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THE INTERNET ECONOMY,
STRATEGIES AND BUSINESS
MODELS, E-BUSINESS)
Ville Saarikoski
CONTENTS – PRELIMINARY PLAN
 Mon
 The Internet revolution,
 Frameworks and definitions
 Earning, creating value with i...
 Mon
 Business model canvas
 Nettipohjaiset liiketoimintamallit
 Tue
 Exam
CONTENTS – PRELIMINARY PLAN
SETTING THE SCENE
 May you live in interesting times – a chinese
saying, what you wish to your enemy
 Nokia – the ”burning platform”
 The Post Office, The mail man’s bag
 Music, from selling DVD,s and CD´s to selling dig...
THE GROWTH OF THE E-ECONOMY
 Infrastructure
 Interesting new companies…
 ….Choose a company which you believe is
buildi...
FRAMEWORKS, DEFINITIONS
PESTEL
PESTEL – technology has always changed society. The
internet is a technology and it is changing our society. It is
...
Individual
Society
Corporation
Click
Society
CorporationBrickl
Service
Technology
Laudon
Saarikoski
DEFINING E-COMMERCE AND E-BUSINESS
 E-commerce is the use of the Internet and the web
to transact business
 E-business r...
EIGHT UNIQUE FEATURES OF E-COMMERCE –
LAUDON P 52-55
 Ubiquity: it is available just about everywhere at all times
 Glob...
SEGMENTATION
 B2B,
 B2C
 C2C
 Peer to peer
 Mobile commerce
CREATING VALUE WITH INFORMATION
THE INFORMATION SOCIETY CREATES AND
CAPTURES VALUE WITH INFORMATION
 Knowledge – can not always be codified, see tacit
kn...
JAMES SUROWIECKI – THE WISDOM OF THE
CROWDS
 On YouTube
http://www.ted.com/talks/james_surowiecki_on_the_turn
ing_point_f...
INFORMATION ECONOMY – EARNING WITH
INFORMATION – VALUE CREATION, VALUE
CAPTURING
 Characteristics of information
 Sunk c...
INFORMATION ECONOMY – EARNING WITH
INFORMATION – VALUE CREATION, VALUE
CAPTURING
 Lock-in/switching costs:
 If an organi...
LECTURE 2
COMPANIES IN NETWORKS
6/19/2014 Laurea-ammattikorkeakoulu 20
Håkansson, Ford,
Snehota, Gadde,
Waluszewski
VALUE CREATION VALUE CAPTURING – EXAMPLES
OF THE GAMES BUSINESSES PLAY
 Auction in which both the winner and the second p...
THE GAMES BUSINESSES PLAY – VALUE
CREATION, VALUE NET FRAMEWORK
 The Right Game – use game theory to shape
strategy HBR J...
THE VALUE NET , THE RIGHT GAME HBR
1995
Company
Supplier
Substitutor Complementor
Customer
COMPETITIVE EDGE IN BUSINESS
Pay-offs
Innova Dolla
1 1
3 2
2 4
4 3
Innova strong in
R&D, Dolla
financially strong.
The Bus...
GAME THEORY
 Businesses (and systems) evolve into a balance,
This balance is not necesarily the best choice
(optimum)
LII...
THE NEW ECONOMY, THE NEW OPTIMUM
The optimum
structures of
the industrial
economy
The new
optimum
structures of
the intern...
GAME THEORY AND SHOULD I
COLLABORATE?
COMPETITOR A
COMPETITOR
B
Don’t cooperate cooperate
Don’t cooperate B=5, A=5 B=12, A...
THE STANDARS GAME, INFORMATION RULES ,
SHAPIRO P 250
Weak team´s choice B
Strong teams
choice A
Willing to fight Wants sta...
CLASSIFICATION OF GAMES
Classification Example
Taphtuvatko siirrot samanaikaisesti vai
peräkkäin? *
What is the amount of ...
CASES
 Valio
 Personal trainer & Gym
 YTK
 Chosing where you live
 The governance structure in a house of
apartements
KONIGSBERG PROBLEM – SEVEN BRIDGES
LECTURE 3 EARNING ON THE INTERNET – A
HUGE INFORMATION NETWORK
EARNING ON THE INTERNET – A HUGE
INFORMATION NETWORK
Combining the logic of earning with information and
earning in a netw...
HOW TO CREATE NEW MARKETS? – WHICH
MARKET IS/ARE EMERGING?
• Focus on
• Put theory into practice
• Lobby for new laws and ...
EXAMPLE THE EMERGENCE OF THE MOBILE
MARKET
 Liberalisation of the telecom market in Finland in 1994 created
competition a...
SIX DEGREES
SIX DEGREES - COMMUNICATION IS NOT ABOUT
AVERAGES!
LOOK AT THE DATA FROM A NEW PERSPECTIVE –
SEARCH FOR THE SUPER NODES
 ...
SIX DEGREES THE SUPER CONNECTED,
MALCOLM GLADWELL, TIPPING POINT
 How many do you know? First agree on what knowing means...
SIX DEGREES (DISTANCE IN NETWORKS) THEORY:
MILLGRAM, WATTS, STROGATZ
 Communication is about the flow of
information in a...
Six degrees
Create communities that can scale up
and busines models that benefit from
scaling
Capture interest economy, hu...
Albert Edelfelt 1887, Ruokolahden Eukot kirkonmäellä,
Ateneum
GRAHAM BELL INVENTED THE PHONE, BUT DID NOT SEE
FACEBOOK
Huh...
THE LOGIC OF FLAT RATE
 The problem
 1 costs 1,99 10 cost 19,90? (physical product)
 1 message costs…. 10 messages cost...
The Long Tail
Chris Anderson (2006) The Long Tail: What happens
to demand when supply is no longer limited
The Long Tail and
change
Chris Anderson (2006) The Long Tail: What happens
to demand when supply is no longer limited
Reme...
Combining six degrees and the Long tail -
Companies should focus on building from the the tail.
Create communities that ca...
THE NEW LOGIC OF SHARING, LIMITED
RESOURCES BECOMING UNLIMITED, OPEN
DATA, OPEN RESOURCES - THE DILEMMA (TRAGEDY) OF
THE C...
THE DILEMMA OF THE COMMONS,
REORGANISING RIGHTS...CHANGES IN LAW
 Resource based view vs unlimited resources
 Some recen...
WHAT RESOURCES CAN YOU IDENTIFY THAT ARE
BEING TRANSFERRED INTO THE OPEN
ENVIRONMENT?
WHAT OPEN RESOURCES (OPEN DATA) ARE ...
KEY INTERNET TECHNOLOGIES
 Packet switching
 Client server computing
 TCP/IP Architecture and protocol
UNDERSTANDING HOW THE INTERNET WORKS
 http://www.youtube.com/watch?v=gJ5h4_0mllI
tcp/ip
 http://www.youtube.com/watch?v=...
 http://www.youtube.com/watch?v=yU9oMOcRsuE
the first packet switch i.e. router
 http://www.youtube.com/watch?v=rHHpwcZi...
LECTURE 4
GENERAL THEORIES TO HELP
SHAPE MARKETS
Ville Saarikoski
HOW TO CREATE NEW MARKETS? – WHICH
MARKET IS/ARE EMERGING?
• Focus on
• Put theory into practice
• Lobby for new laws and ...
EXAMPLE THE EMERGENCE OF THE MOBILE
MARKET
 Vision: ”mobile into your pocket”
 New infrastructure 3G, UMTS
 Laws:
 In ...
Name: 00601 Operative Systems and Commerce
FOCUS: INDIVIDUAL TRAVEL PLAN
E-SERVICE
CONNECT TO
REAL WORLD
VALUE
SERVICE PRO...
THE MUSIC INDUSTRY
 Excercise: Look at the video.
 Try and plot all the different earning cases on to the
business model...
THE E-HEALTH INDUSTRY
 Excercise
 Identify a new entrant to the market
 Discuss its business model
 Look into possible...
POSITION YOUR BUSINESS IN A NETOWORK –
PORTER FIVE FORCES 1979
Present
competition
By present
competitors in the
market pl...
GROUNDSWELL THE USER LEAD REVOLUTION –
IDENTIFY THE ROLE OF THE USER!
Individual
Society
Corporation
GROUNDSWELL CHARLENE LI, JOSH BERNOFF 2008
– IDENTIFY THE ROLE OF THE USER
 What is groundswell p 9(verkkovalta)?
 A soc...
TECHNOLOGIES AND CLASIFICATION P 18-
People
creating:
blogs,
user
generate
d
content
People
connectin
g: social
networks
a...
EXAMPLE: BLOGS
• How they work:A blog is a personal (or group) journal of
entries containing written thoughts links and of...
EXAMPLE CONTINUED:
• How they threaten institutional power: Blogs, user generated
video and podcasts aren´t regulated, so ...
THE PROFILES, THE SOCIAL TECHNOGRAPHICS
PROFILE – KNOW YOUR CUSTOMER? P 40
• Creators:
• publish a blog,
• publish own web...
THE PROFILES, THE SOCIAL TECHNOGRAPHICS
PROFILE – KNOW YOUR CUSTOMER? P 40
• Collectors:
• Use Rss feeds
• Add tags to web...
70
Innovators dilemma: why a garage based
company can succeed when an incumbent
(large company) fails (Business aikido)
ht...
THE INNOVATORS DILEMMA – COMPANIES TRADITIONALLY
FOLLOW A VALUE PROPOSITION, THE CHALLENGE OF
OVERSHOOTING CUSTOMER NEED =...
WHY DID WESTERN UNION THE LEADER
IN THE TELEGRAPH BUSINESS NOT
INVEST IN THE TELEPHONE
 The established processes, resour...
EXAMPLES OF DISRUPTIVE INNOVATION –CAN
YOU FIND ANY?
DISRUPTOMETER
STRATEGIACANVAS EXAMPLE
( x-akselilla kuvataan asiakkaiden arvoja ja y-akselilla yrityksen ja sen
kilpailijoiden tarjontaa...
Poista
• Ylimääräiset toiminnot tai
tekijät poistetaan
• Asiakkaalle tarjotaan lopulta
sitä mitä he oikeasti
haluavat
• Es...
USE THE STRATEGY CANVAS TO CREATE A
BLUE OCEAN STRATEGY
http://en.wikipedia.org/wiki/Blue_Ocean_Strategy
http://www.blueoc...
THE CHRONOLOGICAL DEVELOPMENT OF MODELS
OF INNOVATION (TROTT 5 TH EDITION P 26)
78
Date Model Characteristics
1950/60 Tech...
79
http://www.desai.com/our-approach/innovation-
funnel/tabid/88355/Default.aspx 15.2.2012
From innovation process to open...
OPEN INNOVATION - CHESBROUGH
80
http://en.wikipedia.org/wiki/Open_innovation
CONCEPT 1:THINK OF YOUR BUSINESS AS A SERVICE BUSINESS – OPEN
SERVICE INNOVATION CHESBROUGHP37
81
Service-Based view of tr...
Concept 2: Innovators must co-create with customers
 The value of tacit knowledge
 e.g. example riding a bicycle: go fas...
 Concept 3: Open innovation accelerates and
deepens service innovation
83
FOUR STEPS TO OPEN SERVICE INNOVATION
 Concept 4: Transform your business model with
services
84
FOUR STEPS TO OPEN SERVICE INNOVATION
Grocer Chef
Target marke...
THE MESH, LISA GANSKY,
WWW.MESHING.IT
6/19/2014 Laurea University of Applied Sciences 85
Eg. hammer Mesh sweet spot
Eg. To...
4. PESTEL
 P – Poliittinen
 Kansainväliset sopimukset, EU-, alue- ja kehittämispolitiikka yms.
 E – Ekonominen
 Talous...
MIHIN KÄYTETÄÄN?
Menetelmällä
 Kartoitetaan muutosilmiöitä toimintaympäristöstä
 Selvitetään ilmiön tai organisaation ny...
6. BOSTON CONSULTING GROUP MATRIX
5. ANSOFFIN IKKUNA TYÖKALUNA
 Pohditaan erilaisia vaihtoehtoisia polkuja yrityksen kasvuun
 Arvioidaan millaisia panostu...
TECHNOLOGY ROADMAPS
 Try and guess, how technology will change the
business
90
LECTURE 5 BUSINESS MODELS
Chapter 5
BUSINESS MODEL P 325
 Business model: a set of planned activities
designed to result in a profit in a market place
 Busi...
EIGHT KEY ELEMENTS OF A BUSINESS MODEL
P 325
 Value proposition
 Revenue model
 Market opportunity – market space
 Com...
REVENUE MODELS
 Advertising: a compan provides a forum for
advertisements and receives fees from advertisers
 Subscripti...
CATEGORIZING E-COMMERCE MODELS
 B2B and B2C
 Major business to consumer models
 Etailer online retail stores
 Communit...
BUSINES MODEL GENERATION
Definition: A
business model
answers the
question how value
is created and
captured
www.businessm...
CASE
 http://www.youtube.com/watch?v=Njuo1puB1lg
 RtB
 CwF
BUSINESS MODEL GENERATION 9-ELEMENTS
(BUILDING BLOCKS) OF THE CANVAS
 Customer Segments
 mass market, niche market, segm...
BUSINESS MODEL GENERATION 9-ELEMENTS
(BUILDING BLOCKS) OF THE CANVAS
 Key Resources
 physical, intellectual, human, fina...
 Unbundling business models
 customer relationship businesses, product innovation
businesses, infrastruture businesses
...
The internet economy   business models and strategies slideshare
The internet economy   business models and strategies slideshare
The internet economy   business models and strategies slideshare
The internet economy   business models and strategies slideshare
The internet economy   business models and strategies slideshare
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The internet economy business models and strategies slideshare

Slides from a course I teach titled "The Internet Economy - Business Models and Strategies" 20 hrs of classroom interaction. During class students read 3 HBR articles, build a business model canvas BMX, view the BMC through theories and discuss how to create and shape new emerging industries

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The internet economy business models and strategies slideshare

  1. 1. THE INTERNET ECONOMY, STRATEGIES AND BUSINESS MODELS, E-BUSINESS) Ville Saarikoski
  2. 2. CONTENTS – PRELIMINARY PLAN  Mon  The Internet revolution,  Frameworks and definitions  Earning, creating value with information  Case  Tue  Value creation and value capturing in a network environment  Playing the right game – Game theory  Business networks  Cases  Mon  Network theories: six degrees, long tail, the commons (dilemma of the commons)  The structure of the Internet  E business/ e-commerce tools  Tue  Disruptive innovation  Open innovation  Groundswell  Creating new market space  Creating new markets 2
  3. 3.  Mon  Business model canvas  Nettipohjaiset liiketoimintamallit  Tue  Exam CONTENTS – PRELIMINARY PLAN
  4. 4. SETTING THE SCENE  May you live in interesting times – a chinese saying, what you wish to your enemy
  5. 5.  Nokia – the ”burning platform”  The Post Office, The mail man’s bag  Music, from selling DVD,s and CD´s to selling digital music and subscriptions e.g. Spotify  Newspapers declining amount of readers, search for new digital business model  The paper industry  The retail shops and supermarkets challenged by e-commerce  Universities challenged by online education  Health care moving to ehealth, eprescriptions, patient records etc  Changing structures e.g. airlines from brick to click i.e. value creation with information =>1) Pick up a market creating company, understand theory and apply theory to case ( a good theory, explains, predicts, categorises), =>2) look at it from an industry perspetive THE MACRO SCENE IN FINLAND - OLD STRUCTURES REACH A ”TIPPING POINT” AND EXPERIENCE A ”MELT DOWN”? => UNDERSTAND THE LOGIC OF THE NEW ECONOMY:
  6. 6. THE GROWTH OF THE E-ECONOMY  Infrastructure  Interesting new companies…  ….Choose a company which you believe is building and redefining the market
  7. 7. FRAMEWORKS, DEFINITIONS
  8. 8. PESTEL PESTEL – technology has always changed society. The internet is a technology and it is changing our society. It is also challenging what we perceive to be ethical. An understanding of the internet will help in understanding ethical and hence political questions we will face.
  9. 9. Individual Society Corporation Click Society CorporationBrickl Service Technology Laudon Saarikoski
  10. 10. DEFINING E-COMMERCE AND E-BUSINESS  E-commerce is the use of the Internet and the web to transact business  E-business refers primarily to the digital enabling of transactions and processes within a firm, involving information systems under the control of the firm  P 49 Laudon e-commerce
  11. 11. EIGHT UNIQUE FEATURES OF E-COMMERCE – LAUDON P 52-55  Ubiquity: it is available just about everywhere at all times  Global reach  Universal standards  Richness. Earlier there was a trade off between richness and reach  Interactivity: an online merchant can engage a consumer in ways similar to a face to face  Information density  Personalization/customization  Social technology: user content generation and social networking Note Prahlad: The New Age of Innovation N=1 R=G
  12. 12. SEGMENTATION  B2B,  B2C  C2C  Peer to peer  Mobile commerce
  13. 13. CREATING VALUE WITH INFORMATION
  14. 14. THE INFORMATION SOCIETY CREATES AND CAPTURES VALUE WITH INFORMATION  Knowledge – can not always be codified, see tacit knowledge  Information – can be codified  The vision of friction free commerce provided by information i.e. perfect information market – no transaction costs – reality information asymmetries exist  The limits of rationality  Kahneman  Herbert Simon Bounded rationality
  15. 15. JAMES SUROWIECKI – THE WISDOM OF THE CROWDS  On YouTube http://www.ted.com/talks/james_surowiecki_on_the_turn ing_point_for_social_media.html  How much do I weigh?  Information cascades: Angela Hung, Charles Plott p 62  experiment: which shows if you believe that you will be rewarded for the group being right you will tell the truth, however…  Co-ordination problems  Brian Arthur, El Farol Problem  Schelling points: where to meet  Que behaviour  Imitation is a rational response to our own cognitive limits
  16. 16. INFORMATION ECONOMY – EARNING WITH INFORMATION – VALUE CREATION, VALUE CAPTURING  Characteristics of information  Sunk cost  Costly to produce, cheap (=>0) to reproduce => the changing role of copyright  Service provider should avoid commodotization i.e price comparability  Focus on marketing, note samples can be given for free at no cost, low variable cost offers great marketing possibilities => pricing strategies see www.marketingexperimenst.com  Focus on segmentation (identifying customers), versioning, personalised pricing,  If members of different groups systematically differ in their price sensitivity, you can profitably offer them different prices. Student and senior citizen discounts are prime examples. • Information asymmetry
  17. 17. INFORMATION ECONOMY – EARNING WITH INFORMATION – VALUE CREATION, VALUE CAPTURING  Lock-in/switching costs:  If an organization chooses to standardize on a particular product, it may be very expensive for it to make the switch owing to the costs of coordination and retraining. Again Microsoft serves as an example  Bundling  Positive feedback, preferential attachment  Network effects:  If the value to an individual depends on how many other members of his group use the product, there will be value to standardizing on a single product. Microsoft has exploited this desire for standardization with its Microsoft Office suite.  Sharing:  In many cases it is convenient for the individual user to manage or organize all information goods that he or she will want to consume. Information intermediaries such as libraries or system administrators can  Platforms, ecosystems
  18. 18. LECTURE 2
  19. 19. COMPANIES IN NETWORKS 6/19/2014 Laurea-ammattikorkeakoulu 20 Håkansson, Ford, Snehota, Gadde, Waluszewski
  20. 20. VALUE CREATION VALUE CAPTURING – EXAMPLES OF THE GAMES BUSINESSES PLAY  Auction in which both the winner and the second placed have to pay up  Destroying your own assets  Each player can donate to the community and the community will give a payoff double the contribution and divide it equally among the players  Collaborative tasks game http://www.fiksuhuuto.com/ See also: Jacobides theme of research the causes and consequences of the division of labour, between and within organizations
  21. 21. THE GAMES BUSINESSES PLAY – VALUE CREATION, VALUE NET FRAMEWORK  The Right Game – use game theory to shape strategy HBR July - August1995, Adam brandenburg and Barry J Nalebuff  The importance of value creation and value capturing in Value Networks  PARTS, Players, added value, rules, tactics, scope
  22. 22. THE VALUE NET , THE RIGHT GAME HBR 1995 Company Supplier Substitutor Complementor Customer
  23. 23. COMPETITIVE EDGE IN BUSINESS Pay-offs Innova Dolla 1 1 3 2 2 4 4 3 Innova strong in R&D, Dolla financially strong. The Business question should I invest in R&D? INNOVA low high DOLLA high high DOLLA low low
  24. 24. GAME THEORY  Businesses (and systems) evolve into a balance, This balance is not necesarily the best choice (optimum) LIISA PEKKA Keeps mouth shut Talks Keeps mouth shut 1, 1 5, 0 Talks 0, 5 3, 3
  25. 25. THE NEW ECONOMY, THE NEW OPTIMUM The optimum structures of the industrial economy The new optimum structures of the internet economy
  26. 26. GAME THEORY AND SHOULD I COLLABORATE? COMPETITOR A COMPETITOR B Don’t cooperate cooperate Don’t cooperate B=5, A=5 B=12, A=2 cooperate B=2, A=12 B=9, A=9 The figure shows B´s payoff and A´s payoff. Try and apply the logic of the prisoners dilemma to understand why the companies end up not collaborating. A market understanding to what collaborating or not could mean. If e.g. A is given to understand that B is co-operating so A will do nothing and will wait for joint efforts to emerge and be decided upon. B will quietly build a factory and captures the market. B=12, A=2, The answer: Look at what your best choice would be if your competitor a) co- operates, b) does not co-operate Johnson, Scholes, Whittington p 243, Exploring Corporate Strategy
  27. 27. THE STANDARS GAME, INFORMATION RULES , SHAPIRO P 250 Weak team´s choice B Strong teams choice A Willing to fight Wants standard Willing to fight Standards war A tries to block B Wants standard Voluntary standard
  28. 28. CLASSIFICATION OF GAMES Classification Example Taphtuvatko siirrot samanaikaisesti vai peräkkäin? * What is the amount of competition or collaboration between players* Is the game played once and the players will never ever meet againa?* Do all the players have the same information?* Can the rules be changed?* Are contracts binding?* Zero sum games *Source The Oxford Handbook of strategy p 878-881
  29. 29. CASES  Valio  Personal trainer & Gym  YTK  Chosing where you live  The governance structure in a house of apartements
  30. 30. KONIGSBERG PROBLEM – SEVEN BRIDGES
  31. 31. LECTURE 3 EARNING ON THE INTERNET – A HUGE INFORMATION NETWORK
  32. 32. EARNING ON THE INTERNET – A HUGE INFORMATION NETWORK Combining the logic of earning with information and earning in a network and moving it into a macro environment i.e. the Internet
  33. 33. HOW TO CREATE NEW MARKETS? – WHICH MARKET IS/ARE EMERGING? • Focus on • Put theory into practice • Lobby for new laws and regulations • Regulators will ensure that competition will exist also in new environments • Create new structures (destroy old structures) e.g. new ecosystems, • New business models • Focus on Lead users • Establish market creating products 6/19/2014 Laurea University of Applied Sciences 34
  34. 34. EXAMPLE THE EMERGENCE OF THE MOBILE MARKET  Liberalisation of the telecom market in Finland in 1994 created competition and encouraged new markets to emerge  GSM 1994 and 97-98 a vision: ”mobile into your pocket”  New infrastructure 3G, UMTS  In Finland changes in telecom law e.g. allowing bundling of phone and subscription, number portability,  Progress in creating a dataroaming market by establishing cap prices in the EU  Business model: toward monthly flat rate pricing  Key market creating products: mokkula (c 2004-2005) a data connection to your computer, I-phone, (both arrivals from the outside to Finland), smart phones 2011  Structures: three competitors, service operator and new market entrants changed the rules of the market  Future: ?
  35. 35. SIX DEGREES
  36. 36. SIX DEGREES - COMMUNICATION IS NOT ABOUT AVERAGES! LOOK AT THE DATA FROM A NEW PERSPECTIVE – SEARCH FOR THE SUPER NODES  How many sms messages do you send per month?  How many calls do you make per month?  How many pictures do you take and send?  How many contacts do you have on your phone?  How many hours of music do you have on your phone?  How many times do you access the Internet per day from ypur mobile?  How many bookmarks do you have on your mobile phone?  Which member of parliament sends the most Chrismas Cards? http://www.savonsanomat.fi/teemat/eduskuntavaalit/il-kari- k%C3%A4rkk%C3%A4inen-suoltaa-joulukortteja/627307
  37. 37. SIX DEGREES THE SUPER CONNECTED, MALCOLM GLADWELL, TIPPING POINT  How many do you know? First agree on what knowing means. Second pick randomly 20 names in your language by e.g. picking the first name on every 20`th page in a telephone directory  Alanen, Brunell, Forssman, Harkonsalo, Hjelt, Ikäheimo, Jääskeläinen, Keinänen, Korhonen, Kyötikki, Lehikoinen, Lindström, Martinmaa, Mäkinen, Nyfors, Parviainen, Pulkkinen, Riijärvi, Saikkonen, Setälä, Summanen, Tihinen, Vaara, Volanen, Åkerblom  Concepts structural holes, strong weak ties, the mathematics of networks  http://en.wikipedia.org/wiki/Network_science  http://en.wikipedia.org/wiki/Social_network_analysis  http://en.wikipedia.org/wiki/Interpersonal_ties  http://en.wikipedia.org/wiki/Social_network  http://verkkopalvelu.vrk.fi/Nimipalvelu/default.asp?L=1
  38. 38. SIX DEGREES (DISTANCE IN NETWORKS) THEORY: MILLGRAM, WATTS, STROGATZ  Communication is about the flow of information in a network. Marginal price goes to zero => the individual’s willigness to spread links and information, ”to spin the web” increases. => from price per minute or per message (transaction based pricing) to flat rate http://en.wikipedia.org/wiki/Six_degrees_of_separation 25.8.2010 http://gizmodo.com/5620681/all-300000-biggest-websites- visualized-with-their- icons?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A +gizmodo%2Ffull+%28Gizmodo%29&utm_content=Google+Reader
  39. 39. Six degrees Create communities that can scale up and busines models that benefit from scaling Capture interest economy, huomiotalous, (Sarasvuo) Participation economy, osallistumistalous (Hintikka)
  40. 40. Albert Edelfelt 1887, Ruokolahden Eukot kirkonmäellä, Ateneum GRAHAM BELL INVENTED THE PHONE, BUT DID NOT SEE FACEBOOK Huhuverkko (rumour network), Puskaradio, (bush radio) Viidakkorumpu (jungle drum)
  41. 41. THE LOGIC OF FLAT RATE  The problem  1 costs 1,99 10 cost 19,90? (physical product)  1 message costs…. 10 messages cost? Same price (information product)  Our social networks are not evenly distributed, communication is not about averages  Flat rate pricing allows for connectors to emerge; the individual starts sharing links  When pricing is flat i.e. marginal pricing is zero, superconnected nodes emerge e.g. blogs with millions of readers, people with thousands of friends  The distance between nodes in a network, which has superconnected nodes shrinks. A scale free (six degree network) emerges. The flow of information in a network increases. The network becomes interconnected.  The Internet is scale free. The Internet has flat rate pricing  Mobile networks used transaction based pricing (per minute, per message, per kilobyte). Only when the pricing model (business model) changed, did the mobile Internet start to spread
  42. 42. The Long Tail Chris Anderson (2006) The Long Tail: What happens to demand when supply is no longer limited
  43. 43. The Long Tail and change Chris Anderson (2006) The Long Tail: What happens to demand when supply is no longer limited Remeber: Bricks and Clicks, The Virtual world combines with the physical world
  44. 44. Combining six degrees and the Long tail - Companies should focus on building from the the tail. Create communities that can scale up and busines models that benefit from scaling Capture interest economy, huomiotalous, (Sarasvuo) Participation economy, osallistumistalous (Hintikka)
  45. 45. THE NEW LOGIC OF SHARING, LIMITED RESOURCES BECOMING UNLIMITED, OPEN DATA, OPEN RESOURCES - THE DILEMMA (TRAGEDY) OF THE COMMONS, RESURSSINIITTY, RESURSSIALUSTA Copyright Copy left (Asset of user) Phone number Number portability (Asset of user) Limited Frequencies Wlan hotspots (Asset of user) Code Open code In your Business?? Bus routes Information accesible to user (open data) http://www.julkinendata.fi/, Reittiopas Yochai Benkler “Sharing and shared efforts become more feasible, because of developments in technology” The Wealth of Networks: How Social Production Transforms Markets and Freedom
  46. 46. THE DILEMMA OF THE COMMONS, REORGANISING RIGHTS...CHANGES IN LAW  Resource based view vs unlimited resources  Some recent reorganisations of rights  Creative Commons, restructuring of copyright Lawrence Lessig. Copy left instead of copyright  Number portability  Non licensed frequencies (WLAN) Yochai Benkler, Some economics of wireless communications. Harvard Journal of Law and Technology Volume 16 Number 1 Fall 2002  Yochai Benkler “Sharing and shared efforts become more feasible, because of developments in technology” The Wealth of Networks: How Social Production Transforms Markets and Freedom  Public sector information becomes open http://www.lvm.fi/c/document_library/get_file?folderId=964902&na me=DLFE-10617.pdf&title=Julkinen%20data
  47. 47. WHAT RESOURCES CAN YOU IDENTIFY THAT ARE BEING TRANSFERRED INTO THE OPEN ENVIRONMENT? WHAT OPEN RESOURCES (OPEN DATA) ARE YOU BENEFITTING FROM? FROM OPEN DATA TO BIG DATA
  48. 48. KEY INTERNET TECHNOLOGIES  Packet switching  Client server computing
  49. 49.  TCP/IP Architecture and protocol
  50. 50. UNDERSTANDING HOW THE INTERNET WORKS  http://www.youtube.com/watch?v=gJ5h4_0mllI tcp/ip  http://www.youtube.com/watch?v=Zfmk0GtANNs client server architecture  How the internet works http://www.youtube.com/watch?v=7_LPdttKXPc
  51. 51.  http://www.youtube.com/watch?v=yU9oMOcRsuE the first packet switch i.e. router  http://www.youtube.com/watch?v=rHHpwcZiEW4 ucla´s Leonard Kleinrock on packet switching and early internet  http://www.youtube.com/watch?v=L8VpthhRaEg packet switching
  52. 52. LECTURE 4 GENERAL THEORIES TO HELP SHAPE MARKETS Ville Saarikoski
  53. 53. HOW TO CREATE NEW MARKETS? – WHICH MARKET IS/ARE EMERGING? • Focus on • Put theory into practice • Lobby for new laws and regulations • Regulators will ensure that competition will exist also in new environments • Create new structures (destroy old structures) e.g. new ecosystems, • New business models • Focus on Lead users • Establish market creating products 6/19/2014 Laurea University of Applied Sciences 57
  54. 54. EXAMPLE THE EMERGENCE OF THE MOBILE MARKET  Vision: ”mobile into your pocket”  New infrastructure 3G, UMTS  Laws:  In Finland changes in telecom law e.g. allowing bundling of phone and subscription, number portability,  Progress in creating a dataroaming market by establishing cap prices in the EU  Business model: toward monthly flat rate pricing  Key market creating products: mokkula (c 2004-2005) a data connection to your computer, I-phone, (both arrivals from the outside to Finland), smart phones 2011  Structures:  three competitors, service operator and new market entrants changed the rules of the market  Liberalisation of the telecom market in Finland in 1994 created competition and encouraged new markets to emerge  Future: ?
  55. 55. Name: 00601 Operative Systems and Commerce FOCUS: INDIVIDUAL TRAVEL PLAN E-SERVICE CONNECT TO REAL WORLD VALUE SERVICE PROVIDER / BUSINESS MODEL WHO IS LOOSING? COMMUNITY MY E-TOOLS 1 2 3 4 5 59 Bricks and clicks VALUE CREATION/CAPTURING IN A NETWORK - value to me - value to company - value (cost, time, quality) - blog - web site - wiki - contact networks -videomeeting connectpro - e-library -- e-survey Change in the way of doing things = innovation => focus on the process flow of goods, information and resources in a repair cycle http://en.wikipedia.org/wiki/Lo gistics From data to networking Use this framework to identify changes in value creation and capturing after adoption of services like online booking and the availability of online customer recommendations
  56. 56. THE MUSIC INDUSTRY  Excercise: Look at the video.  Try and plot all the different earning cases on to the business model canvas and identify the key elements that remain the same through different cases.  Discuss and identify cases on how the music industry is changing.  Take an example company and discuss how that company can act in the market place to create a new market.  The video  http://www.youtube.com/watch?v=Njuo1puB1lg  CwF, Connect with fans  RtB, Reson to buy
  57. 57. THE E-HEALTH INDUSTRY  Excercise  Identify a new entrant to the market  Discuss its business model  Look into possible new infrasrtucture elements it is attempting to build on e.g. patient records, eprescriptions,  Look into databases and are these databases hierarchical or is power given to the users? To what extent is open data thinking allowed and applied to the creation of new services?
  58. 58. POSITION YOUR BUSINESS IN A NETOWORK – PORTER FIVE FORCES 1979 Present competition By present competitors in the market place Barganing power of customers Threat of new entrantThreat of substitutors Barganing power of suplliers http://en.wikipedia.org/wiki/Porter_five_forces_analysis
  59. 59. GROUNDSWELL THE USER LEAD REVOLUTION – IDENTIFY THE ROLE OF THE USER! Individual Society Corporation
  60. 60. GROUNDSWELL CHARLENE LI, JOSH BERNOFF 2008 – IDENTIFY THE ROLE OF THE USER  What is groundswell p 9(verkkovalta)?  A social trend in which people use technologies to get things they need from each other, rather than from traditional institutions like corporations  The strategy for corporations: If you can´t beat them, join them  The BIG principle for mastering the groundswell p 18: Concentrate on the relationship, not the technologies 64
  61. 61. TECHNOLOGIES AND CLASIFICATION P 18- People creating: blogs, user generate d content People connectin g: social networks and virtual worlds People collabora ting: wikis and open source People reacting to each other: forums ratings, and reviews People organizin g content: tags Accelarat ing consump tion: rss and widgets How they work Participatio n How they enable relationshi ps How they threaten institutional power How you can use them See next slide for example
  62. 62. EXAMPLE: BLOGS • How they work:A blog is a personal (or group) journal of entries containing written thoughts links and often pictures • Participation: Blog reading is one of the most popular activities in Groundswell with one in four online Americans reading blogs (2006). Video reviewing is also popular. Podcasters and even podcast listeners are rare • Participation: The authors of blogs read and comment on others blogs. They also cite each other adding links to other blogs from their own posts 6/19/2014 Laurea University of Applied Sciences 66
  63. 63. EXAMPLE CONTINUED: • How they threaten institutional power: Blogs, user generated video and podcasts aren´t regulated, so anything is possible. Few YouTube video uploaders check first with the subjects of their videos. Companies frequently need to police employees who post unauthorized content about their employees and their jobs • How you (a company) can use them: First listen, read blogs about your company. Search for blogs with most influence. Start commenting on those blogs 6/19/2014 Laurea University of Applied Sciences 67
  64. 64. THE PROFILES, THE SOCIAL TECHNOGRAPHICS PROFILE – KNOW YOUR CUSTOMER? P 40 • Creators: • publish a blog, • publish own web pages, • upload video you created • upload music you created • write articles and post them • Critics: • publish a blog, • post ratings/reviews of products or services • comment on someone else´s blog • contribute to on line forums • contribute to/ edit articles in a wiki
  65. 65. THE PROFILES, THE SOCIAL TECHNOGRAPHICS PROFILE – KNOW YOUR CUSTOMER? P 40 • Collectors: • Use Rss feeds • Add tags to web pages or photos • Vote for web sites online • Joiners: • Maintain profile on social networking sites • Visit social networking sites • Spectators: • read blogs • watch video from other users • listen to podcasts • read online forums • read customer ratings/reviews • Inactives: • None of these activities http://www.youtube.com/watch?v=kGJTmtEzbwo
  66. 66. 70 Innovators dilemma: why a garage based company can succeed when an incumbent (large company) fails (Business aikido) http://www.innosight.com/
  67. 67. THE INNOVATORS DILEMMA – COMPANIES TRADITIONALLY FOLLOW A VALUE PROPOSITION, THE CHALLENGE OF OVERSHOOTING CUSTOMER NEED => POORER IS BETTER 71
  68. 68. WHY DID WESTERN UNION THE LEADER IN THE TELEGRAPH BUSINESS NOT INVEST IN THE TELEPHONE  The established processes, resources and values encouraged investing in present customers.  The Phone was in its early stages a short distance mediium – performed porly on long distances  Western Union saw that the phones performance in long distance was getting better, but it continued investments along its present value performance base  When the future was evident, it was already too late
  69. 69. EXAMPLES OF DISRUPTIVE INNOVATION –CAN YOU FIND ANY?
  70. 70. DISRUPTOMETER
  71. 71. STRATEGIACANVAS EXAMPLE ( x-akselilla kuvataan asiakkaiden arvoja ja y-akselilla yrityksen ja sen kilpailijoiden tarjontaa )
  72. 72. Poista • Ylimääräiset toiminnot tai tekijät poistetaan • Asiakkaalle tarjotaan lopulta sitä mitä he oikeasti haluavat • Esim. Omenahotelli Supista • Turhat kustannukset poistetaan • Asiakas ei joudu maksamaan ylipalvelusta • Esim. IKEAn itsepalvelukassat Paranna • Jo olemassa olevia tuotteita tai palveluita parantamalla lisätään asiakastyytyväisyyttä • Asiakkaiden tarpeiden selvittäminen ja niihin vastaaminen • Esim. Apple Luo • Tarjotaan asiakkaille jotain uutta mitä toimialalla ei ole aiemmin ollut saatavilla • Uusien toimintojen tulisi synnyttää kysyntää, sekä muuttaa toimialan ajattelutapaa • Esim. Verkkokauppa Uusi lisäarvokäyrä
  73. 73. USE THE STRATEGY CANVAS TO CREATE A BLUE OCEAN STRATEGY http://en.wikipedia.org/wiki/Blue_Ocean_Strategy http://www.blueoceanstrategy.com/
  74. 74. THE CHRONOLOGICAL DEVELOPMENT OF MODELS OF INNOVATION (TROTT 5 TH EDITION P 26) 78 Date Model Characteristics 1950/60 Technology-push Simple linear sequential process; emphasis on R&D; the market is a recepient of the fruits of R&D 1970 Market pull Simple linear sequential process; emphasis on marketing; the market is the source for directing R&D; R&D has reactive role 1970`s Dominant design Abbernathy and Utterback (1978) illustrate that an innovation system goes through three stages before a dominant design emerges 1980`s Coupling model Emphasis on ontegrating R&D and marketing 1980/90 Interactive model Combinations of push and pull 1990´s Network model Emphasis on knowledge accumulation and external linkages 2000`s Open innovation Chesbrough´s emphasis on further externalisation of the innovation process in terms of linkages with knowledge inputs and collaboration to exploit knowledge outputs Excercise: draw these models on the innovation filter
  75. 75. 79 http://www.desai.com/our-approach/innovation- funnel/tabid/88355/Default.aspx 15.2.2012 From innovation process to open innovation
  76. 76. OPEN INNOVATION - CHESBROUGH 80 http://en.wikipedia.org/wiki/Open_innovation
  77. 77. CONCEPT 1:THINK OF YOUR BUSINESS AS A SERVICE BUSINESS – OPEN SERVICE INNOVATION CHESBROUGHP37 81 Service-Based view of transportation Selection of vehicle Delivery of vehicle Maintena nce of vehicle Informatio n and training Payment and financing Protection and insurance Car purchase or lease (product- focused approach) Customer chooses Customer picks from dealer stock Customer does this Customer does this Customer dealer, or third party Customer provides Taxi Supplier choose Customer is picked up Supplier does this Supplier does this Enterprise car rental Customer chooses from local stock Customer picks up or is picked up Supplier does this Supplier does this By the day Customer is responsible Zipcar Customer chooses from local stock From Zipcar locations Supplier does this Supplier does this By the hour Customer purchases from supplier
  78. 78. Concept 2: Innovators must co-create with customers  The value of tacit knowledge  e.g. example riding a bicycle: go faster to stay up,  balancing on a rope…  One way:  Let the customer themselves provide the information,  Let the customer have control of the process 82 FOUR STEPS TO OPEN SERVICE INNOVATION: Make reservation Arrive at restaurant Ask for table Go to table Receive menu Order drinks and food Eat Order bill Pay Visit restroom Leave Chesprough Open services innovation p 59
  79. 79.  Concept 3: Open innovation accelerates and deepens service innovation 83 FOUR STEPS TO OPEN SERVICE INNOVATION
  80. 80.  Concept 4: Transform your business model with services 84 FOUR STEPS TO OPEN SERVICE INNOVATION Grocer Chef Target market Consumers Diners Value Proposition Wide selection, quality price Dining experience Core elements Rapid inventory turns, choosing correct merchandise Great food, skilled cooks, atmosphere Value chain Food suppliers, related items, logistics, information technology, distribution centers Fresh produce, local ingredients, quality equipment, knowledgeable and couteous service Revenue mechanism Small markup over cost, very high volume, rapid inventory turns High markups over cost, low volume, alcohol, tips Value network, ecosystem Other services on premises, parking Cookbooks, parking, special events
  81. 81. THE MESH, LISA GANSKY, WWW.MESHING.IT 6/19/2014 Laurea University of Applied Sciences 85 Eg. hammer Mesh sweet spot Eg. Tooth brush? Eg. Smart phones How often do you use it Often Seldom CostCheap Expensive p 22 Own-to-mesh http://www.ted.com/talks/lisa_gansky_the_f uture_of_business_is_the_mesh.html
  82. 82. 4. PESTEL  P – Poliittinen  Kansainväliset sopimukset, EU-, alue- ja kehittämispolitiikka yms.  E – Ekonominen  Talouskehitys, talouskriisit ja lamat  S – Sosiaalinen  Ikärakenne, arvot, syntyvyys ja kulutuskäyttäytyminen  T – Teknologinen  Informaatio- ja tietoliikenne sekä virtuaalimaailma  E – Ekologinen  Ympäristötietoisuus, ilmastonmuutos ja infrastruktuurin muutos  L – Lainsäädännöllinen  Lainsäädännön rajoitukset
  83. 83. MIHIN KÄYTETÄÄN? Menetelmällä  Kartoitetaan muutosilmiöitä toimintaympäristöstä  Selvitetään ilmiön tai organisaation nykyistä tilaa ja tulevaisuutta  Tunnistetaan, millaisiin muutoksiin on osattava varautua strategiaa määriteltäessä
  84. 84. 6. BOSTON CONSULTING GROUP MATRIX
  85. 85. 5. ANSOFFIN IKKUNA TYÖKALUNA  Pohditaan erilaisia vaihtoehtoisia polkuja yrityksen kasvuun  Arvioidaan millaisia panostuksia ja riskejä eri vaihtoehtoihin liittyy Tuotteet/palvelut Markkinat Nykyiset Uudet Nykyiset Kasvu nykyisten markkinoiden avulla Kasvu markkina- vaihtoehtoja lisäämällä Uudet Kasvu tuotetarjontaa laajentamalla Kasvu moni- alaistumalla
  86. 86. TECHNOLOGY ROADMAPS  Try and guess, how technology will change the business 90
  87. 87. LECTURE 5 BUSINESS MODELS Chapter 5
  88. 88. BUSINESS MODEL P 325  Business model: a set of planned activities designed to result in a profit in a market place  Business plan: a document that describes a firm´s business model  E-commerce business model: a business model that aims to use and leverage the unique qualities of the internet and the world wide web
  89. 89. EIGHT KEY ELEMENTS OF A BUSINESS MODEL P 325  Value proposition  Revenue model  Market opportunity – market space  Competitive environment  Competitive advantage  Market strategy  Organizational development  Management team
  90. 90. REVENUE MODELS  Advertising: a compan provides a forum for advertisements and receives fees from advertisers  Subscription revenue model: a company offers its users content or services and charges a subscription fee for access to some or all of its offerings e.g. XBoxLive, Match.com, ancestry.com  Transaction fee revenue model: a company receives a fee for enabling or executing a transaction e.g. eBay (x % of transaction)  Sales revenue model: a company derives revenue by selling goods, information, or services e.g. amazon sells books  Affeliate revenue model, a company steers business to an affiliate and receives a referral fee or percentage of the revenue from any resulting sale. (sisäänheittäjä)
  91. 91. CATEGORIZING E-COMMERCE MODELS  B2B and B2C  Major business to consumer models  Etailer online retail stores  Community provider  Content provider  Portals  Transaction Brokers  Markert creator  Service provider
  92. 92. BUSINES MODEL GENERATION Definition: A business model answers the question how value is created and captured www.businessmod elgeneration.com http://www.youtube.c om/watch?v=QoAOz MTLP5s business model canvas 2 min http://www.youtube.c om/watch?v=8GIbCg 8NpBw Osterwalder 53
  93. 93. CASE  http://www.youtube.com/watch?v=Njuo1puB1lg  RtB  CwF
  94. 94. BUSINESS MODEL GENERATION 9-ELEMENTS (BUILDING BLOCKS) OF THE CANVAS  Customer Segments  mass market, niche market, segmented, diversified, multisided platforms (or multisided markets)  Value Propositions  Newness, performance, customization, getting the job done, design, brand/status, price, cost reduction, risk reduction, accessibility, convenience/usability  Channels  Customer Relationships  personal assistance, dedicated personal assistance, self- service, automated service, communities, co-creation  Revenue Streams  asset sale, usage fee, subscription fees, lending/renting/leasing, licensing, brokerage fees, advertising
  95. 95. BUSINESS MODEL GENERATION 9-ELEMENTS (BUILDING BLOCKS) OF THE CANVAS  Key Resources  physical, intellectual, human, financial  Key Activities  production, problem solving, platform/ network  Key Partnerships  optimization and economies of scale, reduction of risk and uncertainty, acquisition of particular resources and activities  Cost Structure  cost driven (driving down costs), value driven, fixed costs, variable costs, economies of scale (e.g. lower bulk purchase rates), economies of scope(e.g. same channel supports multiple products)
  96. 96.  Unbundling business models  customer relationship businesses, product innovation businesses, infrastruture businesses  The Long Tail (selling less of more)  Multisided Platforms  bring together two or more ditinct but interdependent groups of customers e.g. Visa, Google, eBay  Free as a business model (Freemium) includes Bait and Hook  Non paying customers are financed by another customer segment e.g. Metro, Skype  Open Business Models  companies systematically collaborate with outside partners to create and capture value BUSINESS MODEL GENERATION – 5 PATTERNS

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