PPT

  Do 12 PPT (with speaker notes. Instructions is given in assignment 6. You need to follow assignment 1 for the ppt.  Due by morning

Assignment No. 6 ~ Technology Innovation for competitive advantage

Revised: 6/29/2022

For this assignment, use the business that you selected for Homework 1 — unless you clear a new selection with your facilitator in advance.

Good news! The business evolution that you proposed (from Module 1) was accepted!

Over the next two years, your organization needs to shift its business model and widen its technology exploitation in order to expand in its existing market, expand into new markets, facilitate new products and services, and reduce costs, using your business evolution as the beginning platform to do it from.

Your mission is to provide the CEO or CFO with technical recommendations on how to accomplish these goals and fulfill your business model evolution proposal.

Your assignment is to prepare a PowerPoint presentation for the CEO, CFO and the Board of Directors, describing a technology you believe should be adopted, describing the benefits, costs and risks of adoption, and recommending how to proceed. However, all work and ideas not your own should be clearly acknowledged in the PowerPoint notes in accordance with academic standards.

Use your own words and do research to back up your assertions! Your objective is to convince the committee to adopt your proposal.

Use the PowerPoint “Notes” section for comments that you would supply verbally at the presentation. Also use it for explanations to your facilitator
.

Address (in order) the sections described below in approximately 15 PowerPoint slides with Notes sections. Typically, an average submission is about 12-13 slides with speaker notes. You may follow this with appendices if you wish.  Appendices will be read only as needed.  You need not address every point mentioned within each section – just those most significant for your organization and the technology, and which result in a clear, coherent overall presentation.   Give approximately equal space to the sections.

For 5 points of extra credit for this assignment, you can record yourself going through the presentation and upload it as well either separately or as part of the presentation. This must include video to achieve the 5 points of extra credit!

Hints:

A. This presentation is designed to convince your CEO, the CFO and the Board of Directors. The slides should steer a course between the extremes of wordiness (remember that you can talk to add content) and bare-bones meaninglessness (viewers need words with meaning). Vary bullet slides, figures, and tables to maintain attention.

B. You have limited space, so conciseness is important.

1. Organizational Background

This section of the presentation demonstrates to the CTO/CIO that you clearly understand your organization’s background enough to advocate the technology you propose. Emphasize the basis on which it competes with similar organizations (or for organizations where there is no relevant basis for competition, describe the organization’s mission).  Include mention of technology that your organization uses, but only to the extent that it is relevant or needed to understand this presentation. This will probably differ somewhat from assignment 1 in that it describes the background for the proposals you are making in this presentation: However, you are free to cut and paste from assignment 1 if you wish. The section in this week’s notes on SWOT may help too.

2. Technology Description

Re-cap your business model evolution and then identify and describe a technology (e.g., virtualization) that your organization should adopt, along with its key capabilities and characteristics.  The specifics of “how” the technology would be implemented are not required in this section. If it is to replace technology your organization currently uses, consider summarizing key technology differences.  Focus on the here on the essential technology description, as well as on the problems you expect that adoption would solve. Do not focus on these details about the technology (especially ones extracted from marketing materials).  Where possible, focus on the technology, rather than one particular product or supplier’s version. The section in this week’s notes on IT portfolio management may help for this and subsequent sections. In thinking about this, note the section in this week’s notes on “The Technology Hype Curve.”

3. Use and Benefits

In considering a technology, it is possible or even likely that you have a specific use in mind (e.g., for a specific project, or to solve a specific problem). However, keep in mind that a technology may be used for a variety of purposes, and that after its first use, others applications may present themselves.
Your task in this section is to be somewhat visionary, and imagine, where possible, a range of potential uses (in part, so that you can justify amortizing any one-time costs of adoption over multiple uses) and benefits, while still remaining pragmatic. Be clear about exactly how features of the technology support the benefits described. Recall the following.

a. Operational Uses and Benefits.  What are the most significant ways in which adoption of the technology could allow your organization to operate more effectively?  Consider both new opportunities, as well as ways in which existing problems and compliance requirements can be addressed.

b. Competitive Uses and Benefits. What are the most significant ways in which adoption of the technology could benefit the company’s competitive strategy (or for organizations where there is no relevant basis for competition, consider how adoption would support the organization’s mission)?  Consider new opportunities (e.g. ways of expanding or extending the company’s business model), as well as ways of addressing existing environmental (e.g. regulatory, economic) and competitive forces.

Hints:

c. For technologies whose benefits are primarily operational, there may be no competitive use or benefit that you can clearly articulate.  Don’t stretch to find competitive uses and benefits that are not clear.

d. Internal cost reductions, by themselves, are primarily an operational benefit rather than a competitive benefit, unless the cost reduction is intended to directly affect product or market positioning (e.g. by lowering prices in a market where cost is a primary basis of competition) or to provide the crucial additional revenues needed for specific competitive strategies.

e. Technologies that will be adopted for incorporation into products or services that your organization offers may primarily have competitive uses or benefits and may not have significant operational benefits for your organization.  Note that operational benefits refer to your organization, not to your customers.

4. Technology Analysis

Summarize the preliminary analysis you have done which convinced you that the technology is viable and appropriate for its intended uses in the intended timeframe, and to identify any additional analysis that will be needed as part of the adoption consideration process.   

Consider and address the specific points below to the extent that they serve this purpose.  The goal is not to necessarily address every point, but to include material and organize this section in a way that provides a clear, cohesive, and diligent analysis of the technology, and how it would fit into your organization’s technology infrastructure. Focus here on “what” the technology is, not necessarily “how” it will be implemented in the organization. You may find the section “IT Architecture Planning” – and, of course the section on “Technology Analysis” – in this week’s notes helpful for this part of the assignment.

a. Technology Maturity. 

Think about where the technology currently falls on the reality curve, where you think it will fall at the time you believe it should be adopted, and what that says about whether your organization should adopt it.  What successes and difficulties have been reported in both experimental and actual deployments, especially in situations similar to the uses you imagine?  How stable and mature are the companies developing and supplying the technology?

i. Technology Displacement and Disruption.  In what ways, to what degree, and how rapidly might this technology displace other existing technologies, especially ones your organization is currently using?  How might this affect whether and when your organization should adopt it? 

ii. Technology Impacts.  Think about ways in which the technology would need to be integrated with your organization’s existing IT systems, and the associated costs and risks.  How might it result in new reliability, privacy, security and compliance challenges? How might adoption drive or limit other technology choices you expect to make in the future?  What other IT-based solutions or initiatives are needed to address these issues and ameliorate these risks?  (Note that initiatives or processes that would involve your organization more broadly are probably better discussed below under Addressing Operational and Competitive Impacts).

iii. Technology Evolution.  Think about how the technology might evolve over the next five years and how this might affect its value for your organization, or your organization’s need to adopt it.  Might there be added costs or risks if your organization doesn’t have control over how it evolves?

b. Technology Alternatives.  Are there alternative technologies (other than the ones you are already using) that could be adopted for the uses you envision?  If so, how would they compare with respect to technology evolution and lifetime benefits, as well as costs, risks and benefits.  Why do you believe the technology you’ve chosen is the best alternative?  Note that if it’s not clear, there might be some additional evaluation needed during the adoption consideration process.

5. Operational and Competitive Risks

The purpose of this section is to describe the impact of adoption and the approaches needed to ensure that any related issues and risks are addressed successfully. 

Consider including the following.

a. The major issues and risks that will need to be addressed during integration and deployment of the technology (other than ones fully addressed in the Technology Analysis section above)

b. What it is about your organization or the technology that makes each of these issues or risks significant and critical (this ensures that you focus on real issues specific to your organization or the technology, not just general principles)

c. The operational processes, structures or approaches that will be needed to address these issues and risks successfully.  (These should be very specific to your organization and to the technology.  Note that purely IT-specific solutions and initiatives are probably better discussed above under Technology Analysis.)

In regard to issues and risks, consider the following.

a. The structure, management, business processes, staff and culture of your organization, and whether its capabilities are adequate for successful adoption, as well as any negative impacts that adoption might have.

b. The external relationships of the organization, and how they might be impacted by adoption.

c. Whether adoption might have any negative impact on the basis of competition in your segment (e.g. might adoption lead to commoditization) or on the success of your organization’s competitive strategy.

In regard to processes, structures and approaches needed for successful integration and deployment, consider the following.

d. relationships with technology suppliers

e. stakeholder involvement

f. change management

g. resource and capability management (including outsourcing)

h. pace and extent of deployment

i. management and governance structure and activities

6. Adoption Analysis Summary

The purpose of this section is to summarize the key reasons why you believe, on balance (considering costs, risks etc.), that the technology is seriously worth considering for adoption, and the reasons for the specific timeframe you are recommending. 

Consider and address the specific points below only to the extent that they serve this purpose.  The goal is not to necessarily address each and every point, but to include material and organize this section in a way that provides a clear, cohesive and compelling overall analysis that supports your recommendation.

j. Adoption Cost and Value.  What are the main sources of cost due to adoption, including some rough $ estimates?  What are the overall costs, and how would they be spread out?  What’s the ROI (or other basis for evaluating return), or more generally, how can the costs be justified relative to the perceived value of adoption?  You might think about quantifying the perceived value in terms of s, although this can be hard to estimate, especially when the benefits involve opportunities such as preparing for potential business model evolution or are part of a larger initiative.

k. Risks of Adoption.  What are the most significant risks of adopting the technology? What’s the likelihood of the various risks?  What kinds of effort should be put into ameliorating (vs. accepting) the various risks, and what are the associated costs? (Note that these may actually dominate other costs!)  What are the costs and other impacts if the risk scenarios actually occur?

l. Other Approaches.  For the uses you intend, are there other approaches that need to be considered that do NOT involve adoption of new technology, and if so, why?  How do they compare with respect to costs, risks and benefits?  Why do you believe that adopting new technology makes most sense?  Note that if it’s not clear, there might be some additional evaluation processes needed during the adoption consideration process.

m. Relative Value.  How important and urgent is adoption of this technology relative to other IT activities your organization could undertake instead?  How well does adoption of this technology fit into your organization’s overall IT portfolio?

n. Adoption of this Technology.  It is almost certainly worth noting what kind of adopter your organization should be for this technology, with respect to (a) all potential adopters, (b) all organizations in your industry/segment and (c) just those of comparable size.  You will probably want to provide some justification if the answers are different than the one for organizational adoption, in general.

End with a list of references following the standard reference format, as described in References and Citations document.
Use the Ask Your Facilitator Discussion Board if you have any questions regarding the objectives of the assignment or how to approach the assignment. 
Save your assignment as
LastnameFirstname_
assign6 and submit it in the Assignments section of the course.

© Trustees of Boston University. Materials contained within this course are subject to copyright protection.

Dell Customer Communication – Confidential

Introduction

In October 20

1

7, the first store of Luckin coffee opened in Beijing. Today surpassed Starbucks to become the largest retail coffee brand in China. Luckin Coffee has received a lot of attention from the outside world since its establishment, and Luckin Coffee’s subversive business strategy has also attracted a lot of controversy and discussion. Luckin Coffee makes full use of the new retail model of mobile Internet and big data technology to provide customers with products that combine convenience, cost-effectiveness and high quality.

In the summer of 2020, Luckin Coffee issued an announcement to “self-expose” the company’s internal financial fraud. After investigation, the company was involved in forging sales with a total amount of about 300 million US dollars from the second quarter to the fourth quarter of 2019, and some costs and expenses during the period were also caused. After the incident, Luckin Coffee’s stock price fell by more than 85% before the market and triggered a circuit breaker. After the opening, Luckin Coffee’s suspended trading due to six intraday circuit breakers. The market value has shrunk by nearly $5 billion overnight.

After experiencing a series of changes such as financial fraud, delisting, leadership change, and heavy fines, Luckin Coffee has been quietly continuing to seek breakthroughs, and the actions of various links seem to have become an important factor in efforts to achieve profitability.

The first time I tried Luckin Coffee was in 2018. At that time, I always saw its advertisements in elevators, and everyone in office buildings and gyms had a cup of Luckin Coffee. At that time, Luckin Coffee advertised that the first cup was free and guaranteed to be delivered within 30 minutes. The carefully selected raw beans were prepared by the world’s top baristas. The price was cheaper than Starbucks, buy two get one free, buy five get five and so on… The overwhelming publicity and a large number of discounts have attracted the attention of coffee lovers and office workers.

Business Model

Why can Luckin Coffee grow so fast? What does the core business model look like? What is new retail? Compared with the traditional model of Luckin Coffee, there are three fundamental differences at the core.

The first fundamental difference is that there is no cashier in the store, and all transactions, whether online or in-store, are done through the app. This brings three benefits, the first of which is an optimized customer experience. For example, after placing an order, the customer can see the estimated completion time through the App, and can also set the time to pick it up so the customer does not have to wait in the store at all. At the same time, customers can also find stores conveniently and quickly through the App. Customers can also see the coffee making process through the app after ordering. All of these will be of great help to the improvement of customer experience and bring a novel consumption experience. The second advantage is that because there is no on-site counter ordering and no cashier, the store operation is very simple and very efficient. Imagine that each employee’s job is clear, from receiving the order to making the coffee, and finally putting the coffee to the pickup spot. The whole process is very smooth and efficient. The third benefit is the strong connection between the app and the customer. On the one hand, the customer starts to buy the first cup of coffee, and starts to collect data on the customer’s consumption behavior from the download of the App, to understand the customer’s consumption habits, and to provide better services and goods in the future. In addition, the reverse can continuously upgrade its own products based on these data, iterate its own products, and at the same time provide customers with better prices and better products.

This is the first fundamental difference. This is a big difference between online ordering and in-store ordering. The core of Luckin Coffee is 100% transaction through App. Operational dataization provides Luckin with data retention and user portraits. Imagine ordering through the APP, getting the order data, getting the customer data, and establishing a connection with the customer, getting the user’s preference, consumption behavior and even other Internet behavior data. Based on these data, accurate portraits of customers can be made, such as age, occupation, spending power, etc., and then based on this portrait, accurate advertisement pushes (SMS, APP notifications) can be implemented to customers to increase the repurchase rate. Assuming that without data, the customer and Luckin are disconnected. The customer pays Luckin cash, and Luckin gives coffee to the customer. When the customer leaves, the connection is lost. Ordering through the app brings unlimited benefits to Luckin.

The second fundamental difference is the store model. Luckin Coffee has opened three kinds of stores when it was founded, the first one is fast pickup store, there are no seats for dine in. Second one is flagship store, it is similar to Starbucks Selected Store. The third one takeaway kitchen store, which is the delivery guy will go to the nearest takeaway kitchen to make coffee. Luckin now claims 6,024 stores in China compared to Starbucks’ 5,654 (McGregor, 2022). The strategic focus of Luckin Coffee is on pick up stores, which account for more than 95% of all stores. The pick-up stores are mainly concentrated in the lobby of office buildings, inside enterprises, and some places with high traffic. The store is not large. Smaller shops have no seats or have less seats. Why focus on pick up stores? Why does the core of Luckin Coffee provide the service of a pick up stores? Comparing the pricing of Luckin Coffee, we found that the audience of Luckin Coffee is office workers and young people with a fast pace of life. These people are accustomed to taking out coffee instead of sitting in the store to enjoy coffee. Therefore, Luckin Coffee is not selling space, but coffee. Luckin Coffee is not a “third space”. Luckin Coffee’s expectation is “infinite scenes”. Luckin Coffee is to allow their customers to enjoy a good cup of coffee anytime, anywhere. What customers consume is not space, but the high quality, cost-effectiveness and convenience of coffee. This is the core strategic goal of Luckin Coffee.

The third core difference from the traditional model is that it is driven by technology and centered on data, and Luckin Coffee has established a close relationship with customers. The key to Luckin Coffee’s quality assurance is the entire information system, and the entire data enables them to control the quality very effectively. The system will detect each order. After each customer places an order, the customer will be asked to comment later. The evaluation of customer satisfaction or dissatisfaction will be related to the KPI of the store. Finally achieve customer satisfaction. Therefore, the service quality of the entire store and every order are monitored.

At the same time, sensors are installed on every coffee machine and thermometers are installed on every refrigerator. The traditional way may be to rely on people’s sense of responsibility to check whether the caffeine extraction time has exceeded the standard, the machine is stable or unstable, and the if the temperature is correct. Luckin Coffee relies on adding automatic quality inspection technology to each machine and equipment, collecting all machine operation data to the cloud, and monitoring it through the background system. Once the parameters deviate, the system will automatically Send an order to the store to tell them that the machine is down for repairs. On the one hand, the efficiency is improved through this system, and on the other hand, the quality of the whole service and the quality of the products are monitored.

The above three points are the differences between the core and traditional models of Luckin Coffee. These three differences constitute the new retail model of Luckin Coffee, and at the same time, they change the cost structure of the entire coffee.

Competitive Forces and Challenges

In China, when young people discuss coffee, the first thing that comes to mind is Luckin and Starbucks. These two types of coffee give people different feelings. Luckin is like a coffee with high cost performance, which is cheap, affordable and taste good. Because of the large storefront of Starbucks, the decoration is very good and gives a high-end feeling. But for white-collar office workers, Luckin must be their first choice, because mobile ordering provides convenience and price advantages. Luckin now claims 6,024 stores in China compared to Starbucks’ 5,654 (McGregor, 2022).

In terms of positioning, the early positioning of Luckin has always been aimed at Starbucks’ large-scale stores pursuing commercialization and high-quality ready-made taste, so Luckin at that time only operated directly-operated stores. The disadvantage is that it takes up a lot of funds. In the long-term subsidy and unprofitable operation process, it is easy to fall into a cash flow crisis, a collapse, etc. In this regard, Luckin has changed in two points: The first is to increase the franchise model, and attract franchisees to enter the market through franchise discounts and technical support. In this way, it can ensure a stable cash flow, also open up new revenue channels (franchisees need to purchase raw materials from Luckin).

The second is that Luckin gave up a large part of the big store model, closed down the stores with unqualified revenue, and started the takeaway model. From an objective point of view, although Luckin has always been “challenging” Starbucks, it has to admit that the overlap of user portraits with Starbucks is very low. The real user groups of Luckin have always been young white-collar workers who pay attention to cost performance. As a result, Luckin engaged in dislocation competition, opened pop-up stores intensively, and slogans such as “we drink coffee, we only pay for coffee”.

In terms of products, Luckin adopts a high-frequency push of new products to create the logic of explosive models. Unlike the North American market, coffee is not a necessity for most Chinese users, and more of it exists in the form of leisure drinks. On this track, Chinese consumers, especially young consumers, obviously prefer a variety of tastes. “The first quarter of 2022 was a relatively weak quarter for Luckin Coffee’s self-operated stores due to the New Year’s holiday. However, in the first quarter, Luckin Coffee launched 34 new products, which supported its performance. In April this year, Luckin Coffee’s new Coconut Latte exploded the market as soon as it was launched, with 4.95 million cups sold in the first week(SANJIEKE， 2022).”

Problem

Luckin Coffee’s customers are all price-sensitive customers, and customers who increase prices will be lost. If there are low discount coupons, they will only buy them. If the discount is raised one day, or the coupons are not given out, these customers will be lost, and the customer loyalty will be weak. Luckin customers are trained from day one to interact with Luckin through coupons/free coffee, not through people, style, service, culture. Some customers trade less without coupons and discounts.

Luckin also doesn’t have a loyalty program or points system in 2020, and customers won’t get anything extra from spending more or more frequently. On the contrary, the less you spend, the higher the discount coupon will be issued to you. It is difficult to cultivate loyal members of the brand. Luckin should use the membership program to increase user stickiness and enhance customer loyalty.

Strategy

Luckin uses “private traffic” to increase user loyalty. Private traffic in China is concentrated on WeChat. From personal WeChat to WeChat groups to official accounts, they all belong to private traffic scenarios, but official accounts are farther away from users than personal WeChat and WeChat groups. Luckin found that making a private domain is a way to attract a lot of traffic and increase sales. So Luckin began to develop private traffic in WeChat by building WeChat groups. Luckin will occasionally publish advertisements for people who enter the group to receive coupons. Those who join this group get a 52% coupon on purchases. “The data shows that since Luckin became a private domain, the community has contributed more than 35,000 cups of orders per day, and more than 100,000 cups of orders have been promoted through information reminders in the group. After users join the group, the monthly consumption frequency has increased by 30%, and the number of weekly repurchases has increased by 28% （Li, 2022）”.

The biggest feature of Luckin Coffee’s private domain community is location-based services, that is, differentiated operations for the community of stores. When you scan the code to enter the community, the system will automatically identify nearby stores and recommend the corresponding community. Because each group has different geographical locations and different target users, promotions and offers are also different. For example, promotions are often held in WeChat communities near universities, and the lowest discounts can reach 72% off. Because of the low consumption level of college students, they are often more willing to order coffee online together, which saves shipping costs; in this way, although the discount is large, the delivery cost is also being lowered. In addition, Luckin Coffee near the school also has new products for students. It can also be seen from this small detail that Luckin Coffee’s private domain operation is really refined, which solves the problem of user loyalty.

Since Luckin Coffee has used the app side to place orders from the beginning, the app side should add some data shows and visualize to users. Such as monthly consumption, quarterly consumption and annual consumption. The annual per capita coffee purchases of Luckin users and the user’s own purchases, and some percentages of data are given to stimulate users’ enthusiasm for purchase.

Summary

Luckin is not just coffee. Coffee is a good business in today’s fast-paced society. It has high viscosity, high frequency and high gross profit. In my opinion, coffee is a huge potential market. a good business. But at the same time, there is a lot of information that can be gained by buying coffee. This is also why Luckin Coffee requires Luckin Coffee’s consumers to download Luckin Coffee’s App from the first day of making coffee. Through the App, more than 6,000 stores and WeChat’s private domain group, Luckin Coffee has built a powerful Network, a sales network. On this sales network, in addition to coffee, Luckin Coffee also provides consumers with a variety of other beverages, desserts and light meals to meet everyone’s needs for eating and drinking in the daily office environment or other consumption scenarios.

References

Ghosh, P. (2021, February 5). Luckin Coffee Files for bankruptcy seven months after Nasdaq delisting. Forbes. Retrieved July 15, 2022, from https://www.forbes.com/sites/palashghosh/2021/02/05/luckin-coffee-files-for-bankruptcy-seven-months-after-nasdaq-delisting/

Li, Y. (n.d.). After 100 days of “undercover” Luckin fan group, I discovered the secret of its “coming back to life”. CBNData. Retrieved July 14, 2022, from https://www.cbndata.com/information/150528

McGregor, G. (2022, May 23). Luckin coffee plots an improbable redemption after delisting, bankruptcy. Fortune. Retrieved July 14, 2022, from https://fortune.com/2022/05/22/luckin-coffee-china-wall-street-listing-nasdaq-scandal-fraud-starbucks/

McGregor, G. (2022, May 23). Luckin coffee plots an improbable redemption after delisting, bankruptcy. Fortune. Retrieved July 15, 2022, from https://fortune.com/2022/05/22/luckin-coffee-china-wall-street-listing-nasdaq-scandal-fraud-starbucks/

SANJIEKE. (2022, June 1). Turning losses into profits for the first time, and the total number of stores surpassing Starbucks, Luckin finally reborn? https://finance.sina.com.cn. Retrieved July 14, 2022, from https://finance.sina.com.cn/chanjing/gsnews/2022-06-01/doc-imizmscu4571079.shtml

1