Introduction
Jacobides (2019)’s ecosystem economy
Jacobides suggests 5 questions to consider to make use of ecosystem economy. These are
- Can you help other firms create value?
- What should be the terms? Dimensions of access and attachment.
- What role should you play?
- Can your organization adapt?
- How many ecosystem should you manage?
Importance of ecosystems is due to rollback of regulations, technology revolutionizing and convergence of products and services.
Chapters 1 & 4 of Parker et al. (2016)’s platforms
Parker et al. define a platform as a business that enables value-creating activities to external producers and customers. Platforms disrupt industries. They replace old traditional pipelines, which they define as a business that employs a step-by-step arrangement for creating and transferring value with producers at one end and consumers at the other. Two advantages over pipelines is effects of network effects and superior marginal economics of production and distribution. Disruption has effects on value creation (new sources of supply), value consumption (new forms of behavior) and quality control (community-driven curation). Structure changes through de-linking assets from value, re-intermediation and market aggregations.
Business models and value chains
Teece (2010)’s business models
Teece in the paper establishes concept of business model. Business model defines the way in which enterprise delivers value to customers, entices customers to pay for the value and transform payments to profits. He ties the concept to value proposition, value delivery (which can be understood as value chain) and value capture. Teece sees business model as more general than business strategy. Novel business models come to be either through technological innovation or through innovation of (existing) business model per se. Indeed, however technological innovation has to be coupled with considers to business model as technological innovation alone will not bring value (no commercial use for example). Diagram below connects the concepts which relate to (sustainable and good) business model.
Amit and Zott (2012)’s business model innovation
Amit and Zott in their paper consider that business model innovation can be more valuable to companies than single product/process innovation. Mainly due to difficulty of immitation and has more profound gain potentialities. They define company’s business model as system of interlinked and interdependent activities, which determines the way the company does business with customers, vendors and partners. Business model innovation can be brought by tweaking one or more of following knobs: content (by adding new activities), structure (by connecting activities differently) and governance (by changing parties who perform activities). Business model value main drivers are novelty, lock-in, complementaries and efficiency. Indeed, when business model is with novel innovations, efficient along with commitments from partners and customers to business and complementing activities, then business model is more likely to be right within the context of environment, industry and company. They also present six question before launching a new model: these include first identifying customers needs for value, then consideration each design dimensions: content, structure and governance, then seeing how stakeholders can get their value and finally coming up with revenue model, which complements business model. They define revenue model as specific ways a business model enables revenue generation for a business and its partners. The figure below aims to map the concepts, depicting aspects to consider in creating business model innovation or launching a new model.
Customer relationships and channels
Grewal et al. (2017)’s on future of retailing
The paper notes 5 key areas, where retailing is pushed forward. These are technology supporting decision-making, visual displays, consumption and engagement, big data collection/usage, analytics and profitability.
Hansen & Sia (2015)’s omnichannels
Hansen & Sia consider Hummel’s digital transformation within industry of fashion/clothes retail. In particular, it decided take on digital business journey, which aimed to creating omnichannels, which is defined as integrated, multichannel approach to sales/marketing. Four pushes and thrusts for Hummel’s omnichannel strategy were desire to align online branding globally, enhancing e-commerce support for B2B, building the omnichannel customer community and complement the physical store experience. In fact, they implemented digital B2B e-commerce sites, B2C e-commerce site for physical retail partners as shop-in-shop, bringing together all separate local websites under one umbrella, creating standardized brand guidelines Digital Manual, integrating social medias, utilizing visual boards and holograms in store, creating exclusive Hummel retail shops, creating a game app, doing collaborations with clubs and encouraging social media interactions - this all for better global brand management, creating omnichannels which support its customer relations and partners. Four implications from Hummel to other companies wanting to build omnichannels, is to embrace channel partners, recognizing deep change management in successful omnichannel strategy, utilize strategic role of CDO and evolve the role of CIO in enabling an omnichannel strategy.
Revenue models
Chapter 6 of Parker et al. (2016)’s monetization
In this chapter, Parker et al. talk about monetization part of platform businesses. In particular, questions like how and where to capture extra value added is under consideration. First and foremost, value creation in platforms is due to: access to users, market, tools and curation. There are four ways to look at value capturing (monetization): by charging on transactions, by charging for enhanced access, by bringing in third-party contributions or by subscription providing enhancing curation. Questions one who to charge can be divided as follows: (everybody in case of private club VIP platforms), user base which does not subsidies (e.g. unequal supply, demand), full price with subsidizing stars (famous people who attract activities).
Platform economics
Eisenmann et al. (2006)’s two-sided market strategies
Eisenmann et al. address 3 challenges of creating two-sided market platforms: pricing (how to charge and capture), winner-takes-all dynamics (is market going to be shared or proprietary platform, should you fight for a position) and threat of envelopment (threat of getting eaten by bigger side MSM).
Hagiu (2014)’s multisided market strategies
Hagiu addresses 4 challenges of strategic decision for multisided platforms (MSP). These challeges are: how many sides of platform, multisided platform design (how to ensure elements do not create negative cross/same-side network effects), pricing structure (who to charge) and governance (ways to address market failures that cannot be fixed with pricing mechanisms). Obstacles of MSP building are chicken-and-egg problem of getting users on board, resistance from potential MSP constituents and complexity of running MSPs.
Platform strategy
Zhu & Iansiti (2019)’s strategic characteristics of sustaining platforms
Zhu and Iansiti in their paper cover strategic characteristics of thriving and sustaining platforms. These are network effects (strong), clustering, risk of disintermediation, vulnerability to multi-homing and network bridging. Strong network effects are those where value of connections do not depend in few nodes (like it does in video game platforms, where only few good games is needed). Clustering considers how separated and clustered are nodes, with less clusters meaning stronger likeliness to thriving platform. Risk of disintermediation is about how to make sure that activities stay on platform. Vulnerability to multi-homing is concerned with question of how to minimize multi-homing with competitors and finally network bridging is about connecting different networks, so that platform addresses more needs and is not so easy to be overthrown.
Platform architecture
Chapters 3 of Parker et al. (2016)’s platform architecture
This chapter focuses on digital platform architecture. The platform’s goal is to bring together producers and consumers and enable then to engage in these forms of exchange: of information, of goods or services and of currency (money, attention, fame). The crux of why participate on platform is to focus on core interaction and consider participations, value unit and filter, where participations divides users to consumers and producers, value unit is produced by producers and filter helps consumers to find desires value units. Pull, facilitate and match aspects are to be considered to answer question of how interaction should be achieved and thus attract and keep people on platform in platform design.
Ross et al. (2019)’s digital offerings
Ross et al in their paper examine creating digital offerings customers are willing to buy. This encompasses running constant flow of experiments, cocreation with customers and cross-functional development teams working and sharing learnt insights. Most digital innovations are smaller bets (test-and-learn). Conducting digital experiments is like betting a tiny amount on all and having option to increase bet at various points if deemed necessary or successful. Learning how to accumulate and share customer insights allows companies to place their bets in this way - on those digital offerings that customers are actually willing to pay for.
Data-driven business models
Loebbecke & Picot (2015)’s changes big data brings to society
Loebbecke & Picot in their paper writes about reflections on societal and business model transformations arising from digitalization and big data analytics. In particular, they point out three mechanisms underlying digital and information goods: centralized production, increased harmonization of demand and erosion of property rights. They use the definition of business models as the rationale of how an organization creates, delivers and captures value. In fact, they highlight that business models are re-shaping due enabling and facilitating new forms of division of labour (crowdsourcing and flexibility) and are based on exploiting digital distribution, demand and customer engagement. Societal transformations can be seen through both desired and critical lenses, where the former entails concepts of growth of employment, productivity and consumer surplus (measure of technological innovation) and the latter is encompassed of replacing and/or changing human labour (such as substituting physical labour, mass amateurization, replacing high-level decision-makers and knowledge-based, cognitive processes).
Servitization
Kohtamäki et al. (2019)’s digital servitization
Kohtamäki et al. in their paper establish conceptualization and characterization of digital servitization business models. In particular, they define digital servitization as a transition toward smart product-service-software systems that enable value creation and capture through monitoring, control, optimization and autonomous function. Digital servitization business models require change of thinking of understanding the others within the ecosystem to create strategic fit between the business models. Ultimately, ecosystem is a way of organizing tasks and thus it requires also consideration of doing market or interorganizational networks as Thorelli has theorized (for the sake of completeness, hierarchical form is status quo of carrying out tasks in-house by yourself, while network is collaboration and market approach is buy and outsource the tasks). Digital servitization business models have three dimensions: solution customization (standardized, modular, customized), solution pricing (product-oriented, agreement-oriented, availability-oriented, outcome-oriented) and solution digitalization (monitoring, control, optimization, autonomous. They also conclude that in a grand scheme of things, any business model is just a collection of routines used by the company to create, deliver and capture value and concept of business model should be understood as dynamic one, something constantly constructed and reconstructed. Therefore, they suggests that their characterization of digitalization business models categorized into five are somewhat exemplary and idealistic and in real practice, one can forge different aspects together. In particular, they separated digital servitization business models into product provider, industrializer, integrated solutions provider, outcome provider and platform provider business models and set them apart through use of four theories of firms (resource-based view, organizational identity, power approach and transaction cost approach).
Business Models and Dynamic capabilities
Teece (2018)’s business models and dynamic capabilities
Teece in the paper connects concepts of business models, dynamic capabilities and strategy. Author sees that it is important to establish relationships between them and shed light on these research opportunities. Through organizational design, business model sets conditions on possibilities of dynamic capabilities. Dynamic capabilities includes sensing, seizing and transforming needed to design and implement a business model (p. 43). Teece defines business model as a design or architecture of the value creation, delivery and capture mechanisms a firm employs (p. 41). However, the core of dynamic capabilities lies in the fact that through enacting this ‘asset’, business can reform and reshape its business model, called business model innovation. Strategies generally are creation of human mind, thus not depended on structure of business model and dynamic capabilities, though the are still conditioned as business model set boundaries on feasibilities. He sees strategies as a separate concept to business model and defines it as ‘coherent set of analyses, policies, arguments and actions that respond to high-stakes challenges’ (p. 44). Figure below reflects these relations and the key point of the paper in a simple manner.