IDE Virtual Lunch Seminar - February 25 - D.J. Wu

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D.J. Wu: "Commercializing Smart and Connected Products: A Value Chain Perspective"

Abstract: While the rise of smart and connected products ignites the virtuous cycle of the product network, their growth and diffusion also present novel challenges for managing its platform ecosystem. The traditional division of labor in the value chain is no longer sufficient to address the challenge in the era of smart and connected products. This research in progress examines two research questions: (1) how to leverage the data network effects in pricing smart and connected products? (2) how to coordinate the platform ecosystem when commercializing smart and connected products? Our analytical model first develops a benchmark that consists of a single centralized planner and compares it with the decentralized case when an upstream manufacturer and a downstream retailer choose their strategies sequentially and independently. The result suggests that the retailer's seeding strategy can maximize the overall value chain profit, but he does not have the incentive to do so unless the marginal product cost is sufficiently low. We then extend our model to allow the value chain participants to endogenize the strength of network effects among users. Surprisingly, we find that the upstream manufacturer in the decentralized value chain could invest in engineering network effects at a level higher than the centralized case, which eventually generates greater social welfare than the centralized case. These findings provide inspiring business and policy implications for managing the platform ecosystem of smart and networked products.

Biography: D. J. Wu is the Ernest Scheller Jr. Chair in Innovation, Entrepreneurship and Commercialization, Professor of IT Management, and Area Coordinator in IT Management at the Scheller College of Business (SCOB), Georgia Institute of Technology. He graduated from the Computer Science and Technology Department of Tsinghua University and received his Ph.D. from the Wharton School, University of Pennsylvania. 

Dr. Wu's current research interests include economics of digital innovation and transformation, digital business model innovations, platform ecosystems, enterprise information technology, IT contracting, online auctions, economics of cloud computing, and machine learning. Dr. Wu's recent work has been published in top-tier academic journals including Management Science, Information Systems Research, Manufacturing and Service Operations Management, and MIS Quarterly. 

 Prof. Wu serves as the Information Systems Department Editor, Management Science. He is also the president of INFORMS Information Systems Society. 

The contents of this presentation are not to be reproduced or distributed. 

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