The document summarizes literature on internet business models and strategy. It discusses three key papers: [1] Strategy & the Internet by Michael Porter, which argues that the internet does not change fundamental strategic factors like industry structure and competitive advantage; [2] Value creation in e-business by Amit & Zott, which identifies how business models can create value through efficiency, complementarities, lock-in, and novelty; [3] E-business model design by Dubboson-Torbay et al., which presents a framework to classify and measure e-business models based on their key components. The document emphasizes that the internet impacts industry profits and that winners will view it as a complement rather than substitute for traditional

1. Internet Business Models
A summary & discussion on
literature, examples and cases
Hasnain Zaheer

2. Online business models
• Strategy & the Internet: Michael E. Porter
• Value creation in e-business: Amit & Zott
• E-business model design, classifications &
measurement: Dubboson-Torbay, Osterwalder,
Pigneur
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3. Strategy & the Internet
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4. Strategy & the Internet
• Who creates value online?
• Who will capture economic benefits from
Internet?
– Customers or companies
• How will it impact industry structure?
– Expand or shrink pool of profits?
• What will be the impact on strategy?
– Bolster or erode ability of companies to gain SCA
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5. Strategy & the Internet
• Internet makes strategy more important than
ever
• Distorted signals
– Experimentation, sustained profitability
• Fundamental factors that determine
profitability:
– Industry structure
– Sustainable competitive advantage
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6. Strategy & the Internet
• Industry structure
– New industries: Online auctions, marketplaces
– Reconfiguration in existing industries
• Distance learning.
• In most cases, negative influence on industries
• Ebay – example of positive influence.
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7. Strategy & the Internet
• Myth of the first mover
– Switching costs
– Network effects
• Common technologies such as Paypal
• Marketplaces good for fragmented markets only
– Brands online
– Partnering
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8. Strategy & the Internet
• Internet & competitive advantage
– Operational effectiveness, price & cost
– Speed & agility not enough
– More revenue at the cost of profitability & market
share
– Distinctiveness, not outsourcing & partnership
– Convenience, service, specialisation, customisation &
other forms of value are ignored at the altar of price
– People’s skills, unique configuration of activities &
other sources of competitive advantage.
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9. Strategy & the Internet
• Internet & value chain
– Just the latest stage in the ongoing evolution of IT
• Internet as complement
– Network of stores as pick-up points
– Value of physical locations
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11. Strategy & the Internet
• Internet is an enabling technology and does not change
the enduring nature of strategy frameworks (such as 5
Forces).
• It tends to weaken profitability without providing
proprietary operational advantages.
• It affects industry structure and in many cases, it hurts
rather than benefit businesses especially when they
decide to compete on price rather than differentiate
their offerings online. It shrinks the pool of profits.
• The winners will be those who view the Internet as a
complement to, not a cannibal of traditional ways of
competing.
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12. Value creation in e-business
• How value is created?
• 59 e-businesses – case study approach
• How value can be created by ways in which
transactions are enabled?
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14. Value creation in e-business
• How value is created?
• Value creation potential hinges on 4 interdependent
dimensions:
– efficiency
– Complementarities
– lock-in; and
– novelty
• No single entrepreneurship or strategic management
theory can fully explain the value creation potential of
e-business.
• A firm’s business model is an important locus of
innovation and a crucial source of innovation.
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15. Value creation in e-business
• Internet can help create tremendous wealth
• Value going beyond configuration of value
chains, formation of strategic networks or firm
specific core competencies
• New exchange mechanisms and transaction
structures.
• Business model construct: Design of
transactional content, structure & governance
so as to create value.
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16. E-business model design classification
& measurements – Dubboson-Torbay,
Osterwalder, Pigneur
• E-business model decomposition
– Product innovation
– Customer relationships
– Infrastructure management
– Financial aspects

17. E-business model classification
• User role
• Interaction pattern
• Nature of the offering
• Pricing system
• Level of customisation
• Economic control
• Level of required security
• Level of value integration
• Value / cost offerings
• Scale of traffic
• Degree of innovation
• Power of buyer or seller

18. E-business model measurement
• By each component of business model design
– E.g., Product innovation: auction model
• Target customer: No. of registered users, no. of visitors
per day etc
• Value proposition: No. of products on sale
• Capabilities: delivery time

19. Thank you
Questions?

20. Business model generation
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21. 7 e-business models
1. Advertising
2. Affiliate
3. Brokerage
4. Merchant
5. Subscription
6. Information
7. Community
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