Chapter 5


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Chapter 5

  1. 1. CHAPTER 5<br />DYNAMICS OF INTERNET BUSINESS MODEL<br />Business is not constant, so as its business model, it has a direct impact<br />This chapter examines the dynamics of business models<br />Who profits from technological change<br />Examine several technological change models<br />Its implication towards Internet business model<br />
  2. 2. WHO PROFITS FROM TECHNOLOGICAL CHANGE<br />Business model = strategy for making money<br />Understand what it takes to make money from technological change<br />Complementary assets model examine.<br />
  3. 3. Complementary Assets Model<br /> Complementary assets = capability/ability/ qualification, that the firm needs to exploit the technology <br />(includes brand name, manufacturing, marketing, distribution channel, service, reputation, installed base of products, relationships with clients /suppliers & complementary technologies)<br /> Imitability = the extent to which the technology can be copied, substituted by competitors.<br />
  4. 4. Pg 79. complementary assets model table figure 5.2<br /> Imitability = the extent to which the technology can be copied, substituted by competitors. E.g. Internet<br />I<br />II<br />High<br />Imitability<br />III<br />IV<br />Low<br />Freely available/unimportant<br />Tightly held & important<br />Complementary assets<br />
  5. 5. How to use table 5.2<br />Implications of the internet<br />Internet;easy to imitate, so imitability is high<br />Strategic Implications of Complementary Assets Model<br />Determining One’s Complementary Assets<br />
  6. 6. Strategic Implications of Complementary Assets Model(figure 5.3 pg 81)<br />I<br />II<br />High<br />Imitability<br />III<br />IV<br />Low<br />Freely available/unimportant<br />Tightly held & important<br />Complementary assets<br />
  7. 7. Determining One’s Complementary Assets<br />To determine its complementary assets it must follow these steps:<br />Understand the product-market position it occupies or wants to occupies<br />Understand its value configuration & determine what capabilities other than technology that are critical<br /><ul><li>Customer value
  8. 8. Scope
  9. 9. Positioning (firm attains /wants to attain)</li></li></ul><li>DEVELOPING THE TECHNOLOGY<br />Developing technology is not easy, the inability of a firm to develop products or services using a new technology is often reason why such firm fail to exploit new technology<br />Models of technological change provide guidance for developing successful technology<br />
  10. 10. MODEL OF TECHNOLOGICAL CHANGE<br />5 models of technological change provide guidance for developing successful technology<br />Radical versus incremental change<br />Architectural innovation<br />Disruptive change<br />Innovation, value added change<br />Technology life cycle<br />
  11. 11. 1. Radical versus incremental change<br />Type of firm that is likely to exploit a technological change is a function of the type of change<br />The change impacts the firm’s product-market position & capabilities<br />
  12. 12. 2. Architectural innovation<br />A new design that wants to take advantage of the speed of a much faster processor is an architectural innovation & must consider the changes in the linkages between new processor & other components of the computer<br /> architectural innovation model can help explore the potential impact of the Internet on some industries<br />
  13. 13. 3. Disruptive change<br />Has 4 characteristics:<br />Create new markets by introducing new kind of product or services<br />New products/services from new technology cost less than existing products/services from old technology<br />Product perform worst at the beginning but catches up & improve itself by fulfilling the needs of consumer<br />Technology are difficult to protect using patents<br />
  14. 14. Disruptive change model e.g. pg 90 figure 5.5<br />Measure of key <br />performance Attributes<br />A<br />Cost<br />Improvement over the years<br />Meets key performance attributes<br />Meets key performance <br />attributes<br />C<br />B<br />product<br />D<br />demand<br />0<br />6<br />1<br />2<br />3<br />4<br />5<br />
  15. 15. 4. Innovation, value added change<br />The value that a firm offers its customers is a function of the firm’s capabilities & collaboration of its suppliers, customers & complementor<br />DELL <br />VALUE <br />ADDED<br />CHAIN<br />MICROSOFT<br />INTEL<br />SOFTWARE<br />BUNDLE<br />
  16. 16. 5. Technology life cycle<br />Used as a framework for understanding the evolving competitive landscape following a technological change<br />According to the model, technology undergone 3 phase.1.fluid2.transitional<br />3. stable<br />
  17. 17. Figure 5.7 pg 94, Internet Technology Life Cycle<br />GROWTH/<br />TRANSITIONAL<br />MATURE/<br />STABLE<br />EMERGING/<br />FLUID<br />Stable Phase (mature)<br /><ul><li>Product highly define
  18. 18. Demand growth
  19. 19. Fewer competitors
  20. 20. Firm’s strategy is to defend its position in the market, & look for next technology</li></ul>Fluid Phase<br /><ul><li>Product & market uncertainty
  21. 21. Confusion among producer & customers on products
  22. 22. Product quality is low & cost/prices high
  23. 23. E.g. auto industry</li></ul>Transitional Phase<br /><ul><li>Standardization took place, common standard for producing product emerge
  24. 24. Reduce the phase of uncertainty for the product
  25. 25. Customer base increase->mass market</li></ul>SALES<br />Where in the Internet value<br />Network do you want to be<br />
  26. 26. THE “dotcom” BOOM & BURST<br />Should the dotcom bubble & burst have been expected?<br />Who wins in a dotcom vs. Brick-and mortar battle?<br />