Introduction
Innovational Proposal
Today, data archiving processes severely slow down the data processing centers by using the tape drives, hard drives, and solid-state drives. Microsoft and University of Washington researchers, on the other hand, have developed a completely automated system that encodes and saves data in DNA for the subsequent encoding and reading.
Microsoft
Microsoft is a leader in the information technology sector, delivering a wide range of devices and services, software and IT services. It is a global company, operating in more than 190 countries around the world. The company has a product-type divisional organizational structure, where each division specializes on a certain line of products and services. Thus, the range of Microsoft products is wide for the IT industry, including a wide range of software systems, apps and digital technology in general. The official Microsoft site (2021) states that the employee count worldwide has reached the number of 182,268, with 103,894 of that count belonging to various company branches in the U.S..
As a company, Microsoft intends to keep its products both innovative and accessible, upholding the balance between costs and barriers to entry. According to Tariq et al. (2019), Schumpeter’s entrepreneurship theory associates the concept of entrepreneurship precisely with innovations and continuous development. Microsoft invests in innovative technologies projects from non-profit organizations such as universities, that aided the company in developing the first DNA storage device.
Microsoft Business Model
Microsoft so far has been basing its business model on both the Windows operation system and the license fees for using the Windows operating system and Microsoft Office. After years of growing futility in a race against Google and Apple, Microsoft unveiled a new vision in April 2014, instantly shifting the focus to making Windows software more compatible with competing products. Going forward, however, Microsoft has realized that paid software is harder to sell in an era of the low-cost alternatives, and focused on product integration, freemium software, and the cloud computing tools.
Environmental Analysis
Where Is the DNA Storage Now
For successful development, the organization must constantly identify the existing and potential opportunities concerning the most effective use of its internal resources – intellectual, informational, labor, material, financial, and other. According to Williams et al. (2018, para. 1), “the true benefit for a firm appears to lie not in any one particular action but in a conglomeration of strategic thinking approaches”. The gap between the global data center resources’ capabilities and the amount of data that requires processing and storing will only increase with time. Microsoft has taken a significant step in facilitating the hard drives and SSDs replacement with the DNA storage tools.
The Source of Innovation and How It Defines the Opportunities
The amount of digital data generated, transmitted, and stored on various storage drivers is growing at an incredible rate. Subsequently, these storage drivers consume an incredible amount of electricity, leaving their negative imprint on the planet’s ecology. At the same time, the storage period of data on such drives is calculated in years or, at best, decades, which does not satisfy the current market requirements.
A $10,000 prototype gadget developed by Microsoft researchers in cooperation with University of Washington experts can automatically convert any digital data into a DNA sequence and then read that data. The word hello was represented in binary code on a computer during a successful experiment, which was subsequently encoded into a DNA sequence, manufactured, and stored as a liquid. The DNA was then retrieved from storage, sequenced, and converted to binary code and the original word. Takahashi et al. (2019) claims that “this device establishes a baseline from which new improvements may be made toward a device that eventually operates at a commercially viable scale and throughput” (p. 3). The technology, on the other hand, was revolutionary in how it operated flawlessly in a completely autonomous mode without the need for human involvement.
DNA molecules can store digital information at a very high density, occupying far less physical space less than modern data centers, increasing its value for businesses. DNA storage is currently a topic of investors’ interest for the foreseeable future (Stanley et al., 2020). As a tool it maintains relevancy for as long as the encoded information exists, which is not the case for the potential alternatives.
MACRO Trend Environmental (PESTLE) Analysis
The study of the external environment, as well as the monitoring of the industrial market, are the most essential aspects of strategic management and planning in the firm. According to Wandhwani et al. (2020), historical assumptions are one of the most important factors in entrepreneurship study, as they provide the context necessary for any impact evaluation. The risks and possibilities that the company may face in the course of doing business are both existent in the external environment, of which the firm is a part. Rastogi and Trivedi (2016) explain that, for example, an increase in inflation rate would definitely affect the company’s pricing strategy, and not in a favorable for consumers way. Qiu (2014) supplies that economic and social globalization has a positive effect in the product diversification and large corporations’ market value. Competitors, unethical suppliers, quickly changing tax regulations, societal cataclysms, and a variety of other things might pose an inconvenience to Microsoft in the external environment. For example, Warner (2019) states that Microsoft already has had several fines problems with the EU for abusing its market dominance. Therefore, government intervention could have a negative impact on the organization.
Microsoft is constantly introducing new technologies into its operations. Technological innovation affects the efficiency with which products can be manufactured and sold, the rate at which the product becomes obsolete, how information can be collected, stored, and distributed. The last aspect forms the base on which the marketing strategy for the DNA storage systems would be built in the future.
MICRO Trend Environmental Analysis
Dobbs (2014) explains Porter’s five forces as the threats posed by competitive rivalry, powerful buyers, powerful suppliers, potential new entrants, and substitute products. In modern market conditions, those that develop better information products, systems, and management technologies faster than competitors secure the advantage. For example, Kah Chon (2019, para. 2) states that, in 2013, Microsoft had problems in the field of operational risks in PC market, as the launch of Windows 8 resulted in lower profit rates. So the defining perspective development of the IT industry today is the development through establishing unique innovative products, systems and control technologies.
Alternatively, Microsoft could utilize the Porter’s Five Forces framework for their DNA data storage technology. This model was designed to analyze a competitive market environment and as such has identified several factors of influence: threat of new entrants, threat of substitutes, existing rivalry, power of buyers, and power of suppliers. The threat of new entrants is relatively high for Microsoft, since the data processing and storage technologies are currently on the rise. It is difficult to evaluate the existing rivalry, since the niche is still relatively new and not a lot of firms are part taking in it currently. Substitutes for the DNA storage technology are plentiful, yet none of them imitate the tool’s characteristics in full. Finally, the bargaining power suppliers is relatively low, considering the size and corporate power of Microsoft, while the power of buyers depends on which of the mentioned segments they belong to.
Customer Segmentation Analysis
If successful, the DNA storage technology will allow the preservation of data that is necessary for legal reasons, such as rare surveillance camera footage, medical records and historical government records. Thus, the first customer segment will be represented by governmental organizations such as health care industry, national archives, police, and penitentiary system. The segment’s variability is low due to the public service orientation of the stakeholders mentioned, but their position within the market is strong due to their capacity for submitting large orders.
To the second customer segment would belong large tech corporations such as Google, Apple, Amazon and Facebook. Currently, Microsoft is a pioneer and has the furthest progress in the DNA storage technology. Thus, at least for a decade, the company’s competitors would have no other choice but to use Microsoft’s technology. This segment is more variable since the companies in question are private businesses with individual needs, and their position in the market is weaker compared to governmental entities.
SWOT Analysis
Bell and Rochford (2016) highlight the critical role of SWOT analysis in integrating internal and external analysis in the marketing strategy. It can be concluded from the analysis above that the DNA storage technology has a very good marketing potential. Microsoft holds leading positions in the IT industry, and the company has both the capital and the competencies for developing this innovative technology. Lukianov et al. (2020, para. 3) suggest that company needs to use each and every aspects of corporate governance, including risk management. The opportunities the technology presents are plenty: company’s expansion in the market and attraction of both domestic and foreign investors, as well as federal investments are the most valuable among them.
The Weaknesses of Proposed Approach
One of the main flaws of the technology is the fact that, unlike silicon-based computing systems, DNA-based storage and computing systems must use fluids to move molecules. The problem is that liquids are inherently different from electrons, thus, they require completely new technical solutions. Also, Heckel et al. (2017) claim that the data on the DNA is stored without a proper order, and read by randomized sampling from the nucleotides pool. Nowadays, the main issue the innovation has yet to overcome is the automation of laboratory experiments that are currently performed manually or by expensive fluid handling robots. Businesses will be able to commercialize DNA storage only when it would be fast and relatively cheap. Researchers have been experimenting with writing data onto the genome since 2012, but today they spend 21 hours writing and reading back a 5-byte word hello.
New Opportunities
However, it must be noted that in 2001, the decoding of the human genome took several years and cost $100 million, while today it can be done in two days and for less than $1,000. Liu et al. (2020) emphasize that DNA storage has all the potential of replacing silicon-based materials as the next generation of information storage technology. The technology has already been improved, and it would continue to evolve, resulting in lower costs and faster results. SathyaBama (2019) states that Microsoft and the U.S Biotech Company Twist Biotech have already successfully stored 400 megabytes of data on the DNA.
Innovation and Marketing Plan
Business Proposition
The technology of DNA storage continues to be improved, but the concept itself has already been proven. Microsoft hopes that this will lead to the development of information storage technologies using DNA, thus further enhancing the field of data processing-focused products (Sorescu, 2017). Modern competitive advantage in a highly contested industry depends on a firm’s opportunity to predict, incorporate, and monetize innovations, regardless of the initial costs their establishment might cause.
Target Market
The concept of target audience refers to characteristically unified group of people potentially interested in company’s proposal that the marketing proposal needs to prioritize. To improve the overall efficiency, marketing strategy should take into account customer expectations and customer satisfaction (Kanten and Darma 2017).) Modern firms possess the opportunity to access and analyze the customers’ social media thus learning the first-hand information aobut Subsequently, target market for the DNA storage technology would be the ever-growing field of IT innovations of almost any kind – seeing as nowadays, big data storage is strictly required for every device. Microsoft currently occupies the role of one of the leading suppliers of this innovative tool, together with Illumina, Twist Lead and the University of Washington. The technology is to be distributed by current channels typical for biotechnology and high-tech data processing tools.
Key Planning Assumptions
Goela and Bolot (2017) state that, as the cost of DNA synthesis and sequencing decreases, ultra-dense DNA storage emerges to become a leading storage technology. Peng et al. (2021) support that claim, adding that the DNA storage technologies provide a viable biological encryption process, which contributes to the issue of data protection. However, Yazdi et al. (2017) claim that, in order for the technology to become marketable and competitive, it first needs to meet several requirements. These requirements are: the reduced synthesis cost, random access possibilities, enabled portable readout system, and extreme decrease in error rates.
How the Innovation Links to the Microsoft Business Model
Microsoft is a company that was build and continues to develop through innovative technologies. Kraśnicka et al. (2017) states that “innovation supportive culture stimulates the generation of new solutions or their absorption from the outside and contributes to the more effective implementation of creative ideas” (p. 745). The innovative technology of DNA storage fits the company’s current business model perfectly. Taran and Boer (2015) supply that innovation-based business model becomes increasingly important due to the globalizing competition. It addresses the key challenge the company has faced in the last decade – the need to create a unique competitive advantage that no other IT company has yet.
Resources and Competencies for Implementation – Do They Exist?
Nikolau et al. (2021) suggest that biology proved to be one of the key methods to enhance entrepreneurship. Microsoft has an extensive research and development division that continues to work in the direction of DNA data storage. Moreover, Ji and Yoon (2021) also suggest that organisational competitiveness comes from the utilization of strategic human resources nowadays, which the company also constantly enhances. Welter et al. (2016) provide an insight into the entrepreneurship behind the Microsoft type of company, claiming that it continues to strongly shape the field of research and implementation means.
Action Plan
Product / Unique Value Proposition
In the heart of any marketing strategy lies a value proposition. The value proposition is a summary of the properties of a product that are the most beneficial to a certain customer. The creation of a value proposition is a strategic task, and the results of its implementation will directly affect the sales results of the product by influencing customers in the purchasing decision process (Guven, 2020; Nadella, 2020). For this innovation proposal, a value proposition lies in the creation of affordable portable DNA storage units. Stanley et al.’s (2020) research shows that, as key opinion leaders claim, in 4 to 10 years the technology would successfully enter the market.
Price
Determining the value of a product is an important step in predicting its success on the market. Carayannis et al. (2015, p.1) also add that “the capacity to introduce new products in the market anticipating their competitors, earning in this way significant shares of sales, constitutes a big competitive advantage for companies”. Katsikeas et al. (2019) emphasize on the importance of internet research in determining the worldwide price medium in the industry. The initial price determines the level of interest in the product and the market segment it gets positioned in.
However, as the technology of DNA data storage is yet relatively new and expensive, it is hard to determine the price range. Metallo et al. (2018) state that the Internet of Things, where this technology is the most applicable, evolves constantly. In the long term, the market infiltration also maximizes sales in the short term and achieves a high market share, which then would gently lead to increase in prices.
Place
The sales area for the DNA data storage technology would be relatively narrow at first. The organizations who require such technology would need to place direct orders and negotiate contracts with Microsoft. Farooq et al. (2021) add that to one of the two goals of stabilizing a digital business is to shift operations towards a digitally supported system, which may require the establishment of the additional branch.
Promotion
By understanding the positioning of competitors, the company can develop a way to stand out in relation to them and show the unique offer of DNA data storage to the consumers. Hole et al. (2018) add that more impactful promotion programs are accessible through service marketing due to its distinctive approach. Horst and Murschetz (2019, p.1) also highlight how the convergence of strategy and entrepreneurship adds to organizational success through developing visions, exploring and exploiting opportunities, managing people, building networks, driving creativity, and facilitating strategic planning. Furthermore, the social media and the real-time feedback exchange between customers currently became a very influential force of increasing sales and promotion (Soegoto and Utomo 2019). Promotion of DNA data storage devices would include such marketing communications as advertising, promotion at points of sale, search engine optimization, PR, and direct marketing.
Evaluation
Measurements of Performance
Sales strategy is a plan for the development of sales in a company, which contains a set of activities and checkpoints to control their effectiveness. As diversification is Microsoft’s strategic approach to the DNA storage technology, the firm needs to invest extra heavily into market research and pre-launch testing, increasing its expenses (Dawes, 2018). Financial analysis provides insights into the company’s sustainability in the current situation and its plans for strategic growth and risk assessment (Malozyomov et al., 2018; Vernimmen et al., 2018). Microsoft should consider adapting its sales strategy, given that financial data included in the appendix showcases the revenue decrease from Windows and it’s simultaneous increase from other digital and hybrid products. This could mean the shift in consumer priorities, market trends and general efficiency in the brand’s value proposition in different segments.
Furthermore, a cash flow statement is highly necessary in an annual financial analysis since the terms “income” and “expenses” used in the general report do not directly reflect the actual cash flow. According to Purba and Bimantara (2020), the company’s financial performance can be estimated through the analysis of profits. Other KPIs relevant to the financial data on the firm may be derived from its expected return on the market and systemic risk estimation, demonstrating the level of reputation the company holds within its field.
Additionally, the company is expected to aim to calculate a break-even point for its new product, thus estimating the necessary profitability threshold. The break-even point occurs when a firm’s total revenue is equal to it’s total expenses, and therefore ensures the company is not faced with financial loss. Based on the previous years, Microsoft can expect its break-even point to occur at 694 units, with each unit contributing $4.90 and having a marginal cost of $7.60 (“Facts about Microsoft”, 2021). This margin can therefore allow the firm to plan the pricing an the production output accordingly.
Recommendations for Future Actions
The main KPI’s Microsoft should prioritize moving forward are revenue growth rate, employee engagement, website search traffic and digital marketing performance. Jankoff (2021, para. 3) states that a risk-averse or too process-driven organizational culture discourages employees from acting as entrepreneurs. It would be useful for the company to ensure that its organizational culture properly addresses needs and ambitions of the employees so that they would be able to perform better (Jakub et al., 2015; Morgan et al., 2018). Additionally, according to research, companies have different benefits from adopting open innovation strategies (Busenitz et al., 2014; Saebi and Foss, 2015). Furthermore, only the systematic analyses of these different approaches and methods can provide the company with the insights into the product development consistent with the evolving demands of the market.
Conclusion
It is data that is the connecting link for all areas of business today. Whether it is people’s daily activities or worldwide work to solve global problems, data complements and empowers human intelligence. DNA can change the data storage business. As the humanity generates more and more data, the value of alternative approaches will grow as the capacity of data centers depletes. Thus, the desire for constant development might become a basis the innovation implementation and integrate the DNA information technology into business operations.
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Appendix A
Calculations of Break-Even Point
The break-even point concludes a balance of income and expenses when the profit remains zero.
The calculation of the break-even point in natural terms is as follows:
BE = FC / (SP – VC)
Where:
- BE = Break-even point;
- FC = Fixed Costs;
- SP = Selling Price per unit;
- VC = Variable Costs.
Appendix B
Weighted Average Cost of Capital
Weighted Average Cost Of Capital is a calculation of the cost of capital of a company, in which each category of capital is accounted for in proportion to its specific weight.
The formula for calculating WACC is:
WACC = (VE * Re) + (VD * Rd * (1 − Tc))
Where:
- E = Market value of the firm’s equity;
- D = Market value of the firm’s debt;
- V = E+D;
- Re = Cost of equity;
- Rd = Cost of debt;
- Tc = Corporate tax rate.
Appendix C
Capital Asset Pricing Model
Capital Assets Price Model is a model for assessing and forecasting the future return of an asset for investors.
CAPM can be calculated through the following formula:
Ra = Rrf + [Ba * (Rm – Rrf)]
Where:
- Ra = Expected return on a security;
- Rrf = Risk-free rate;
- Ba = Beta of the security;
- Rm = Expected return of the market.
Appendix D: The Ansoff Matrix
The Ansoff Matrix is a strategic planning tool designed by American planning expert Igor Ansoff that connects an organization’s marketing strategy with its overall strategic direction. In the form of a 2×2 table or matrix, it provides four potential development options. The matrix considers “products” (both existing and emerging) on one dimension, and “markets”, both existing and emerging, on the other (Martins, 2021; Zanjani et al., 2021). It is generally used to assess the levels of risk associated with each marketing strategy out of the four listed in total.
Market penetration is the first out of the strategies covered by the markets, and is generally considered to be the safest path for companies. Because it knows its consumers, has established networks, and so on, selling current items into existing markets is the least risky option (Guyander and Piscicelli, 2019). This is only viable in markets that are still expanding, or in markets where companies are willing to employ other parts of the marketing mix (such as price discounting and additional promotional activities) to gain market share at the cost of competitors.
The second strategic choice in the Ansoff Matrix is to use a ‘Product Development’ strategy to create new goods for current markets and their customers. Because the marketing mix’s ‘Product’ and ‘Promotion’ parts will vary and involve innovation, the risk is greater than market penetration (Khajezadeh et al., 2019). This strategy’s effectiveness hinges on the company’s ability to perform detailed and effective market research and gain insight into consumer demand and current industry trends, as well as their own internal capabilities and competences for generating innovation.
The third strategy is referred to as Market Development and it focuses on promoting existing goods onto new markets. This is also regarded to be riskier than market penetration since understanding the complexity of new markets may be challenging. The marketing mix is expected to alter in two ways: ‘Place,’ with new channels and routes to market being considered, and ‘Promotion,’ with new target groups being promoted.
The Ansoff Matrix’s fourth and last approach is ‘Diversification,’ which involves creating new goods for new markets. Because the company is entering an unknown market, this approach is considered the riskiest of the four (Quiring et al., 2020). However, this risk can be minimized by pursuing ‘related’ diversification, which may provide the best returns. This approach is the most common for the IT, civil engineering and bioengineering firms, since the majority of them are partial to the most innovative markets.