Digital Transformation Project – SOCOMEC Group – Team 58

20

October

2017

5/5 (2)

SOCOMEC Group (SOCOMEC) is an Italian-French independent industrial manufacturer that specialises in the development and manufacturing of back-up power solutions. Specifically, it produces uninterruptible power supply (UPS) systems, as well as other solutions for the control, safety, and energy performance of low voltage electrical networks (Bloomberg, 2017).

SOCOMEC differentiates itself from its competitors by offering highly innovative and high-quality products. Because of changing market trends SOCOMEC faces new challenges in competing against low-cost competitors and expanding its market size. The company only recently started emphasizing the need to create a comprehensive digital transformation approach. So far, they do not have a digital strategy but implement several digital activities that are not aligned to an overarching plan.

SOCOMEC operates with 27 subsidiaries and a broad distributor network in 70 countries (SOCOMEC, 2016). Thus, a harmonized digital strategy and implementation plan is needed to execute a company-wide digital transformation and ultimately fulfill SOCOMEC’s strategic objectives of sustainable growth, expanding in launching new product areas (such as smart energy meter) and achieve customer satisfaction in preferred segments.

21472b07826c3c1ca572f970ee3b1dad

The proposed digital strategy focuses on transforming SOCOMEC to a digital factory by digitizing the whole value chain. Our proposed solution is to connect the existing system landscape and introduce a state-of-the art Central Data Warehouse & BI system. The solution centralizes and coordinates various data flows, extracts information from integrated tools and systems of the organization and allows for real time analysis and visualisation of data. Thus, it accelerates and improves decision-making based on valuable data insights. The solution fits with SOCOMEC’s goals and business model and is aligned with its company strategy. When carrying out the transformation plan, SOCOMEC has to ensure top management commitment, involvement of representatives of all subsidiaries, ensure proper training of employees in terms of culture change and implemented digital systems. Management should keep in mind the underlying risks and challenges of this complex transformation project and mitigate risks.

Most importantly, our managerial recommendations are:

  • Formulate an overarching digital strategy in cooperation with subsidiaries.
  • Top management support and strong governance is essential in the success of this transformation.
  • Conduct an extensive research on available Central Data Warehouse & BI solution providers
  • Integrate company data in Central Data Warehouse in combination with BI system.
  • Training for employees
  • Increase the implementation speed of digital projects
  • Facilitate Culture Change
  • Continuously monitor risks and possible mitigation strategies.
  • Be aware that there are no quick paybacks but regard this as a strategic investment
  • Make processes throughout the company transparent and aim to digitise the whole value chain

References Blogpost:

Bloomberg L.P. (2017). Company Overview of SOCOMEC Group S.A. Retrieved October 20, 2017, from Bloomberg: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapid=7910361

SOCOMEC Group. (2016). SOCOMEC Group. Your Energy, Our Expertise. General Presentation

Please rate this

BREAKING NEWS: Bitcoin Plummets in Value, Trump Administration Makes America Great Again, Lone Gunman Saves Lives of 22 People, and other FAKE NEWS.

19

October

2017

5/5 (3)

If there is anything Donald Trump is right about, it is about the ubiquity of “fake news” in the media. With the introduction of shareable online media content, social media platforms like Facebook and Twitter have been the breeding ground for “fake news, or “false news stories, often of a sensational nature, created to be widely shared online for the purpose of generating ad revenue via web traffic or discrediting a public figure, political movement, company, etc” (Steinmetz, 2017).

After the tragic shootings in Las Vegas earlier this month, Facebook and Twitter were two online media companies that faced criticism when fake online articles claiming the shooter was a “left-leaning liberal” or aligned with ISIS spilled out onto their social media platforms. With content spilling these false claims and the ability from users to boost content with Facebook or Twitter Ads respectively, this creates a potentially dangerous effect on society. We’ve seen how something like one off-hand tweet from the right person can cause the stock market to react, what happens to society when something so polarizing is spread and believed? And why are we so quick to believe them?

Recent research from Yale University has shown that the illusory truth effect is in effect in these situations. The illusory truth effect (1970) is a studied behaviour that suggests that as an individual hears the same thing a few times, their brain becomes faster to respond to it and can often misattribute that repetition as a sign that what they are seeing is true. When combined with “fake news” this could have very dangerous implications. For example, currently there are numerous investigations looking into whether ad buys promoting “fake news” that were designed to sway elections were effective in amplifying divisive messages that came to play in these elections.

Now I know what you’re thinking – “Sure I can see how the blue-collar working class living somewhere in the south of the US can believe the Breitbarts of this world, but I’m university educated. I can tell the difference.” Can you really though? And is it always so obvious. The Economist recently came out with a Fake News quiz –  https://www.economist.com/blogs/graphicdetail/2017/04/daily-chart
See how many you can spot.

So, what can be done to fight fake news if our brains are predisposed to believe things we see multiple times? Much debate has surrounded around what role online media players like Facebook and Twitter should play in this debacle, and they have faced much political pressure from governments to provide more security to filter out these fake news, while others question where these media platforms should be regulated under rights to free speech in certain countries. Regardless of your thoughts on whether it is these company’s responsibility to fight this war against fake news, here are some readings highlighting  how you can fight fake news with your own news-reading:

https://www.nytimes.com/2017/09/18/business/media/fight-fake-news.html

http://www.npr.org/sections/alltechconsidered/2016/12/05/503581220/fake-or-real-how-to-self-check-the-news-and-get-the-facts

http://uk.businessinsider.com/facebook-how-to-spot-fake-news-2017-4?r=US&IR=T

References

http://time.com/4959488/donald-trump-fake-news-meaning/

https://www.wired.com/story/should-facebook-and-twitter-be-regulated-under-the-first-amendment/

https://www.vox.com/science-and-health/2017/10/5/16410912/illusory-truth-fake-news-las-vegas-google-facebook

https://www.ft.com/content/030184c2-a7f1-11e7-ab55-27219df83c97

Please rate this

Technology of the Week: The Emergence of Auctions in the Online Advertising Industry (Group 58)

13

October

2017

5/5 (3)

Online advertising has been disrupted by auctioning systems that are enabled by information technology thus leading to the development of electronic markets.

When Internet advertising began, ad space was sold based on a pre-negotiated price, run-time, and number of “impressions” (views). This did not give users much insight into the effectiveness of the advertisement.

Biased Market

In 1998, a start-up called Overture presented a search engine auction based on a first-price auction where buyers would bid on search terms and pay on a click basis (Pay-per-click), and the highest bidder would win (Karp, 2008).

The introduction of the PPC auction illustrated three phenomena of the shift towards electronic market structures. Information technology allowed for the search term, the ad and the highest bid to be communicated in real-time, producing an Electronic Communication Effect. The Brokerage Effect was achieved with the introduction of technology that brokered between the advertiser bids and ad placements with each search entry, allowing buyers to screen-out placements or search terms individually. Electronic Integration Effect was also achieved in Overture’s ability to redefine both the speed at which transactions could be determined (real-time) but also in the way the information relating to these transactions were utilized (clicks). While this provided more emphasis on effectiveness by moving the price point to an action, the structure of the auction led to an information asymmetry where buyers were not encouraged to bid the true value of the placement.

Shift to Unbiased Market

Recognizing the bias of this first-price auction method, Google further disrupted the industry by introducing their Google AdWords platform which integrated a Second-Price Auction allowing winning buyers to pay $0.01 higher than the bidder with the second highest ad rank. Furthermore, Google integrated the quality of the ad into the selection process of the ad, providing a more unbiased market where the ranking of the ad was based not only on price paid but also based on relevance of the ad to the search term (WordStream, n.d.).

Facebook later entered the market making use of a Vickrey-Clark-Groves auction which calculated the price based on how much value was lost from the rest of the system if the winning ad was displayed (Varian, 2009). This further reduced information asymmetry as buyers in the auction were incentivized to bid according to their true valuations.

Personalization?

With a shift towards programmatic advertising, or AI-enabled auctions, ads are increasingly utilizing data collected from the visitor and intelligently creating the ad and bid, shifting the online advertising industry towards what we believe to be the final evolution stage of electronic markets – Personalized. Additionally, we predict that the industry will continue to expand outside of web browsing such as integrating them to IoT products or other platforms, creating a potential for new entrants. With the use of programmatic, we also predict that consumer privacy concerns will increase and we believe the success of integrating these technologies to other platforms will need to address these concerns.

References

Chieruzzi, M. (2017). Facebook Ads Bidding 101: Everything You Need to Know. [online] AdEspresso. Available at: https://adespresso.com/blog/everything-need-know-facebook-ads-bidding/#2017update [Accessed 11 Oct. 2017].

Dimoka, A., Hong, Y., and Pavlou, P.A. 2012. On Product Uncertainty in Online Markets: Theory and Evidence. MIS Quarterly 36(2) 395-426.

Ingram, M. (2017). Here’s How Google and Facebook Have Taken Over the Digital Ad Industry. [online] Fortune. Available at: http://fortune.com/2017/01/04/google-facebook-ad-industry/ [Accessed 11 Oct. 2017].

Karp, S. (2008). Google AdWords: A Brief History Of Online Advertising Innovation. [online] Publishing 2.0. Available at: http://publishing2.com/2008/05/27/google-adwords-a-brief-history-of-online-advertising-innovation/ [Accessed 11 Oct. 2017].

Malone, T., Yates, J. and Benjamin, R. (1987). Electronic markets and electronic hierarchies. Communications of the ACM, 30(6), pp.484-497.

Metz, C. (2015). Facebook Doesn’t Make as Much Money as It Could—On Purpose. [online] WIRED. Available at: https://www.wired.com/2015/09/facebook-doesnt-make-much-money-couldon-purpose/ [Accessed 11 Oct. 2017].

Thomases, H. (2012). What Media Planners Need to Know About Programmatic Buying | ClickZ. [online] Clickz.com. Available at: https://www.clickz.com/what-media-planners-need-to-know-about-programmatic-buying/45880/ [Accessed 11 Oct. 2017].

Varian, H. (2009). Online Ad Auctions. American Economic Review, [online] 99(2), pp.430-434. Available at: http://people.ischool.berkeley.edu/~hal/Papers/2009/online-ad-auctions.pdf [Accessed 11 Oct. 2017].
WordStream, (n.d.). Search Engine Marketing: What It Is & How to Do It Right | WordStream. [online] Wordstream.com. Available at: http://www.wordstream.com/search-engine-marketing [Accessed 11 Oct. 2017].

If Interested, Further Readings: 

http://adage.com/article/digital/rush-programmatic-privacy-rules-apply/298060/
http://adage.com/article/privacy-and-regulation/iot-ads-reality-privacy-concerns-follow/307200/
https://www.theguardian.com/media-network/2015/jul/28/internet-things-advertising-marketing
https://hbr.org/2013/03/advertising-and-the-internet-o

Please rate this

So…Are We All Hipsters Now? Thoughts on The Long Tail

4

October

2017

5/5 (5)

Chris Anderson famously coined the term “The Long Tail” to depict what he envisioned as the “new marketplace”- a true shape of demand unfiltered by the economics of scarce, limited shelf space. In his book, The Long Tail: Why the future of Business is Selling Less of More, Anderson disrupts what he calls “hit-driven economics” (also known as the “blockbuster strategy” where retailers and distributors seek to maximize their returns by focusing their marketing resources on a small number of likely best sellers) – by predicting that with the advent of digital technology, we are increasingly shifting from a mass market into a “mass of niches”. In other words, in a culture unfiltered by economic scarcity, we will all be hipsters – individuals aware of and interested in new and unconventional music, books, movies, products, etc.

So…is this the end of “blockbusters” as we know it? Are we moving into an increasingly fragmented market where businesses should focus on niche markets? Or – as one Wharton professor pondered – “What’s going to happen to Tom Cruise?” More relevantly – is this the end of the reign of Queen Bey?

Before you start growing out your beards, buying everything flannel and raising your own kombucha, let’s consider these claims. While it is largely accepted that there is a long tail of demand, and research has proven that it can add up (Brynjolfsson, Hu, Smith 2006), is the demand for niche products really large enough to shift your focus away from creating bestsellers? Anita Elberse from Harvard Business School conducted her own research looking at Australian DVD rental service Quickflix.

In her research, Elberse finds evidence consistent with William McPhee’s theory of exposure which describes two types of distribution: “a natural monopoly” and a “double jeopardy”. In his theory, McPhee observes that light users of a product category are more largely interested in the popular products – creating a “natural monopoly” of popular products, or “hits”, On the other hand, a “double jeopardy” is another term for the double disadvantage niche products face in both being relatively unknown and – if known- are only recognized by people who “know better” or are experts in that product category. Elberse’s findings supported this theory revealing that customers who ventured further down the long tail into the relatively obscure movies were generally the heaviest users.

ac16d509fe2fdf81c052a21c7563aa3f

And when assessing the breakdown of their rentals based on decile of DVD popularity, Elberse found that even the users who rented the most from the lesser popular DVDs (left-most vertical column), still rented largely from the more popular movies with 34% of their rentals coming from the top 10% of rented DVDs (Elberse 2008). Research by Wharton professor Serguei Netessine on the more digital Netflix found similar results (Netessine & Tan 2009).

In her work, Elberse suggests that one explanation for the resilience of these popular titles is the social dynamic of it – people find value in listening to the same music or movies or subscribing to the same product type as their friends. Perhaps the strength of this social motivation may be what is keeping some hits so far ahead of the rest and is hindering the Long Tail from being “fatter”.

All in all, there is no question that a long tail exists. There is no question that the long tail is very long, and that with the product proliferation we are seeing now, it will no doubt continue to stay long. But Elberse and Netessine have a point – perhaps Anderson is being a little too quick to write off hits. Perhaps we are not all as hipster as he suggests we will be in this new “market of multitudes”. ­

So – what are your thoughts? Will the hits as we know it die out? Do you see a future post-digital disruption consisting of mass niches? Or are our tastes less hipster than Chris Anderson suggests?

 

Bibliography:

Andersen, C. (2006). The Long Tail. Hachette Book Group.

Anderson, C. (2008, June 27). Debating the Long Tail. Harvard Business Review. Retrieved from https://hbr.org/2008/06/debating-the-long-tail

Elberse, A. (2008, July-August). Should You Invest in the Long Tail. Harvard Business Review, 86(7/8), pp. 88-96. Retrieved from https://hbr.org/2008/07/should-you-invest-in-the-long-tail

Elberse, A. (2008, July 02). The Long Tail Debate: A Response to Chris Anderson. Harvard Business Review. Retrieved from https://hbr.org/2008/07/the-long-tail-debate-a-response

Manjoo, F. (2008, July 14). Long Tails and Big Heads. Slate. Retrieved from http://www.slate.com/articles/technology/technology/2008/07/long_tails_and_big_heads.html

Netessine, S., & Tan, T. (2009, September 16). Rethinking the Long Tail Theory: How to Define ‘Hits’ and ‘Niches’. Knowledge @ Wharton. Retrieved from http://knowledge.wharton.upenn.edu/article/rethinking-the-long-tail-theory-how-to-define-hits-and-niches/

Schonfeld, E. (2008, July 2). Poking Holes In The Long Tail Theory. TechCrunch. Retrieved from http://techcrunch.com/2008/07/02/poking-holes-in-the-long-tail-theory

Please rate this