the population remained, and so did a need for business associates, families, and friends to communicate with each other across the emerging nation.
To help meet this need, the Pony Express was launched on April 3, 1860. It could deliver letters and small packages between St. Joseph, Missouri, and Sacramento in only 10 days, a breakthrough for that era. The Pony Express accomplished this feat by using a cleverly engineered system of over 150 stations, hundreds of specially selected horses, lightweight riders, specially designed lightweight saddles, and clever “hacks” such as a horn to alert an upcoming station to ready the next horse. The stations were spaced about 10 miles apart, the distance a horse could go at top speed before tiring. In what was a forerunner to today's packet-switched networks such as the Internet, a lightweight pouch containing the mail was handed off from rider to rider, each rider exchanging horses several times before being replaced himself.
On October 24, 1861 – a year and a half after the Pony Express began deliveries – the first transcontinental telegraph network was completed, and in less than 48 hours the Pony Express ceased operations. Thus was a miracle of operational excellence supplanted by early information technology (IT) and what might be called information excellence. It foreshadowed the critical need to exploit IT – or be trampled and left in the dust.
From Value Disciplines to Digital Disciplines
To help companies avoid a fate like that of the Pony Express, this book delineates four digital disciplines– information excellence, solution leadership, collective intimacy, and accelerated innovation – by which IT can galvanize strategy, drive customer value, maximize competitive differentiation, help attain market leadership, and create wealth. The current darlings of Silicon Valley, such as Uber, Nest, Netflix, and Apple, utilize one or more of these strategies, but so can companies in other verticals and with century-old legacies.
Information excellence , as signaled by the transcontinental telegraph, exploits information technology, sophisticated algorithms, and the synthesis of digital and physical worlds to drive better asset utilization, better physical operational excellence, and better business processes: processes that are faster, more cost effective, higher quality, more flexible, more sustainable, or otherwise create differentiated value. Assets can be optimized with information through techniques such as better operations planning to reduce idle time and through predictive maintenance to reduce unplanned downtime.
Uber is a good example of information excellence: It rethought transportation processes by using mobile devices and matching algorithms, and improved asset utilization by using on-demand drivers and their vehicles. Other companies use similar approaches: Airbnb for living spaces; Topcoder for developers. Other examples of information excellence include optimized operations for package delivery firms such as UPS and at ports such as the Hamburg Port Authority and integrated online-offline omni-channel experiences at retailers such as Burberry, featured in Chapter 7.
Solution leadership represents the evolution of standalone products and services to smart, cloud-enabled product-service systems and ecosystems, where firms focus on customer outcomes, one-time sales become ongoing relationships, and competitive advantage evolves from mere product features to ecosystems, communities, and future potential. Products such as cars, thermostats, and dishwashers are being connected to the cloud, but so are services. For example, healthcare services are becoming delivered in part by medical equipment such as connected pills, pacemakers, and CT (computed tomography) scanners.
The Nest Learning Thermostat is a smart device that connects across Wi-Fi to the cloud. From there, it can be remotely controlled by a smartphone, and perhaps someday through smart electric grid demand response and dynamic-pricing based algorithms. Other examples include jet engines from GE that tie to cloud-based analytics and wearables from Nike and its partners that link to cloud services and social networks. Nike's digital strategy is covered in Chapter 10.
Collective intimacy is where independent anonymous transactions become intimate, long-term relationships thanks to “big data” analytics run on detailed customer characteristics and behavior. Relationships become win-win, and products and services become predictive, contextual, and personal.
Examples include upsell and cross-sell of products at etailers such as Amazon.com, improved retention and customer lifetime value at entertainment services such as Netflix, reviewed in Chapter 13, and improved health outcomes through personalized medicine leveraging repositories of genomic data such as at the Mayo Clinic.
Accelerated innovation enables companies to innovate products, processes, and relationships faster, cheaper, and better than their competition by complementing internal resources with ad hoc external ones, through open, external innovation, published big data sets, crowdfunding, open source, platforms and agile development, and crowdsourced challenges exploiting contest economics. Accelerated innovation may be viewed as a meta-discipline, since it can be applied to improve operations and information, products, services, and solutions and customer relationships.
Uber, Nest, and Apple are certainly innovators, but so are Netflix with its Prizes; Procter & Gamble, highlighted in Chapter 16, developing its next billion-dollar blockbuster brand through a combination of internal and external innovation; and GE with its Quests, featured in Chapter 17.
Most of these companies are doing something in each discipline, but GE is applying all four disciplines across its numerous businesses. Opower, a company that is also arguably pursuing all the disciplines, is an interesting case of a company whose strategy is based on applying gamification – leveraging behavioral economics and human cognitive biases – to the business of reducing energy consumption, and is overviewed in Chapter 19.
Immense wealth is being created through the strategic, disruptive application of information technologies in these ways, or lost through the failure to do so successfully: consider Netflix vs. Blockbuster, Wikipedia vs. Encyclopedia Britannica, Amazon.com vs. Borders, Yelp vs. Zagat, Facebook's WhatsApp vs. cellular service providers' text messaging services, Uber vs. taxis, or Google vs. any number of newspapers. Upstart startups have overtaken established brands, seemingly overnight. The digital disciplines offer a blueprint for new companies to disrupt current ways of doing business as well as for established firms to reinvent themselves via compelling, digitally enabled value propositions.
Digital disciplines are the latest incarnation of a popular strategy framework – called value disciplines– originally developed by Michael Treacy and Fred Wiersema 20 years ago in their seminal article for the Harvard Business Review titled “Customer Intimacy and Other Value Disciplines”1 and their bestselling book The Discipline of Market Leaders.2 They proposed three value disciplines: operational excellence (i.e., better processes), product leadership (i.e., better products and services), and customer intimacy (i.e., better customer relationships).
Treacy and Wiersema argued that companies should ideally pursue one discipline, and that different companies can dominate different niches in the same industry by pursuing different value disciplines. Consider retailing: Wal-Mart offers convenience and low cost through operational excellence, including a global store footprint and optimized logistics; Tiffany offers product leadership by selling high quality objects of desire in elegant settings; Amazon's Zappos unit competes on customer service and relationships.
Treacy and
Michael Treacy and Fred Wiersema,
