INB 201 Intro to International Business Spring 2013 Dr. Lairson Technology http://knowledge.wharton.upenn.edu/article.cfm?articleid=2163 Rise of the Knowledge Economy Basic features of the knowledge economy Knowledge is the most important input to products, processes, services Innovation main source of competitive advantage US China Finland Israel India Apple and RIM Apple and Sony Walmart and Kmart Canon, Sony and Kodak Samsung and Apple Knowledge economy in rich states = potential rapid growth in poor states by reusing existing knowledge Knowledge base in developing nations leads to local and then to global innovation New global knowledge pools = Bangalore, Hong Kong, Seoul, Tokyo, Shanghai, Shenzhen, Singapore Pace of competition and innovation rises Turbulence in markets Fast failure Startups Premium for knowledge increases Basic Terms Technology 1. Business analytics (predictive analytics) (Business intelligence) (Big data) 2. Datamining 3. GPS 4. Terabyte/Petabyte 5. Cloud Computing 6. Mobile Computing (Apps) 7. 3D Printing 8. Router; WiFi 9. Customer Relationship Management (CRM) 10. Enterprise Resources Planning (ERP) 11. Ubiquitous Computing 12. Computer Aided Design (CAD); Computer Aided Manufacturing (CAM) 13. Management Information Systems (MIS) 14. Supply Chain Management (SCM) 15. World Wide Web 16. Operating System 17.Browser Important People and firms in microcomputers Bill Gates Xerox PARC Steve Jobs/Steve Wozniak Tim Berners Lee - WWW DARPA INTEL – microprocessor Gordon Moore Transistor Moore’s Law Personal Computer 1982 iPhone 4s 2012 Cost $2500 $600 Processor speed 4MHz 1GHz Weight 25lbs 4oz Storage 30 mb 16gb iPhone: camera, HD video, global phone, internet, verbal commands Ratio 4.18:1 250:1 100:1 528:1 iPhone is vastly more powerful, vastly more capabilities, tiny fraction of the size, vastly better screen resolution for less than ¼ the price (even less in real $) Altair - 1975 Alto - 1978 Apple II - 1977 MacIntosh - 1984 McKinsey Global Institute Disruptive technologies: Advances that will transform life, business, and the global economy What is a disruptive technology? How does a disruptive technology affect business? Yet some technologies do in fact have the potential to disrupt the status quo, alter the way people live and work, rearrange value pools, and lead to entirely new products and services. Business leaders can’t wait until evolving technologies are having these effects to determine which developments are truly big things. They need to understand how the competitive advantages on which they have based strategy might erode or be enhanced a decade from now by emerging technologies—how technologies might bring them new customers or force them to defend their existing bases or inspire them to invent new strategies. the most significant advances in economies are often accompanied by a process of “creative destruction,” which shifts profit pools, rearranges industry structures, and replaces incumbent businesses. This process is often driven by technological innovation in the hands of entrepreneurs. identify which of these technologies could have massive, economically disruptive impact between now and 2025. Identifying disruptive technologies: share four characteristics: 1) The technology is rapidly advancing or experiencing breakthroughs. 2) The potential scope of impact is broad. 3) Significant economic value could be affected. 4) Economic impact is potentially disruptive. The technologies we identify have potential to affect billions of consumers, hundreds of millions of workers, and trillions of dollars of economic activity across industries. McKinsey Global Institute Disruptive technologies: Advances that will transform life, business, and the global economy 5 Exhibit E2 Speed, scope, and economic value at stake of 12 potentially economically disruptive technologies Mobile Internet Automation of knowledge work Illustrative rates of technology improvement and diffusion Illustrative groups, products, and resources that could be impacted1 Illustrative pools of economic value that could be impacted1 $5 million vs. $4002 Price of the fastest supercomputer in 1975 vs. that of an iPhone 4 today, equal in performance (MFLOPS) 4.3 billion People remaining to be connected to the Internet, potentially through mobile Internet $1.7 trillion GDP related to the Internet 6x Growth in sales of smartphones and tablets since launch of iPhone in 2007 1 billion Transaction and interaction workers, nearly 40% of global workforce 100x Increase in computing power from IBM’s Deep Blue (chess champion in 1997) to Watson (Jeopardy winner in 2011) 230+ million Knowledge workers, 9% of global workforce 400+ million Increase in number of users of intelligent digital assistants like Siri and Google Now in past 5 years The Internet of Things 300% Increase in connected machine-to-machine devices over past 5 years 80–90% Price decline in MEMS (microelectromechanical systems) sensors in past 5 years Cloud technology 18 months Time to double server performance per dollar 3x Monthly cost of owning a server vs. renting in the cloud Advanced robotics 75–85% Lower price for Baxter3 than a typical industrial robot 170% Growth in sales of industrial robots, 2009–11 Autonomous and nearautonomous vehicles 7 Miles driven by top-performing driverless car in 2004 DARPA Grand Challenge along a 150-mile route 1,540 Miles cumulatively driven by cars competing in 2005 Grand Challenge 1.1 billion Smartphone users, with potential to use automated digital assistance apps 1 trillion Things that could be connected to the Internet across industries such as manufacturing, health care, and mining $25 trillion Interaction and transaction worker employment costs, 70% of global employment costs $9+ trillion Knowledge worker employment costs, 27% of global employment costs $36 trillion Operating costs of key affected industries (manufacturing, health care, and mining) 100 million Global machine to machine (M2M) device connections across sectors like transportation, security, health care, and utilities 2 billion Global users of cloud-based email services like Gmail, Yahoo, and Hotmail 80% North American institutions hosting or planning to host critical applications on the cloud $1.7 trillion GDP related to the Internet $3 trillion Enterprise IT spend 320 million Manufacturing workers, 12% of global workforce $6 trillion Manufacturing worker employment costs, 19% of global employment costs 250 million Annual major surgeries $2–3 trillion Cost of major surgeries 1 billion Cars and trucks globally $4 trillion Automobile industry revenue 450,000 Civilian, military, and general aviation aircraft in the world $155 billion Revenue from sales of civilian, military, and general aviation aircraft 26 million Annual deaths from cancer, cardiovascular disease, or type 2 diabetes $6.5 trillion Global health-care costs 300,000+ Miles driven by Google’s autonomous cars with only 1 accident (which was human-caused) Nextgeneration genomics Energy storage 3D printing 10 months Time to double sequencing speed per dollar 100x Increase in acreage of genetically modified crops, 1996–2012 40% Price decline for a lithium-ion battery pack in an electric vehicle since 2009 90% Lower price for a home 3D printer vs. 4 years ago 4x Increase in additive manufacturing revenue in past 10 years Advanced materials $1,000 vs. $50 Difference in price of 1 gram of nanotubes over 10 years 115x Strength-to-weight ratio of carbon nanotubes vs. steel Advanced oil and gas exploration and recovery 3x Increase in efficiency of US gas wells, 2007–11 Renewable energy 85% Lower price for a solar photovoltaic cell per watt since 2000 2x Increase in efficiency of US oil wells, 2007–11 19x Growth in solar photovoltaic and wind generation capacity since 2000 2.5 billion People employed in agriculture 1 billion Cars and trucks globally 1.2 billion People without access to electricity 320 million Manufacturing workers, 12% of global workforce 8 billion Annual number of toys manufactured globally 7.6 million tons Annual global silicon consumption 45,000 metric tons Annual global carbon fiber consumption $1.1 trillion Global value of wheat, rice, maize, soy, and barley $2.5 trillion Revenue from global consumption of gasoline and diesel $100 billion Estimated value of electricity for households currently without access $11 trillion Global manufacturing GDP $85 billion Revenue from global toy sales $1.2 trillion Revenue from global semiconductor sales $4 billion Revenue from global carbon fiber sales 22 billion Barrels of oil equivalent in natural gas produced globally $800 billion Revenue from global sales of natural gas 30 billion Barrels of crude oil produced globally $3.4 trillion Revenue from global sales of crude oil 21,000 TWh Annual global electricity consumption $3.5 trillion Value of global electricity consumption 13 billion tons Annual CO2 emissions from electricity generation, more than from all cars, trucks, and planes $80 billion Value of global carbon market transactions 1 Not comprehensive; indicative groups, products, and resources only. 2 For CDC-7600, considered the world’s fastest computer from 1969 to 1975; equivalent to $32 million in 2013 at an average inflation rate of 4.3% per year since launch in 1969. 3 Baxter is a general-purpose basic manufacturing robot developed by startup Rethink Robotics. SOURCE: McKinsey Global Institute analysis Information technology is pervasive. Most of the technologies on our list are directly enabled, or enhanced, by information technology. Continuing progress in artificial intelligence and machine learning are essential to the development
of advanced robots, autonomous vehicles, and in knowledge work automation tools. The next generation of gene sequencing depends highly on improvements in computational power and big data analytics, as does the process of exploring and tapping new sources of oil and natural gas. 3D printing uses computer generated models and benefits from an online design sharing ecosystem. The mobile Internet, the Internet of Things, and cloud technology are themselves information and communications technologies. Information technologies tend to advance very rapidly, often following exponential trajectories of improvement in cost/performance. Combinations of technologies could multiply impact. We see that certain emerging technologies could be used in combination, reinforcing each other and potentially driving far greater impact. For example, the combination of nextgeneration genomics with advances in nanotechnology has the potential to bring about new forms of targeted cancer drugs. It is possible that the first commercially available nano-electromechanical machines (NEMS), moleculesized machines, could be used to create very advanced sensors for wearable mobile Internet devices or Internet of Things applications. The nature of work will change, and millions of people will require new skills. It is not surprising that new technologies make certain forms of human labor unnecessary or economically uncompetitive and create demand for new skills. The future for innovators and entrepreneurs looks bright. A new wave of unprecedented innovation and entrepreneurship could be in the offing
as a result of falling costs and rapid dissemination of technologies. Many of the technologies discussed in this report will be readily available and may require little or no capital investment. It is possible that advancing technology, such as automation of knowledge work or advanced robotics, could create disproportionate opportunities for some highly skilled workers and owners of capital while replacing the labor of some less skilled workers with machines. This places an even greater importance on training and education to refresh and upgrade worker skills and could increase the urgency of addressing questions on how best to deal with rising income inequality. Supply Chains What is a supply chain? How have supply chains changed as a result of new technology and globalization? Why is the supply chain so spread out? What are some of the main problems in managing global supply chains? Analyze the Apple suppliers list and the geographic distribution and nationality of Apple suppliers. What kinds of issues can this present to supply chain managers? How would knowing about operations management prepare you for these issues? How does the value chain convey new information about the supply chain? What does analysis of the value chain for an iPod reveal? Figure 3. Breakdown of 30GB 5th-generation iPod retail price based on analysis so far GROSS MARGIN Retail Price $299 Wholesale Price $224 Cost of Inputs $144 Cost of sales for 7 key inputs $83 $45 retail margin $30 distr. margin $80 Apple gross margin (gross margin for 7 key inputs) COST $33 $1 gross margin for PortalPlayer supplier $224 wholesale price to Apple $144 cost of all inputs $83 cost of goods for 7 key inputs $4 other cost of PortalPlayer chip $28 (cost of 444 still-to-be analyzed inputs) $78 still-to-be analyzed cost for 7 key inputs How does the evolution Apple over time add new issues to the management of a Source: Authors’ estimates; seeoftext. supply chain? What is the relationship Apple’s supply and its brand value? The dominance of Apple’sbetween gross margin suggests thatchain in this particular iPod model, the U.S. captures most of the value. In the case of retail units sold in other countries, a significant portion of the U.S. share would shift elsewhere. For a unit sold in Japan, the total value captured by Japanese companies might even be larger than the U.S. share, depending on the identity of the company that handles distribution. However, it must be recalled that the gross margins for inputs in the third row of Figure 2 exclude direct labor, which is part of the $83 cost of goods. Direct labor, most of which will be outside the U.S., would be included in an ideal value added analysis but will not be accounted for in the current phase of the study because of data availability problems.7 The location of direct labor differs from headquarters location for most electronics firms. Taiwanese CMs, for instance, have moved the bulk of their factories to mainland China over the Big Data http://www8.hp.com/us/en/business-solutions/nascar.html http://www.npr.org/bl ogs/alltechconsidered/2014/03/19/291147096/for-prosports-public-relations-going-high-tech-real-time In the NASCAR Fan and Media Engagement Center, 13 46-inch TV screens display charts, tweets and live races. By 2020, there will be 50 billion Internet-connected points – the Internet of things generating massive and exponentially growing data1 By 2018, the United States alone could face a shortage of 140,000 to 190,000 people with deep analytical skills, as well as 1.5 million managers and analysts with the know-how to use the analysis of big data to make effective decisions.2 Capturing value from data is a massive business opportunity: $300 billion in health care3 Motley Fool, http://www.fool.com/investing/general/2014/02/03/how-the-internets-evolutioncan-transform-your-lif.aspx 2 McKinsey Global Institute, May 2011 3 McKinsey Global Institute, May 2011 1 What is Data Analytics and Visualization? Information about human behavior Behavior then predicts behavior now Understand connections and relationships in social and economic systems Decision makers need new analytical and conceptual tools for data analytics Nature and consequences of large data sets Importance of context for causation Social and political issues in having and using data Power of micro-relationships Data ownership and transparency New business models around specialized and authenticated services Real-time macro data Validity for correlated relationships Unintended consequences of system intervention Good data visualization = good communication Discovery through interactivity Third Industrial Revolution 3D printing Digital manufacturing New materials Nanotechnology Modularity and economies of scale and scope Robotics Manufacturing has always been limited by costs: Factory Machines Mass production for economies of scale Cost of retooling to make different types High costs of small batches You could not make anything that was not susceptible to economies of scale Technology changes what we can do at what cost It changes what we make, how we make it, where we make it and who can afford it All of these create business opportunities and competitive threats What does an auto factory look like? Or a steel factory? 3D manufacturing eliminates the difference between average cost and marginal cost The batch of 1 It allows us to make things for very low cost that we could not make before Use of synthetic living tissue to manufacture a kidney – bio-printing Customized pet design Will 3D printing become common in homes? Are businesses beginning to bet on 3D? In May, office supplies chain Staples announced it would start carrying a 3-D printer for consumers called the Cube. In July, eBay launched a 3-D printing service called eBay Exact where consumers can order customizable products. Prices range from $9 for an iPhone case to $350 for a metal ring. Even Amazon.com has a dedicated "store" for 3-D printers and supplies now. Meanwhile, Microsoft is jumping on the bandwagon by adding support for 3-D printers in its upcoming Windows 8.1 update. Making a 3-D object from your computer "will be as easy as writing a document in Word and sending it to print," wrote Shanen Boettcher, general manager of the firm's startup business group, in a June 26 blog post. "We want this to be so simple anyone can set up their own table-top factory." the technology is best suited for custom, one-of-a-kind products and the manufacturing of goods that have low, but highly sporadic demand. "3-D printing will make inroads in applications where demand is highly intermittent, and where true customization to the unique characteristics of the customer is valuable," Ulrich notes in his Journal column. One may not need a custom-made ice cream spoon, but customization will come in handy for a patient who needs a hip replacement, he says. When it comes to infrequently ordered items, such as a vintage motorcycle part, it is more efficient for a company to 3D-print it rather than keep an inventory of spares. 3-D printing is making a big impact in a variety of industries. These printers have been used to make chocolate, synthetic scaffolds for organ transplants, detailed prosthetic legs, aircraft, high-concept cars and even NASA rocket engine parts. Global Business Strategy Tech Giant at War The impact of continuous, accelerating competition No advantage lasts very long Fast Follower/Lead Innovator Winner takes most where the battle lines between the four large companies seen as dominating the consumer internet—Google, Apple, Facebook and Amazon—are in furious flux. What is strategy? The plans, actions and efforts to develop capabilities that increase your strength relative to adversaries. As the web becomes something that lives through and on the phone, and software something handled in a cloud, the clear lines that once defined territories and strategies are blurring. A mixture of threat and opportunity has the big four using their cash and acumen to strike out into other areas—sometimes into uninhabited lands, sometimes into places where some other firm is used to ruling the roost. And they are not the only ones involved in the fray. The battlefields on which the big four are fighting are, like most battlefields, messy and confusing. They are also numerous. Apple and Google are crossing swords in operating systems for smartphones and tablet computers; both firms and Amazon are butting heads in hardware; Google and Facebook have become sworn enemies in social networking; some of the other protagonists even have designs on e-commerce, which has long been Amazon’s stronghold. What is the specialization of each firm? Why do they encroach on each other’s territory? What is the relationship of hardware, software and content? Apple: software, devices, content as an integrated system Google: search content and lots of bets Facebook: social media and some bets Amazon: e-commerce plus device plus content competition between Apple’s iOS mobile operating system, which powers the iPhone and the iPad tablet computer, and Android, Google’s rival operating system, which is used by a host of manufacturers such as Samsung and HTC. Google snapped up the firm that created Android in 2005 as a strategic hedge; it was worried that its search engine and other services might be excluded from mobile devices owned by potential rivals. It has since turned the system into a formidable competitor to iOS. How do Apple and Google compete in operating systems? Symmetrical competition? Best mobile experience? Apple has 16% global market share in mobile phones and 60% of global profits. What is Amazon’s strategic advantage over the other three firms? How does Amazon compete with device and content? E-books versus e-music? Is Kindle enough or does Amazon need a phone-computer? Does Facebook compete on the basis of content? Other firm’s content with a social twist? Google and content? Google Play? Apple versus everyone with mobile apps. What are the implications of Google buying and then selling Motorola Mobility to Lenovo? Can Microsoft get in the game with Surface and Nokia? Why has Facebook bought Oculus? What strategic purpose is it pursuing? If Google wants to compete with Amazon in e-commerce, does it need to buy a logistics firm to match Amazon’s warehouses? UPS? Is Google Glass the device response to the iPhone and iPad? What is the winning combination of content, device, commerce, ads \ ?