Welcome to Digital Transformation Strategy! As you probably know, this is the first course in a three part specialization focused on the digital transformation of finance. We'll aim to bring you insights about how digitalization intersects with finance, culled from one of the world's top regions for digital innovation. I'm excited to have you in the class and look forward to helping you learn more about this important topic. To begin, I recommend taking a few minutes to explore the course site. A good place to start is the navigation bar on the left. Click Course Content to see what material we’ll cover each week, as well preview the assignments you’ll need to complete to pass the course. Click Discussions to see forums where you can discuss the course material with fellow students taking the class. Be sure to introduce yourself to everyone in the Meet and Greet forum! This course should take about four weeks to complete. You can check out the recommended course schedule below to see a quick overview of the lessons and assignments you’ll complete each week. By the time you finish this course, you’ll have mastered the transformational forces of digitalization and the new competitive dynamics it gives rise to, learned from leading financial companies and seen inspirational examples from the digital masters. You'll be introduced to the Capstone Project for the specialization and have a chance to form some preliminary solutions for a financial company seeking a new strategy for the digital age of finance. Good luck as you get started. I look forward to seeing you in class!
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Do curso por Copenhagen Business School
Digital Competition in Financial Services
147 ratings
Copenhagen Business School
147 ratings
Curso 1 de 4 em Specialization Digital Transformation in Financial Services
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Digital ecosystems
In this module, we introduce the business ecosystem metaphor as a way to think of and model the increasingly complex relationships between actors in the digital financial service industries. We elaborate on how to deal with relational tensions internally and towards externally. We also address how digital technology strategies become inseparable from business strategy in the digital era.
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Jonas HedmanAssociate Professor
Department of Digitalization
Stefan HenningssonAssociate Professor
Department of Digitalization
By now, you should have started to appreciate the value of intercompany
relations in the digitalization of finance.
You should also be able to recognize how digitalization makes relations
increasingly complex.
In this lesson we're going to further our exploration of relations
in digital innovation ecologist.
Examine what powers mean to these relations.
We're going to look at where power comes from, what responsibilities it brings and
how to effectively take care of those responsibilities.
Although everyone in an ecosystem are dependent on the common success of
the ecosystem, not all players in an ecosystem are equal.
Some positions are more powerful than others.
Control of a platform core,
as discussed previously, is a particularly critical and power generating resource.
But it is not only resources that can give a strong ecosystem position.
Power can come from a particular important technology,
a strong customer base, a brand name, Or
some other valuable resource that is fundamental to the ecosystem.
With the control of a critical ecosystem resource comes the power
to influence the rules of the ecosystem and the task of ecosystem governance.
Understanding the approach to ecosystem governance is important both for
the center organization managing the ecosystem, but also the current and
potential members of the ecosystem.
It gives possibilities to understand the climate in this ecosystem.
In governing a digital business ecosystem, a company can use its
power to become either a keystone organization or a value dominator.
A keystone organization is what makes the ecosystem prosper.
A value dominator everyone should stay away from.
What is then a keystone organization?
And how does it create value for the ecosystem?
A keystone organization is the organization that uses its power
to find a healthy balance between growing the pie and eating of the pie.
In practice, Apple app, as a keystone organization, when it provides
new iPhone features, API's and development kits for app developers to build new apps.
And allows app developers to make a healthy profit.
According to Apple, 3rd party developers have made
over $60 billion in revenues since the first iPhone was released.
Apple could, in theory, write rules so
that it claimed a larger portion of the revenues.
But if no one gets rich writing app, fewer will continue to do so.
So this is pretty straightforward.
Sharing revenues is good for the ecosystem, and in the long run good for
the dominating firm.
But can you think about other times when this sharing is more questionable?
Apple, for example, does of course not share everything.
There are many types of apps you're not allowed to develop
because they would compete directly with Apple's own services.
Another example is Twitter that's been accused of acquiring
innovative complementers Then to turn of the external APIs and
make their recent acquisition having a monopolic position in that specific niche.
The other complimenters in the same area gathered business.
In the short term this pushes Twitter's revenues.
But how do you think this impact the likelihood to attract new developers?
This behavior is called value domination.
Value dominators munch on too much of the ecosystem pie to push their profit.
They use their power to extract value from the ecosystem, and
make the ecosystem grow weak.
So I think we all can agree to the public owns the [INAUDIBLE] obligation to set up
structures, for the ecosystem to work efficiently.
But how do we do that.
Here it's important to remember that the reason why we care about ecosystem
in the first place, is because it is essential to cocreate digital innovations.
Remember, in the digital financial industry,
it's true innovation that companies compete.
It's true enabling innovation that keystone organization
also enables the ecosystem to pass.
At the heart of the challenge lies the seemingly conflicting goal
of evolution and stability.
Evolution refers to the fostering of unforseen creativity and
innovation that leads to technological progress and a variety of niche solutions.
Stability on the other hand it's critical for compatibility and
quality of the combined output of the ecosystem.
Why these calls are contradictory is because too much unrestricted innovation
can make it difficult to integrate and
consolidate the products produced by the ecosystem.
But on the other hand, too much stability isn't good either because it restricts
innovation what you really want is to find that magic formula that allows
the ecosystem to produce just to write a man of innovation, so how do we do that?
To answer this question,
we have to dig deeper into what leads to evolution and stability.
Under the surface we have three different tensions forming the dynamics of
an ecosystem.
Output tension, this is standardization versus variety in offering to
what extent does an ecosystem require that products and services are standardized?
Act attention, this means control versus autonomy.
To which level do the keystone actors decide the behavior of other actors,
for example, how to price products.
Identification, this is collective versus our individual identification.
You'll ecosystem be branded at ecosystem level where should every company
develop it's own brand.
If we pull too much to the left, we get stability but no innovation.
If we pull too much to the right, we get evolution, but no integration.
We want to stay somewhere in the middle,
to find that healthy balance, that gives integrated innovation.
This is taken care of in the Partner Program.
A Partner Program consists of both positive, and
negative steering mechanisms both sticks and carrots.
Broadly, a partner program works in two dimension.
One is to regulate the degree of involvement of an actor in that ecosystem.
Here you have the partner method, which basically means that the more value you
provide for the ecosystem, the more the ecosystem benefits you should be granted.
The other dimension is that the behavior rules and enabling resources
that are in place to encourage some type of desirable innovation and
at the same time, discourage unwanted innovation.
Let's consider MasterCard again, to make this a little bit more concrete.
Where do we place the masterpass ecosystem?
Masterpass has the ability in that the core technology for
payment transaction cannot be altered with.
This is basically a standarized service.
Partners are not allowed to tamper with this service for a whole set of reasons.
Which regions, do you think?
Well, security, of course.
It would be devastating for the whole ecosystem with security loopholes, but
also, interoperability.
Terminals should be able to handle all types of master power connections.
Just because some clever guy finds a setting in the NFC protocol that was
suboptimal does it mean that it is a good to innovate in this one.
But you use an embed master path in many different ways.
This kind of innovation is encouraged.
Can come up with new context of payments with your MasterCard.
In fact MasterCard has provided extensive documentation for how to embed
a Masterpass service, including a reference library of available APIs.
But are all of Masterpasses APIs available to all partners?
Probably not.
Banks such as Citibank are platinum partners.
That are probably the most equal among the equals.
With it's extensive costumer base,
Citibank brings more business to the MasterPass ecosystem.
In turn, Citibank should be rewarded by the possibility
to a more closely integrated MasterPass in the bank's other products.
So the CitiPay becomes something more that just a MasterPass with another logo.
So, now we'll talk a lot about the relations between companies.
In digital technology systems, but as you probably also have noticed,
the relationships between technologies are also important here.
They sort of go hand in hand.
Business ecosystems are important,
just because the little technologies exist in complex ecosystems.
This will be the topic of the next lesson
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