Analyzing Business Models in Communications-enabled applications

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

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

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

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)


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


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


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


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


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


Research roadmap

Section 2

Section 1

Section 3

Section 4

Section 5


Results-section 1:
Business Model analysis

A Four Box Model displaying results of business model analysis


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


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


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


Results-section 4:
Results of analysis of shifts in competition basis

Anticipated growth curve in communications enablement


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


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


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


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


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


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