These slides use concepts from my (Jeff Funk) course entitled Technology Management Strategy to analyze the business model for Google’s PhoneBloks. Google is planning to provide a few standard exoskeletons and modules for a price of 50USD that enable standard voice calls, messaging and limit downloading of data. Users can pay a higher price for a phones that includes other modules and they can also upgrade the phones at any given time with a wide variety of modules that are expected to be available for this modular smart phone. These slides describe the specific value proposition for various types of final users, service providers, and app developers. The low price of this modular smartphone enables service providers to substantially reduce their subsidies for phones and thus introduce a new method of value capture that includes lower prices for users. This presentation also discusses other aspects of the business model such as scope of activities, and method of strategic control.

1. ❑ Chang Yi Ting
❑ Ngo Tung
❑ Samuel Lee Liang Hong
❑ Wong Keng Kit Gabriel
❑ Woon Khai Jhin

2. Short Video Introduction for Phonebloks

3. OUTLINE
• Introduction
• Value Proposition
• Customer Selection
• Scope of Activities
• Value Capture
• Strategic Control
• Summary

4. What is PHONEBLOKS?
• A modular designed phone
• Project between Google &
Motorola
• Scheduled to release in Jan
2015

5. Why the Phone Industry?

6. Which COMPANY?

7. Current COMPETITORS
iPhone
Samsung
Nokia
Xiaomi
…

8. Smartphone PROBLEMS
• No perfect phone for every user
- Functions you do not want, are present
- Functions you want, are absent
• Required to replace phone in its entirety
• Current phones get outdated rapidly
• Electronic-Waste

9. VALUE PROPOSITION
Why PHONEBLOKS?

10. VALUE PROPOSITION
• Modularity allows for
hardware customization,
to fit the different needs of
users

11. VALUE PROPOSITION
iPhone 6 Samsung S5 Phonebloks
Screen
Size
4.7 Inches 5.1 Inches 5/6/7 Inches
Capacity 16-128GB 16/32GB* ∞
RAM 1GB 2GB ∞
Camera 8-MP 16-MP ∞
• Modularity
allows for an
almost infinite
number of
possibilities
*Expandable via SD card

12. VALUE PROPOSITION
• Modularity allows
for flexibility, to
change modules
on the go

13. VALUE PROPOSITION
• Environmentally
friendly, reduces
amount of electronic
waste
Taken from Global E-Waste Management Market (2011 – 2016)

14. VALUE PROPOSITION
• Possible integration
to other industries
– Mobile gaming
– Medical

15. VALUE PROPOSITION
• Affordability
due to
incremental
upgrading
iPhone 6 Samsung S5 Phonebloks
Price From
S$988*
From
S$1068*
From
S$65
*Price without contract

16. VALUE PROPOSITION
• Customizable Value
– Minimal lock-in cost
– Possibility of Blok
Vouchers
iPhone 6 Phonebloks
Price w/o
Contract
S$988 S$65
Price w/
$42.90
Contract
S$508 S$0
Subsidised S$480 S$65

17. VALUE PROPOSITION -
Service Providers
iPhone 6 Phonebloks
Price w/o Contract S$988 S$65
Price w/ $42.90
S$508 S$0
Contract
Subsidised S$480 S$65
Blok-Vouchers Up to S$415
• Balance between voucher
value and savings
• Win-Win Situation
• Higher demand = More
sales and profits

18. VALUE PROPOSITION -
Service Providers
• Vouchers can expire
→ Cost savings

19. CUSTOMER SELECTION
Who to Target?

20. CUSTOMER SELECTION
• Techies (short term)
– Enjoy customising
gadgets

21. CUSTOMER SELECTION
• Teenagers to Young
Adults (middle term)
– Desire to stay
updated/fashionable
– Limited spending
power

22. CUSTOMER SELECTION
• Environmentalists
(middle term)
- High emphasis on
being environmental
friendly

23. CUSTOMER SELECTION
• Everybody
(long term)

24. SCOPE OF ACTIVITIES
What should Google do in-house
and outsource?

25. SCOPE OF ACTIVITIES
• Vertically Disintegrated
– Google is a creative company
– Do not want to be too dependent
• Create the standard phone base
• Leave most to external partners

26. SCOPE OF ACTIVITIES
R&D
In-house
Software Marketing
Manufacture of
phone base
Quality
Assurance
Outsource
Sales Distribution
Manufacture of add-on
modules/accessories

27. VALUE CAPTURE
How does Google make profits?

29. VALUE CAPTURE
• Sales of standard
phone base (S$65)
• License of technical
information for
module developers
for compatibility

30. VALUE CAPTURE
• Commission from
sales of hardware
modules from
external parties in
Blokstore

31. VALUE CAPTURE
• Commission from
possibility of
entering a new
industry, the mobile
gaming industry

32. VALUE CAPTURE
• Smart Advertisements/
Recommendations in
Blokstore based on user
internet browsing history

33. VALUE CAPTURE
• Continued
earnings from
Google Play

34. VALUE CAPTURE
• Razor-Razorblade Model
– Earn minimal from phone base
– Earn more from its complements

35. STRATEGIC CONTROL
How does Google maintain its dominance?

36. STRATEGIC CONTROL
• Patenting the modularity concept and
technology, increasing entry barriers by
forming a closed system
• Setting the Standard by being the first to
introduce a modular phone
– Customer and developer lock-In

37. STRATEGIC CONTROL
• Network effects from establishing an
ecosystem of users, software developers
and hardware developers

38. STRATEGIC CONTROL
• Leveraging on
Google’s brand
equity
– Known for being
innovative and
high-quality

39. Summary
• Value Proposition
- Customisable on the go
- Affordable
- Environmentally friendly
- Many more possibilities
- Cost savings (service
providers)

40. Summary
• Customer Selection
- Techies
- Teenageers to
Young Adults
- Environmentalists
- Everybody

41. Summary
• Scope of Activities
- Very vertically
disintegrated
- Self sustainable

42. Summary
• Value Capture
- Sales
- Commission
- Licensing
- Advertisements
- Razor-Razorblade
model

43. Summary
• Strategic Control
- Patenting
- Setting the Standard
- Network Effects
- Brand Name

44. THE END - Q&A