Scribd
Upload
23 views

Sprint Live Session 1 March 2022

Digital Transformation

Uploaded by

nelsonm
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
23 views

Sprint Live Session 1 March 2022

Digital Transformation

Uploaded by

nelsonm
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 38

Digital Transformation Sprint

Live Session with Michael Wade

Copyright © 2021 IMD. All rights reserved.


10 Manufacturing
Transportation Hospitality
11 9
and Logistics and Tourism
Tech Products
2
and Services Professional
Retail 3 8
Real Estate 12 Services
Media and
1
Entertainment
Financial
4 7 Education
Services
Healthcare and
13
Pharmaceuticals 6 Consumer
5 Telecoms Packaged Goods

Energy and 14
Utilities

© Global Center for Digital Business Transformation. All rights reserved. 2


Which industries
will self-driving
cars disrupt?

Write your answer in


“Does your car have any idea
the chat window. why my car pulled it over?”
Source: The New Yorker

© Global Center for Digital Business Transformation. All rights reserved. 4


The Digital Business Transformation Journey
Assess your digital Choose how to differentiate by Choose your appropriate response
opportunities and threats combining cost value, experience strategy: Harvest, Retreat, Disrupt,
value, and platform value and/or Occupy

Why to Transform What to Transform

Define a roadmap for digitization across Build Digital Business Agility: Hyperawareness, Informed
your organizational value chain Decision-making, and Fast Execution

How to Transform
13
PROFIT (US$B, Q3, 2021) 30

20

10

25 50 75 100
REVENUE (US$B, Q3 2021)
Customer Value Drivers

$
Cost Experience Platform
Value Value Value
Compete by Compete by Compete by
offering the offering the creating network
customer a lower customer a effects that
cost or other superior benefit customers.
economic gains. experience.
The benefits of platform business models…
IMD analysis of the
activities of key B2C
digital giants

19
IMD analysis of the
activities of key B2B
digital giants

20
A comparison of platform business models
The Concept…

…Office Space as a Service…


The
Value
Proposition

• For freelancers and startups: professional space without responsibilities,


opportunities to build networks
• For small-to-medium businesses: flexibility and scalability at a reasonable cost
• For enterprise organizations: save money and hassle by outsourcing office facilities
• For landlords: long-term guaranteed leases, often more than 15 years
The
Business
Model

Source: CB Insights 2019

• Rent arbitrage: wework leases office space from landlords, reconfigures it, and sub-leases it at a
higher price
• Space strategy: Typical wework spaces include a mix of private offices, conference rooms, lounges,
and open workspaces with a variety of worker-friendly features such as coffee, office supplies, and
beer on tap
• Worker density: wework typically fits more bodies into its spaces than a typical corporate office: 1
person per 102M, vs an average of 1 person per 202M
The Concept…

…The world’s largest accommodation


provider owns no property…
The
Value
Proposition

• For travellers: low prices, easy-to-use interface, unique properties with a home
feel, extensive choice and global scale
• For property owners: access to a massive market at a reasonable cost
The
Business
Model

Source: Micrometrics 2018

• Market maker: platform connects guests and hosts, and facilitates transactions
• Guest revenue: charge rental and service fees to guests
• Host revenue: charge rental and service fees to hosts
vs
fundamentals

Revenues $3.2B (2020) $3.4 Billion (2020)

Profits ($3.2) Billion (2020) ($4.6) Billion (2020)

Market Cap $47B (2019), Revised to <$3B (April $108 Billion (December 2021)
2020), $9B SPAC listing (Oct 2020), $35 B (2018), $20 B (April 2020)
$6B (Dec 2021)
Employees 6,000 (2020) 6,000 (2020)

Scope 270 K members in 500 locations 2 M nightly stays from 6 M listings


across 32 countries across 191 countries
Source: Company data
vs

Which has the strongest


platform business model? Why?
Strong platform business models…
1. Reduce market fragmentation
• Uber has consolidated the fragmented market for on-demand transportation
2. Serve as a launchpad for new products and services
• Amazon has expanded from books to multiple product categories, to AWS, etc.
3. Have positive network effects
• Facebook’s power increases with the number of users
4. Are durable and resilient
• Alibaba can easily scale up and down operations depending on market conditions
5. Digital platforms have low variable and fixed (capital) costs
• The cost for Google to add and provide services to an additional user is negligible
• Tencent has relatively few fixed assets
Strong platforms…
Reduce market fragmentation

• The market for short-term vacation rental property is


extremely fragmented. airbnb has consolidated the market
using a single global brand, user-interface, and business
model.

• The market for office space is also extremely fragmented.


wework is building a consistent look and feel, and a global
brand.
Strong platforms…
Serve as a launchpad for new product and services

• Could use its platform to offer additional services to travellers, like


vacation experiences or work space; and to property owners, like key
exchange or cleaning.

• Could expand to other business services, like hosting meetings or


business consulting. wework pursued expansion into complementary
areas such as housing (welive) and education (wegrow), both now
scaled back.
Strong platforms…
Have positive network effects…

• For a travel marketplace, the more properties available on the platform,


and the more travellers, the better.

• For an office space marketplace, network effects are less clear. People do
not move their place of work very often. It is not obvious how a renter of
office space in London will benefit from another property in Austin or
Tokyo.
Strong platforms…
Are agile, durable, and resilient

• Since airbnb owns few physical assets, and the process on onboarding
home owners and guests is largely automated, it can ramp up and down
relatively quickly and easily. Thus, it is well placed to leverage market
upturns and absorb downturns.

• Since wework’s business model is based on assuming relatively cheap long-


term leases, it is stuck with multi-decade fixed cost liabilities, lowering
durability and agility.
• The speed of wework’s growth is hampered by individually negotiated
contracts with both landlords and renters.
• wework’s resilience in the face of a market downturn when rents normally
fall, sometime dramatically, is an open question. Critics have noted that if
the company was unable to achieve a positive cash flow when the
economy was buoyant, it is unlikely to do so now when conditions are less
favourable.
Strong platforms…
Have low variable and fixed (capital) costs…

• Like many digital companies, airbnb is based on a low fixed cost model
– it famously doesn’t own any accommodation properties. In addition,
because of its low variable costs, it can expand quickly and cheaply
without assuming additional liabilities.

• wework doesn’t own property either; however, it needs to invest in


fixed costs, like long-term leases, furniture, and technology; It also has
significant ongoing costs, such as utilities, security, insurance,
maintenance, improvements (wear and tear), as well as consumables
like printer paper and ink, coffee, and beer. Thus, capital investment
requirements are high and not scalable on a variable basis. wework will
need a very strong balance sheet.
Summary
airbnb embodies many of the characteristics of a strong platform
business model including:
- Taking advantage of market fragmentation
- Offering complementary services
- Building positive network effects
- Durability and resilience in the face of market disruptions
- Low fixed and variable costs

By contract, wework only contains a few of these characteristics.


Thus, it will probably struggle to become a successful platform
player in the medium to long term.
How strong is your platform value
compared with your competitors?

1. Have you reduced market fragmentation?


2. Have you used your platform to launch new products and services?
3. Do you have positive network effects?
4. Is your platform durable and resilient to market conditions?
5. Can you maintain relatively low variable and fixed (capital) costs?

© Global Center for Digital Business Transformation. All rights reserved. 37


The Digital Business Transformation Journey
Assess your digital Choose how to differentiate by Choose your appropriate response
opportunities and threats combining cost value, experience strategy: Harvest, Retreat, Disrupt,
value, and platform value and/or Occupy

Why to Transform What to Transform

Define a roadmap for digitization across Build Digital Business Agility: Hyperawareness, Informed
your organizational value chain Decision-making, and Fast Execution

How to Transform

You might also like