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Analyzing Business Models in Communications-enabled applications
1. Scrutinizing Business Models using publicly
available information: The case of
communications enabled applications
Laleh Rezaie Adl
Thesis defense presentation
Technology Innovation Management
Sep 13, 2011
2. Objective (s)
Objectives:
(i) Examine Business Models (BMs) of large suppliers of
Communications Enabled Applications (CEAs)
(ii) Analyze how these companies refine and innovate their BMs
Deliverables:
(i) Propositions that highlight distinct aspects of business models used
by large companies that supply CEAs
(ii) A classification of communications enabled market offers
(iii) A model that explains how large suppliers of CEAs improve and
innovate their business models
lalehadl@sce.carleton.ca Sep 13, 2011 Slide 2
3. Relevance
Who cares Why Evidence that managers care
about the issues addressed
TMT and executive Provides: Major sources of growth and
directors • A language for business modelling renewal for a company lies in it’s
business model that the company
• A visual representation of BMs to
follows to make money
implement enterprise changes (Christensen & Reynor, 2003)
Academics • To use as a unit of analysis The use of business models as a
unit of analysis is an emerging trend
in management research (Zott, Amit
and Massa, 2011)
Entrepreneurs To understand how large companies The greatest opportunities for
configure or re-configure required resources growth don't really come from
to create new value propositions selling more of the same market
offers to more customers, but from
truly new ways to turn a profit
(Johnson, 2010)
lalehadl@sce.carleton.ca Slide 3
4. Literature review
Stream Key highlights of the stream Key References
BM concept and notions Taxonomy of BM Amit & Zott (2001), Rappa (2003)
Definition of the components Tapscott, Lowi and Ticoll (2000)
Zott et al. (2011)
BM structure CVP, Key resources & processes, profit formula, Afuah & Tucci (2001), Hamel (2000)
plus rules, norms and metrics Johnson et al. (2008)
Four Box BM
CVP, CVS, CH, CR, R$, KR, KA, KP, C$ Osterwalder & Pigneur (2009)
BM Canvas
Others: BM components (2), Seven Petrovic, Kittl and Teksten (2001),
sub-models BMs, eight atomic elements Weill and Vitale (2001)
BM innovation constructs White space (within, beyond and between) Boundreau & Lakhani (2009)
White Space Open innovation leverages internal and external Chesbrough (2009)
innovation Chesbrough & Rosenbloom (2002)
Open innovation BM
Platform BMs operate based on “who sells to Christensen (2003)
Platform BMs (Integrator, product & two
whom”
sided platforms) Johnson (2010)
Four vector BM has two dimensions: Value
Four vector business models Venkatraman & Henderson (2008)
creation and Scope of relationships
Disruptive business models
Disruptive BMs generate profits at the low end
Growth formulae Incremental core, adjacencies, white space Evans & Schemalensee (2007)
Johnson’s model for growth & renewal Multi-sided growth strategies Hagiu (2005)
Multi-sided growth Johnson (2010)
Rochet & Tirole (2003), (2004)
Communication Enabled Eliminates human delay in business processes Becchina, Ciccarelli, Giotis & Kenny
(2007)
Applications (CEA)
lalehadl@sce.carleton.ca Slide 4
5. Contribution
Develops a model:
Can be used to predict circumstances whereby a change in
BM is required
Offers opportunities to lower costs and associated risks of
improving BMs or creating new ones
Provides a process which reduces time and effort
required to describe, analyze and improve how a
company makes money
lalehadl@sce.carleton.ca Slide 5
6. Lessons learned
All key elements of a business model need to be internally consistent
Opportunities for BM innovation arise whenever customers have jobs to be
done that are not satisfied by existing Customer Value Propositions
Companies have a tough time changing their BMs for two main reasons: (i)
tendency to apply same logic of launching new products (ii) rules and
behavioral norms
Designing CEAs requires an in depth understanding of business processes
and information flows as much as technology advancement
Platforms need to make three key strategic decisions to achieve
sustainability: (i) scope definition (ii) make pricing decisions (iii) make
decisions that provide differentiation
lalehadl@sce.carleton.ca Slide 6
7. Method
Step Describe the dominant activity undertaken to produce deliverables
1 Select structures to Review Literature
analysis BMs Identify approaches to organize elements of a BM
Select structures to examine BMs and BM innovation
2 Select sample Define sample criteria
Identify members of population that meet the criteria
3 Build data base Collect data required to populate selected structures in step 1
Enter data into a database
4 Develop propositions Organize data on elements of business models using BM Canvas
anchored around Four Box Identify unique attributes of sample canvases using Four Box BM
BM Develop four propositions that highlights unique attributes of sample BMs
5 Develop propositions Organize data using Value proposition frame (johnson, 2010)
anchored around Examine the inter-relationships between key elements of BMs across all market
interdependencies offers
Develop second set of propositions
6 Classify market offers Classify CEA market offers based on their delivered value (Bailetti, 2009)
7 Develop model for BM Develop a model using white space frame (Johnson, 2010) to explain how large
innovation suppliers of CEAs improve and innovate their business models
lalehadl@sce.carleton.ca Slide 7
8. Data acquisition
Data is collected from company’s secondary sources:
websites, annual reports, product/service literature, press
releases, analysts reports and media coverage
Required data includes but not limited to:
Communication enabled solutions: product features,
functions & added value
Jobs need to be done/problem to be solved for customers,
revenue models, cost structures, customer relationships,
key partners & channels to market
Key resources & key processes: physical, financial &
human related resources, technologies and intangible
assets
Data related to basis of competition, different types of the
innovation and shifts in problem solving methods
lalehadl@sce.carleton.ca Slide 8
9. Data analysis
Research method
Holistic single case study with embedded units
Units of analysis
A business model representation for large IT/telecom
companies: Nortel, Avaya, IBM, Microsoft and Cisco
Study period
Jan 1, 2003 to Jan 1, 2010 gathered in
Oct-Nov 2010 time period
lalehadl@sce.carleton.ca Slide 9
11. Results-section 1:
Business Model analysis
A Four Box Model displaying results of business model analysis
lalehadl@sce.carleton.ca Slide 11
12. Results-section 2:
Analysis of interdependencies: sample
CVP: Optimizing Communications
Job to be done
Users need consistent &
optimized communication
independent of location Customer Value
Segment 1
Finance companies to
have:
Market Offers Higher ROI from multi-
vendor communication
Multi vendor voice from infrastructure
Avaya (CS 1000), Cisco 1 hour/week improved
(CM) & IBM (Sametime) user productivity due to
application integration
Click to call from Corporate independent of location
Portal (Packaged & Cost saving (travel &
Custom Applications) real state) for mobile
employees
Hot Desking to manage
voice & video at any
location
Value proposition frame for Avaya
lalehadl@sce.carleton.ca Slide 12
13. Results-section 2:
Second set of propositions
Analysis of 43 customer cases produces 4 propositions:
1. Customer value proposition is more a function of the job-to-be-
done than specific type of market offer
2. Clearly defined jobs-to-be-done and better match between
jobs-to-be-done and market offers results in stronger, more
sustainable value propositions
3. Cheapest market offers are not always the best solutions to
provide a compelling value proposition
4. CEA market should be segmented based on the value that
communications enabled solutions provides for customers
lalehadl@sce.carleton.ca Slide 13
14. Results-section 3:
Classification of CEA market offers
CEA market offers were organized into three types:
1. Unified Telephony and Unified Messaging
2. Unified Communications and Communications enabled
Business Processes
3. Communications and Collaboration Platform or Communications
enabled platform
lalehadl@sce.carleton.ca Slide 14
15. Results-section 4:
Results of analysis of shifts in competition basis
Anticipated growth curve in communications enablement
lalehadl@sce.carleton.ca Slide 15
16. Results-section 5:
Analysis of shifts in problem solving
Use 13 BM Canvases as a sample of analysis
Analysis is based on White Space beyond frame
(Johnson, 2010)
Three types of business models are identified as
results:
Solution based business models
Value adding process business models
Multi-sided platform business models
lalehadl@sce.carleton.ca Slide 16
17. Key finding
A model for BM innovation
Problem solving method
Communications
enabled solutions
Business
Model
innovation
Process
Unified
innovation
Communications:
Convergence with
applications
Product
innovation
Unified
Telephony
OR
Unified
Messaging
Basis of the competition
lalehadl@sce.carleton.ca Slide 17
18. Discussion of results
Business model canvas
Needs to be extended in four areas before application
Developed model for business model innovation
Application to different domains
Innovation as the third key driver
lalehadl@sce.carleton.ca Slide 18
19. Conclusion
First study on how to do business by analyzing BMs
Analysis of BMs requires an understanding of two aspects: key
elements of BMs and how these elements work together
A vocabulary for business models accelerate decisions about
how to do business in CEA domain
Two features make business models of large suppliers of CEAs
distinctive: (i) structure of their BMs (ii) pattern in improving and
innovating their BMs
lalehadl@sce.carleton.ca Slide 19
20. Limitations & future research
Limitations
Use of secondary sources of data
Lack of knowledge in CEA domain
Future research
Examine business models in start-ups
Explore how multi sided approach changes the way CEA
companies do business
lalehadl@sce.carleton.ca Slide 20
21. References
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