Unleashing the Killer App: Digital Strategies for Market Dominanceby Larry Downes, Nicholas Negroponte, Chunka Mui
When technologies, products, and services converge in radical, creative new ways, a 'killer app' can emerge -- a new application so powerful that it transforms industries, redefines markets, and annihilates the competition. The compass, the steam engine, the cotton gin, and the Model T were all killer apps that sent shock waves through the social, political, and… See more details below
When technologies, products, and services converge in radical, creative new ways, a 'killer app' can emerge -- a new application so powerful that it transforms industries, redefines markets, and annihilates the competition. The compass, the steam engine, the cotton gin, and the Model T were all killer apps that sent shock waves through the social, political, and economic systems of their time. Today's killer apps spring from the digital realm: the personal computer, e-mail, and the World Wide Web have profoundly influenced and even altered society far beyond their intended use. Tempted by the promise of such devastating power, companies large and small, from vast multinationals to lean entrepreneurial start-ups, are remaking themselves into organizations that nurture killer apps rather than succumb to them.
With Unleashing the Killer App, Downes and Mui offer a progressive guide to transforming your company into a place where killer apps are born. Drawing from their experience and research with leading global businesses, the authors identify the 12 fundamental design principles for building killer apps; illustrate these principles with classic stories from history and examples from a wide range of industries that have successfully developed killer apps; examine the economic consequences of the diminishing transaction costs in cyberspace; and describe how to integrate digital strategy into an organization's planning process to create new markets, form new customer relationships, and change the product line.
Among these strategies are structuring transactions as a joint venture, cannibalizing market share and 'hiring' the children. The authors are serious; they advise executives to listen to young people, including their own children. By watching them play with video games or computers, executives can learn more about their products than if they tried to perform the same tasks. The authors, affiliated with Diamond Technology Partners, an executive learning forum, provide various examples of companies that have successfully incorporated these strategies, including AOL, McDonald's and Lotus Notes. With an insightful foreword by Nicholas Negroponte, this book presents a convincing case for a radical shift in current business strategies.
- Harvard Business Review Press
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Read an Excerpt
Chapter 1: The Killer AppChristopher Brennan wasn't trying to start a revolution. The regional manager for British Petroleum's (BP) sixteen hundred gas stations in Germany, Chris was looking for new sources of revenue in a saturated, largely commodity-priced business dominated by a few brands. Then he got an idea. Gas stations were exempt from Germany's rigid shopping laws that required stores of all kinds to close by 6 P.M. during the week and by 2 P.M. on Saturday. Small convenience stores attached to the stations already sold basic staples and impulse food purchases 24 hours a day. Why not really exploit this regulatory loophole? Chris had heard about the future of electronic shopping from his colleague Matthias Richly. Why wait for the future? Why not invent it now?
Working with discretionary marketing funds (and largely on personal time), Chris and a small team created the BP multimedia shopping kiosk, a brilliant combination of digital technology and strategic partnerships with name-brand merchants and credit card companies eager to try a new marketing chanel. At the kiosk, consumers use a touch-sensitive screen to view short videos, select merchandise, and get advice on everything from party planning to the latest fashions. All goods ordered at the kiosk could be picked up the next day at the gas station or in some cases even delivered to the customer's home.
Early reception to the kiosk was enthusiastic. German shoppers, assumed to be hostile both to technology and to new services, embraced the kiosk at once. They seemed delighted to be able to order everything for a birthday party or a brunch, based on the recommendations of two-dimensional images. Theyconfounded traditional marketing dogma by using the kiosk to purchase precisely the kind of goods that no one expected anyone would want to buy off a computer screen in a smelly gas stationfruits, vegetables, and even meats. Shoppers began to use the kiosk to replace, rather than supplement, their regular grocery shopping. German consumers, it turned out, were fed up not only with the inconvenient shopping hours but with the quality of their shopping experience. Now they could avoid the crowds, the dirty stores, and the generally unhelpful attitude of the merchants. The kiosk tapped into a channel that conventional wisdom had told Chris didn't exist.
A month into a pilot deployment in Munich, Chris and his team had redesigned the interface several times and increased the number of participating stations. They began making long-term plans to exploit the stations' prime locations as staging and distribution centers, and to deliver the system itself directly to home computers using public networks. Chris and his team were beginning to see that their project had the potential not just to improve gas station revenues but to re-create the very notion of the "station" and the role it played in the consumer's life.
Then they did something really radical. They told the folks at BP headquarters what they'd been up to.
Is There a Strategy in the House?
Chris's story is a story of digital strategy. A manager suspends his disbelief, looks around at the available technologies that might play some role in his planning, forms a variety of alliances and partnerships, and then executes, fine-tuning the experiment not in the laboratory but in the marketplace, with the customer as a true partner. The final result, at least in this case, may be the worst nightmare not just for BP's competitors but for a wide range of other retailers, wholesalers, and distributors. The kiosk may be, in other words, a killer app.
We have purposefully chosen an example from outside the world of high technology companies to demonstrate the broad reach and applicability of digital strategy. What could be less digital than a gas station? What industry less vulnerable than oil and gas exploration, refining, and retailing? Who less likely to remake the face of the value chain than a lone manager, operating in a country that prides itself on conservatism and adherence to long-established rules of commercial engagement?
But hold on a minute. What does the BP kiosk have to do with business strategy? There was no strategy here, just an idea followed by an experiment. Chris did no long-term planning or detailed analysis of the industry. BP, like all large organizations, has a formal strategic planning process and a group of highly trained planners working away in Britannic House, its showcase corporate headquarters, in London. Chris was only vaguely aware of the planning activities of this group. He certainly wasn't acting on the basis of their recommendations.
Perhaps this is your immediate response. A few years ago it would have been ours. Strategy, after all, is the process that Michael Porter and others have taught us about: careful, analytical, and based on a thorough understanding of current market conditions and leverage points. Strategy is what big companies do from the top down. Strategy takes time to develop, time to execute, time to evaluate. What Chris did wasn't strategy, it was just an application, a reordering of relationships. In a word, it was creative.
In the new world, that is strategy.
The Killer App through History
It is too soon to say whether the BP kiosk, or even some future version of it, will prove to be a killer app, which we defined in the Introduction as a new good or service that single-handedly rewrites the rules of an entire industry or a set of industries. Certainly it has the potential. Over the last two years, electronic commerce, of which the BP kiosk is an example, has been touted as the killer app that will redefine the entire manufacturing-distribution-retail-finance business cycle, creating gigantic new markets while it undermines existing ones. Estimates for the speed and scale of electronic commerce range from the conservative (a few billion dollars by the end of the 1990s) to the extreme (the entire cash economy will go digital), but there's no doubt that it is a force with which to be reckoned. The question is when, not whether, and we suspect that you or someone in your organization is already worried.
Electronic commerce as a killer app is more a combination of digital technologies than any one particular new component, product, or service. Its novelty and its explosive potential come from an innovative mix of applications. These include multimedia interfaces (now combining sound, motion, text, and graphics); high-powered, increasingly cheap capacities for computing, data storage, and telecommunications; new forms of payment such as electronic cash; and improvements in security made possible by advanced encryption hardware and software. Electronic commerce is the sum of these parts, built on top of and delivered over the open, global computer network protocols and shared communications services known as the Internet.
Many more killer apps have arrived already, and still more are on the horizon. Consider the potential impact on your business of any of the following: Internet-ready televisions, cars, and other appliances, low-cost digital cameras, desktop publishing software and personal laser printers, intelligent software agents, and telephone services over the Internet. And how about applications now in development at the world's leading technology labs, such as rooms that respond to where you are and what you are doing, wearable computers, electronic ink, and personal area networks?
We don't know how or whether these developments will ultimately change civilization, let alone your business. It is easy, though, to find examples of killer apps from history that demonstrate just how unpredictable and indirect their impact can be. In Medieval Technology and Social Change, for example, historian Lynn White, Jr., studied several inventions from the Middle Ages that revolutionized not only the activities they were intended to affect but society as a whole.
Perhaps the most important of these medieval killer apps was the stirrup, which the FranksGermanic tribes who ruled central Europe after the fall of Romeadopted from an Asian design. The stirrup made it possible for a mounted fighter to strike with his lance without falling off his horse, greatly increasing the force that could be put behind such a blow. It proved decisive in the Franks' efforts to turn back the marauding Saracens who invaded western Europe in the eighth century, despite the superior numbers of the invaders...
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