Goizueta examines digital impact and research

Jag Sheth

Marketing Professor Jag Sheth talks with other faculty and staff about the impact of the digital world on research and business.

To explore the impact of digital on business, higher education, and its future, Emory Business asked six faculty members to share their thoughts on the subject. Roundtable participants were Anandhi Bharadwaj, professor of information systems and operations management; Manish Tripathi, assistant professor of marketing; Ram Chellappa, associate professor of information systems and operations management; Maryam Alavi, John M. and Lucy Cook Professor of Information Strategy; Jag Sheth, Charles H. Kellstadt Professor of Marketing; and Benn Konsynski, George S. Craft Distinguished University Professor of Information and Operations Management. Moderating the discussion was Jackie Breiter 01WEMBA, associate dean of Goizueta Technology Services.

Breiter: Anandhi, to launch us off, would you explain what digital is and if it’s the same as technology?

Bharadwaj: Technology is a key component of digital, but digital means more than technology. Digital has fundamentally changed the capabilities associated with a product, service, or business model, affecting what you can do with the product or service and the communication processes used. For example, take the transition from physical books to eBooks. From a consumer’s point of view, digitalization makes it convenient to walk around with 10 books on an iPad or to find a specific page. From Amazon’s point of view, the purchase of an eBook provides all kinds of new data: which books get read or abandoned, which sections get highlighted, and even how many minutes the reader spends on each page. The entire ecosystem changes around that content. The consumer gets a lot more value, but the company gets even more, and as they start sharing that data with publishers and other partners, the value proposition surrounding that product or service changes.

Breiter: We have always heard that technology needs to align with an organization. How is that changing with digital business strategy?

Bharadwaj: For a long time those of us who taught technology and strategy in the classroom taught technology as a functional-level strategy. Companies also pitched these alignment models that emphasized fit of technology to business strategy. But relegating technology to a supporting role now results in companies missing opportunities in the marketplace. For example, the school’s leadership can ask you, as director of technology, to create your technology platform around the school’s strategy and mission, or they can say, “Jackie, we know that digital technology is fundamentally changing our options for creating content and for fulfilling our research and teaching mission. What are our opportunities, and how do we leverage various technologies to change how we create value for our different constituencies?”

The second option puts you in a very different mindset when deciding what to do with digital technology. Digital business strategy ought to be about changing a firm’s options with respect to how its leaders see the world and how it is changing in terms of scope, scale, the value created and the value captured. It’s no longer, “I have this plan; let me create a platform to support it.” That just doesn’t cut it anymore.

Breiter: What does your research reveal on ways to help a CIO or CEO leverage digital business strategy around scope, scale, and speed?

Bharadwaj: Speed clearly encompasses the fundamental forces of technology and digitization: how new products and services emerge, the rate at which existing business models get disrupted or are created, and the fact that your competition can come from unexpected corners and places. In terms of scope, in the past we categorized companies by whether they were in related or unrelated businesses and by industry classifications. Take Amazon; it’s an electronics e-tailer but also offers web services. Digital allows them to maximize existing synergies, thus redefining scope. Scale is also impacted, because small players can act as if they are large players by leveraging technology in smart ways. A recent Harvard Business Review article noted that when “garage entrepreneurs or hackers” create new products and services, they usually don’t plan to disrupt a business model. Instead they are so passionate about the technology, they just put it out there. Think of apps like Snapchat or What’sApp. Kids start downloading them and pretty soon they become mainstream products and overwhelm companies that have been participating in those traditional markets or services.

Breiter: Manish, we can’t go anywhere without hearing the term “big data.” What is it, and in what ways are companies leveraging it to make decisions?

Tripathi: Companies have the ability to amass and store varied types of information; this is often referred to as “big data.” Personally, I believe there is just data, and I’m not sure why an additional term like “big data” is needed. A Fortune 500 company may collect tons of data on people’s behavior.  As Anandhi mentioned about Amazon, I can know what you are browsing, what you have purchased in the past, and what page you are on. Even a retailer may know your behavior inside the store, especially if you use a loyalty card. So all kinds of data, whether it’s competitive data or data about the customer, can be collected. Of course, collecting, storing, and accounting for all of this data presents challenges—and tremendous opportunities—for analytics. Companies leverage data first by “listening,” or gathering data on customers’ online and offline behavior to better understand them. The next big challenge becomes what to do with the collected information. By defining the objective and clearly using some subset of data and the proper models, companies can create an optimal offer in terms of pricing and promotion.

Breiter: Where does social media fit in terms of generating large amounts of data? How are companies getting people to engage in social media and using that data to make decisions?

Tripathi: Social media is often called earned or paid media, and it can generate content and publicity. One common way companies use social media is for promotions. During the Super Bowl, for example, Esurance had a promotion asking viewers to tweet the hashtag #EsuranceSave30 to be entered into a $1.5 million sweepstakes. It was a huge success. Social media is also used to offer discounts or to provide customer service. In all types of industries, it’s a way to answer customers’ questions quickly and perhaps more cost effectively.

Another way social media is used—it generates more press but can be problematic—is to try to “seed” the conversation. Recently, McDonald’s invited tweets on the experiences of people visiting their restaurants. The problem is you cannot control what people are going to say. Sure, some people tweeted, “I enjoyed my coffee at McDonald’s,” but it quickly went downhill from there. On the other hand, Nike and Starbucks have done a great job on Instagram. They understand who their audience is—younger people with an artistic bent—and they try to create a medium by building advertising that resonates with this audience. They don’t try to drive the conversation; instead, they try to listen to what customers are saying and join in.

Finally, social media is perhaps most powerful as a market research tool. It’s a great way to understand the thoughts and attitudes of one’s current and potential customers.

Breiter: Ram, speaking of understanding others’ thoughts and attitudes, with everything online, is there such thing as privacy?

Chellappa: There is no such thing as a private online transaction. The term cookies comes from the fact you constantly leave trails. In exchange for that “free” Gmail service, Google is buying your information. You’re sharing information in lieu of something else all the time. The first example of user-generated content was likely typing in an online search word—providing information on the relative importance of that particular word. Is anything private? Yes, cash is private. It is the only anonymous transaction. The bigger question I do research on is, “Who owns this data?” Does Google forever own the fact you searched for a given person ten years ago? Is this information? Does it belong to Google or to you? There is a disconnect for these kinds of concepts. In one of my papers I argue that your information should be your property. You might lease or rent it, but you own it forever. And the role of the government should be to ensure this transaction is legitimate and you are protected. The danger of technology is that everything can be collected. In truth, whatever the NSA is collecting, Google is collecting ten times more. The question is not only what they are collecting but what are they doing with it.

Breiter: You are also interested in online pricing strategy, Ram. Considering discounts, promotions, and everything going digital, how does a company stay competitive?

Chellappa: Two dynamics are happening now: one is the way in which traditional physical goods are sold online and how technology acts as a platform. The other is how digital capabilities have created new products and services that are sold online.

Both have led to interesting business models. If you think about the experiential aspect of online transactions, the biggest difference in the type of data we are dealing with—with the exception of volume—is the move from financial transaction to intent. Companies now know what you put in the online shopping cart and almost purchased. This gives them information on consumer intent, which was nearly impossible before digital. As a result, stores can now send a targeted promotion to manage their backend inventory. Additionally, online stores are now personalizing their storefronts according to the types of products and services the customer may be interested in. It’s like walking into Best Buy and having the way the store looks change on the basis of who you are. This allows firms to extract more of a surplus, as we call it in economics. That’s one component.

The other component is that certain products themselves have become digital. For a long time we relied on the characteristics of the physical media to sell digital products. For example, to sell a piece of software, a company would put a plastic CD cover on it. The ability to download products, as Netflix did with movies, changed the business model and the question of pricing. Do we just move the physical price online? We know the music industry tried that and failed. Further shaking up the digital supply chain and ecosystem is the fact that what once generated money is now merely a conduit to generate money through some other means. Take the music industry; 10 or 15 years ago the most important component was the labels. Today, it’s Apple. The company created an iTunes store not because it cared about music but because it wanted to sell iPods, on which it enjoyed a huge profit margin.

Breiter: Maryam, let’s discuss digital strategy’s relevance to higher education. You’ve done a lot of research on technology and behavioral learning and how it has evolved over the last decade; how are social media, technology, and big data changing higher ed?

Alavi: We are in the business of knowledge creation and knowledge dissemination. And the tools and technology we have now—the computing and communications—are the production engine, meaning the nature, source, and process of knowledge creation is changing. The way we disseminate that knowledge is shifting as well. To stay relevant, we have to be on the leading edge, because our stakeholders and constituencies—other businesses—are fundamentally changing. We need to think about how our outputs, our graduates, are going to function in these brave new worlds driven by digital and exponential technologies.

Breiter: This leads us into the next question for both you and Jag; is business management education changing because of digital strategy?

Alavi: It behooves us to be the agent of change and to ensure the relevance of higher education. What is the value add of business schools? Admittedly some nontraditional competitors in knowledge creation and dissemination may actually be doing the job better and faster because they do not have the legacy that institutions of higher education do. By the same token, I have great faith in my very smart, innovative, and entrepreneurial colleagues here to find a way to create an environment that embraces change and builds on our strengths and at the same time can be scalable.

Breiter: Jag, as a futurist and an educator for many years, what are your thoughts?

Sheth: We are moving away from the three R’s of learning—reading, writing, and arithmetic—to the three I’s of teaching: interactive, individualized, and integrated. Surprisingly, most transformation in education is taking place in high schools first and then being adopted by colleges, which is the reverse of the past. Digital technology is the great enabler; you do not have to be bound by time and location. The second major change I see is the rise of the celebrity professor.

[laughter]

Breiter: You?

Sheth: Like celebrity chefs, professors can now reach thousands of learners online, becoming more like celebrities. These professors will not only have great content but will also have showmanship, finesse, and passion, all while reaching a massive audience. Through the rich medium of the Internet, a traditional microeconomics course with 200 students can be offered online to 1200, especially in emerging markets, which have a huge shortage of faculty. That’s transformational. All of the boundaries—national, operational, regulatory, and academic—are beginning to break down, resulting in a borderless education.

The third and biggest change agent to watch is the publishing industry. Publishing is the backbone of academic knowledge, and it is shifting from print to multimedia. Most publishing is online, especially academic journals and increasingly textbooks, and content is becoming organized around a video-centric model, which impacts what we do in the classroom. In other words, what was peripheral (video) is becoming core, and what is core (print) will become peripheral.

Konsynski: Let’s not forget the often neglected stakeholder, the individual who will require a style of learning that better fits their personal preferences, seeks a lifelong learning commitment to further their development, and expects availability of knowledge and skill attainment and credentialing. They know that the job/role they are likely to have ten years from now does not yet exist. Yet they do not want to surrender the historic values provided by the university in place, community, and network of friends and shared experiences that are no small part of the university experience.

Technologies allow us to challenge assumptions: time, proximity, roles, responsibilities, authorities, etc. How might we now challenge the assumptions and assertions of past educational environments, given new capabilities offered by technology advances and new social needs driven by changing global and socioeconomic realities? While digital technology has disrupted the current model, it can also provide answers. To Maryam’s point, if we aren’t bold and willing to tear down paradigms while experimenting to find innovative solutions, someone else will.

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