Third lecture in series on business models for e-business, presented to students at department of Business Informatics, HSE, Moscow

1. Higher School of Economics , Moscow 2011 www.hse.ru Ian Miles Research Laboratory for the Economics of Innovation, HSE (and Manchester Institute of Innovation Research) June 2011 e - Business and e - Business Models – Part 3 [ « Business and business models in the Internet »]

4. Many lists of different types of e-Business Model – example from Rappa

5. This view of the key elements is by Liting Liang 2011 (DPhil thesis) , studying low-cost airlines as innovative business models. But the emergence of the Web (and web2.0) and new media platforms means new approaches possible in all the hexagons. “ Building blocks” need to be aligned, though tension can be creative Higher School of Economics, June 2011 Value Proposition Economic Formula Organisational Vision Position in Value Network Target Market Value Chain Structure Resources and Capabilities Elements of a Business Model

6. Organisational Vision Definition : Strategic intent - what the desired future of the firm will be, what opportunities are to be seized (the business model should flow from this). Example : To be the leading source of news/gossip/reviews... Innovation : To be the leading online portal for news/gossip/reviews... A new vision of what the rules of the game could be. This helps define what business model is adopted. Now let us explore some basic elements. Higher School of Economics, June 2011 Organisational Vision We have already explored Organisational Vision

7. Value Proposition Definition : What services offered to the consumer, at what price and conditions. Example: Books; sold at shop; can examine there; can keep and share them. Innovation : e-books; copying/sharing restricted; available online anywhere; need a reader. New services, new delivery mechanisms, new prices, new service/price combinations (e.g. “no fills”). [scope for “blue ocean strategy”?] Higher School of Economics, June 2011 Higher School of Economics, June 2011 Economic Formula Organisational Vision Position in Value Network Target Market Value Chain Structure Resources and Capabilities Value Proposition 1 – Value Proposition

10. Price/Quality Choice BETTER QUALITY Differentiation strategy (Michael Porter) BETTER PRICE (for customers) Cost leadership strategy (Michael Porter) “ Rip off”: overcharging shouldn’t work in competitive, informed markets Fantastic value: may require mastery of a disruptive innovation Premium services: may work well with demanding/ status-oriented / money rich time poor consumers Budget services: often where disruptive innovation begins, but may also be aimed at low-income niches What space for intermediate value offerings? Whose choice: yours or consumers? Note that the customers’ perceptions of price and quality may differ from yours! Their perceptions are the ones that count. You may have a range of price/quality offerings – and you may have dynamic pricing of some sort.

11. In the first lecture, we noted three types of “Telematic Service” associated with the very first e-businesses INFORMATION TRANSACTION COMMUNICATION Online Databases News, Weather, Timetables “Home and office” banking Shopping, ticketing Electronic mail Bulletin boards, chatlines Earliest services were access to remote computers for data processing, but as prices and sizes declines, more interactive services developed.

12. The three types help to illustrate different Value Propositions INFORMATION TRANSACTION COMMUNICATION e-Publications of all kinds: Text, graphic, audio, video Real-time, transitory and long-term material Static vs.Dynamic (mash-ups etc.) Retail and wholesale services 1-2-1,1-2-many, many-2-many Email, VoIP Many sorts of service have proliferated: here are some of the varieties Processing of uploaded data, etc.: Software as a Service (SaaS) Pay for content, software, data processing Brokering virtual market places Blogs, podcasts, P2P content delivery systems

13. Value Proposition: Information Service Funding Information resources, navigable in several ways Trustworthy Aesthetics

14. News and Entertainment

22. Transactional Services: Value Proposition Special offers, news Membership and established customers Key service is upfront. Simple booking and payment (Expedia get commi-sssions) Note effort to differ-entiate

23. Transactional Services: Value Proposition Very basic presentation: Deliberate strategy? Key service is upfront. Link to areas where classified ads are located “ little interest in maximizing profit” (? Conflicts with eBay part-owners?) “ Funding from paid job and apartment advertisements. Content controversies!

25. Target Market Definition : Who services are being aimed at, for whom value is created. Example : Travel planning and ticket purchasing system . Innovation : Reach people on the move, with services targeted to mobile phones. New target market, often by expanding existing market and reaching people who were excluded, and/or by increasing amount of consumption in existing markets. Higher School of Economics, June 2011 Value Proposition Economic Formula Organisational Vision Position in Value Network Value Chain Structure Resources and Capabilities Target Market 2 – Target Market Value Chain Structure Position in Value Network

27. As they say in business… http://www.plantescompany.com/blog/business-model-innovation-best-practices/ Story about trying to appeal to too many demanding customers

29. From roll-out to roll-up Meanwhile…

30. Example

33. Resources and Capabilities Definition : the buildings, tools, knowledge, skills, routines, relationships used to create value. Example ; design services using paper-based graphics. Innovation : online CAD service (in future, 3-D printing) Better/new use of existing capabilities, application of new capabilities Higher School of Economics, June 2011 Value Proposition Economic Formula Organisational Vision Position in Value Network Target Market Value Chain Structure Resources and Capabilities 3- Resources and Capabilities Value Chain Structure Position in Value Network

35. Higher School of Economics, June 2011 © New Yorker, 9 March 2009 The most important resource is having leaders with optimistic vision they can communicate, transforming challenges to opportunities [The second major result of innovation studies: successful innovations have a “product champion”.] Resources and Capabilities

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