Reinvention at the

The Digital Matrix Collision at the Core
the Edge Root

Rivalry among Rivalry among

Digital Giant
existing firms existing firms

Rivalry among Rivalry among

Industry Incumbent
existing firms existing firms

Venkatraman 2017
Rivalry among Rivalry among
Tech Entrepreneur
existing firms existing firms

42
THE DIGITAL MATRIX – 3 SETS OF PLAYERS

Experimentation at Reinvention at the

The Digital Matrix Collision at the Core
the Edge Root

Rivalry among Rivalry among

Digital Giant ! Your historical,
existing firms
traditional
existing firms
(in the sense
of current) competitors in your industry
! You understand and can anticipate their
likely action
! You have a repertoire of responses for
Rivalry among
their moves Rivalry among
Industry Incumbent
existing firms existing firms
! Banking example: BNP Paribas
! established Banks and financial
institutions
! HSBC, Bank of America, Citigroup,

Venkatraman 2017
Crédit Agricole,
Rivalry among RivalrySociete
among Generale,
Tech Entrepreneur
etc.
existing firms existing firms

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THE DIGITAL MATRIX – 3 SETS OF PLAYERS

Experimentation at Reinvention at the

The Digital Matrix Collision at the Core
the Edge Root

Rivalry among Rivalry among

Digital Giant
! Yesterday’s
existing firms techexisting
entrepreneurs
firms
! Large-scale digital technology companies
! Core business: Digital products and services
! Usual suspects: Alphabet, Amazon, Apple,
Facebook,
Rivalry among IBM, Rivalry
Microsoft,
among Samsung,
Industry Incumbent Huawei,
existing firms etc. existing firms
! Most have horizontal expertise that they
extend to new scope domains
! Banking example: BNP Paribas
! “Banking products” from digital giants

Venkatraman 2017
Rivalry among Rivalry among
Tech Entrepreneur ! GoogleWallet,
existing firms ApplePay,
existing firms SamsungPay

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THE DIGITAL MATRIX – 3 SETS OF PLAYERS

Experimentation at Reinvention at the

The Digital Matrix Collision at the Core
the Edge Root

! Ambitious, up-start tech entrepreneurs

! Born digital: Aim at disrupting traditional
industry by promising unparalleled value to
Rivalry among Rivalry among
Digital Giant customers
existing firms using the power
existing firms of digital business
models and technologies
! Algorithms and automation guide thinking
! Data as differential resource
! Analytics as differential competency
Rivalry
! Most among Rivalry
start out with amongfocused expertise in
deep,
Industry Incumbent
existing firms existing firms
specific vertical area (fin tech, auto tech, farm
tech, etc.)
! Potential competitors or partners
! Banking example: BNP Paribas

Venkatraman 2017
Tech Entrepreneur
Rivalry ! Fintechs Rivalry among
among
existing!firms existingetc.
Paypal, VaultOS, firms

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THE DIGITAL MATRIX—3 PHASES

Experimentation at Reinvention at the

The Digital Matrix Collision at the Core
the Edge Root

Rivalry among Rivalry among

Digital Giant ! Embryonic
existing firms
phase: Experimenting with new
existing firms
digital ideas
! Sketches on napkins, slide decks, rough
prototypes and pilots
! Make sense of the landscape of
Industry Incumbent experimentation
Rivalry among within
Rivalry and beyond your
among
existing firms
immediate existing firms
industry
! Scan for digital ideas that could challenge the
fundamental assumptions underlying your
business model

Venkatraman 2017
! Banking
Rivalry among example: BNPamong
Rivalry Paribas
Tech Entrepreneur
VaultOS existing firms
existing!firms

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THE DIGITAL MATRIX—3 PHASES

Experimentation at Reinvention at the

The Digital Matrix Collision at the Core
the Edge Root

Rivalry among Rivalry among

Digital Giant ! Ideas and
existing firms
experiments have evolved from…
existing firms
! prototypes to business options
! possibilities (could it work) to
probabilities (how to make it work
profitably)
Rivalry amongproductsRivalry
! Digital among challenge
and services
Industry Incumbent
existing firms existing firms
traditional products and services
! Digital business models challenge traditional
organizing logic
! Banking example: BNP Paribas

Venkatraman 2017
Rivalry ! Paypal andRivalry
among Bitcoinamongfor international
Tech Entrepreneur
transactionsexisting firms
existing firms

50
THE DIGITAL MATRIX—3 PHASES

Experimentation at Reinvention at the

The Digital Matrix Collision at the Core
the Edge Root

! Digital
Rivalry amongis no longer anamong
Rivalry afterthought:
Digital Giant
Every
existing firmsproduct/service
existing and
firms business is
digital
! The three sets of players work together
to solve thorny core problems
Rivalry ! Who interacts
among with
Rivalry the end
among
Industry Incumbent customer? existing firms
existing firms
! Who designs the customer
interface?
! Who gathers, possesses and
analyses data to develop insights

Venkatraman 2017
Rivalry among Rivalry among
Tech Entrepreneur ! Banking
existing firms
example: BNP Paribas
existing firms
! BNP and ApplePay?

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FINAL DIGITAL MATRIX

Experimentation at Reinvention at the

The Digital Matrix Collision at the Core
the Edge Root

Rivalry among Rivalry among ApplePay /

Digital Giant
existing firms existing firms
GoogleWallet (for
electronic payments)

Rivalry among Rivalry among

Industry Incumbent
existing firms existing firms

Venkatraman 2017
Rivalry among
Paypal/Bitcoin
Tech Entrepreneur VaultOS existing firms
(for international
transactions)

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THE DIGITAL MATRIX IS NOT…

• … a matrix of technologies: The DM captures core actions

by different types of players (business-pull) rather than
focusing on the devices that drive them (business push)
• …static: The DM brings out the dynamics—the actions,
reactions, and follow-on decisions—to ensure that you are
continually taking advantage of development with different
technologies to evolve your business for the digital future
• … one-dimensional: The DM is multidimensional such that
your (interconnected and reinforcing) actions in every
phase invite reactions and response from the three sets of
players

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IN-CLASS ASSIGNMENT:
Digital Matrix in the
Automotive Industry
Summary &
Conclusion
SUMMARY OF THIS SESSION

• Five forces is a tool for conducting strategic analyses with the

goal to achieve competitive advantages
• IT can affect each force
• " Information systems are often essential for achieving
competitive advantages
• The digital matrix is a tool for incumbent companies to figure
out a way to succeed in the digital transformation. It provides
an analytical lens…
• to understand the moves of two distinct types of
competitors
• to develop effective responses to the opportunities and
threats of the digital transformation

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