“The big, old guys are going to beat the daylights out of the pure-play dot-commers. The existing business already has sales and expenses. Digitize it and costs fall. Sales climb. Instantly [the established company] gets to break even. Then the margins just pour in."

Jack Welch

“Jack Welch is right. Wall Street will no longer throw money indiscriminately at dot-coms. That means the advantage is indeed shifting to the bigcos. Bigcos have the brand, customers, industry expertise, transactions, liquidity, and investment budgets to dominate. But here comes the inevitable "but":

Bigcos still have plenty to fear. The Internet is quickening the spread and adoption of three disruptive technologies [wireless, new information appliances, and high speed broadband networks], which will radically change the business environment once again”.

Chunka Mui

Unleashing the Killer App outlines the importance of understanding the need for a strategic framework that begins by exploring the impact of digital technologies in the work place as well as ways to implement these technologies to reinvent the company’s business model.    The bottom line is that if management is not relentlessly seeking new digital technologies and evaluates their impact of the competitive landscape, the business will be history and the only option for management will be retirement.

But, what is a killer app?

Basically is any “new information technology goods and services that change the rules of the game for people that aren’t even remotely connected to the killer app’s intended markets”. 

In other words, killer apps redefine the competitive landscape, the market, the business models of companies involved, and the expectations from customers, suppliers, regulators, etc.

Downes and Mui point out that by their significant impact, killer apps are disruptive at first.   For example, one can thing of the impact that E-mail had on the post office.   E-mail indeed cut significantly the number of letters and packages sent around the world.  Does this mean that E-mail was the end of the post office? According to the authors, E-mail marked the end of the post office’s old strategy and it forced its management to re-think the way the firm interacts with their customers.

Why are Killer Apps so disruptive?

As confirmed by Moore’s law, processing power doubles every 18 months while costs are held constant.   The impact of constantly developing technologies is never static and once developed, they result in market efficiencies that wipe out the very concept that some businesses were founded on.

In addition, killer apps have been embraced at a rapid pace, aided primarily by the internet.  Metcalfe’s law states that “ the usefulness, or utility, of a network, equals the square of the number of users”.  This is important because massive use of any application defines its impact in the market place.  “One phone is useless, a few phones have limited value [while] a million phones create a vast network … with tremendous power”.

What trends are triggered by Killer Apps?

“Killer apps are reducing transaction costs, in many cases dramatically, for nearly all goods and services”.

The fact that transaction costs are decreasing in the market cause firms to evaluate their value added proposition.  As a result, outsourcing has become more prevalent.  As firms have had to concentrate on those operations that outperform the market.

This specialization of tasks can only be achieved by small, nimble firms that can quickly adapt to the changes in the market, which in a digital world transforms itself at Moore’s speed.

How can we design a killer app?

The authors provide 3 areas that need to be addressed to create a killer app:

1. Reshape the landscape:  It is important to understand the environment in which you compete and what are the renewed expectations of your customers. 

In fact when implementing a digital strategy, management should outsource as much of the tasks to the customer as possible, management must be willing to cannibalize the company’s markets, and management must be able to create communities by providing a channels for customers to interact with each other.

2.  Building new connections:  In a digital strategy technology allows management to design channels of communication to ensure that every participant - customers, suppliers, regulators - constantly seeks improvement along the virtual value chain.  Alliances must be made to create a network design to generate the best product at the cheapest price with the specifications outlined by the final user.  This constant communication is easily aided by the World Wide Web.

3.  Redefine the interior:  In implementing a digital strategy, management has to realize that significant assets become obstacles to adapt to a rapid changing environment.  As a result, it is important to redefine a business model where physical assets are minimized. 

The object of a strong digital strategy is to destroy existing value chains to concentrate on value added propositions resulting from expertise and constant communication with customers.

The best way to be able to discover and implement a killer app is to relentlessly look for it.  However, this search must take place in the “future” of technology.  Management must invest in unproven technologies using a portfolio approach, which reduces the risks of dedicating significant resources to one particular technology.

The Final Word:

In this book the authors point out the drastic changes that digital technology is causing in everyday life.  The only way for managers to approach business is by embracing the challenges caused by the rapid development of applications.  

Ignoring the impact of digital technology will result in business failure.  Technology should not be thought of as the enabler to execute a strategy.  Future technology should shape the vision for the business.

Managers must continuously seek that application that, although disruptive, will ensure the survival of the firm by allowing it to adapt to a market that is changing at Moore’s speed and everyone is embracing.

Diego O. Mahecha