l3 digital ent models strategy
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Digital Enterprise: New Media Communica8on and
Business Strategy
Lecture 3: New Media & Business Models
Mari-‐Klara Stein Assistant Professor, IT Management
Recap • New media not neutral (the way people communicate is someEmes more important than the content of what they say)
• New media, new communicaEon affordances: – Visibility, persistence, editability, associaEon, collaboraEon
• New media, new perspecEve: – From one-‐way ‘control the message’ to collaboraEve ‘co-‐creaEon of message’
– Key challenge: how to manage this ‘co-‐creaEon’?
Agenda
• Digging deeper into new media & various operaEonal areas in organizaEons
• Today: business models & strategy
• Over the next weeks: innovaEon and branding
Learning ObjecEves
AVer this lecture students should be able to: – explain how new media technologies have influenced strategy-‐making and business models in enterprises
– analyze the challenges and opportuniEes involved in using new media technologies for strategizing by applying theories covered in class
What is a business model? A business model captures the way the firm func8ons and creates value. It can be thought of as consisEng of several sub-‐models or domains:
– specifying which resources go into a company (sourcing domain);
– how they are transformed (value genera8on domain) into marketable products or services (value offering domain);
– how the products and services are transferred to the customer (distribuEon domain) and
– how revenues are generated and obtained from business partners (revenue domain)
IT strategy & business strategy? -‐ Common view: must be aligned -‐ Increasingly it’s not just about alignment, but immersion and fusion: -‐ 3 phases of IT & business linking: connec8on, immersion, fusion
-‐ From IT as support tool to IT as part of the core fabric of the organiza8on and its business
A commonly-‐used 4C typology of prototypical Internet business models Wirtz, B. W., Schilke, O., & Ullrich, S. (2010). Strategic development of business models: implicaEons of the Web 2.0 for creaEng value on the internet. Long Range Planning, 43(2), 272-‐290.
Types of e-‐business models • Brokerage (exchange, transacEon, aucEon, distributor)
• AdverEsing (portal, registered user, contextual ads)
• Merchant (pureplay, clicks and mortar, etc.) • Manufacturer Direct (purchase, lease, license) • Affiliate (revenue sharing, pay-‐per-‐click) • Community • SubscripEon (ISP, content services) • UElity (metered usage or subscripEon)
Revenue models
• Revenue model describes the methods of generaEng income for an organizaEon
• Some common online revenue models: – CPM (cost per thousand) – CPC (cost per click) (e.g., Google AdSense or AdWords) – Affiliate revenue (cost per acquisiEon) – TransacEon fee revenue (e.g., Paypal) – SubscripEon fee – Pay-‐per-‐view (e.g., adult entertainment on TV; renEng movies on iTunes)
– Subscriber data access for e-‐mail markeEng
Affiliate revenue model
Business models and organizaEon’s compeEEve strategy need to be dynamic & responsive to changes in the digital environment and consumer tastes
“the goal is to become HBO faster than HBO can become us.”
With so many choices for consumers how do you create conEnued consumer loyalty (and compeEEve advantage for the organizaEon)? Thought experiment: • If BuzzFeed (or some other content site you like to read) would start charging for premium content, would you pay or switch to the next provider that will undoubtedly pop up?
• What would make you stay and pay?
Winning combinaEons of models?
• Content + community -‐> social content (Oestreicher-‐Singer and Zalmanson, 2013)
• Why does deeper level of parEcipaEon translate to increased willingness to pay?
• How does the idea of ‘social content curaEon’ (users not just as content consumers, but as prosumers) relate to the idea that organizaEons should view communicaEon increasingly as collaboraEon (not as one-‐way transmission)?
Winning combinaEons of models?
• Or instead of trying to keep everything within the organizaEon, find great partners?
• MulE-‐sided plalorms – enabling direct interacEons between two or more customer or parEcipant groups (Hagiu, 2014 in opEonal readings)
• Example: – A hotel trying to ‘e-‐ify’ their business model (e.g., FB page, own app, etc.) vs.
– Airbnb whose business model excludes ownership of property and instead includes property owners as partners
Many organizaEons originate and conduct much of their business sEll in the physical environment (e.g., tradiEonal retailers). How can they take advantage of new media?
Most of these businesses by now consider it to be a ‘must’ to be on social media (customer outreach, campaigns, branding).
OVen this is limited to some relaEvely under-‐planned iniEaEves a la ‘lets create a Facebook page’.
Anecdotal evidence suggests even big organizaEons don’t know how to handle their social media environment when crises happen (e.g., FIFA’s FB page).
-‐> more & more pracEcal guidelines to help organizaEons (e.g., Culnan, et al.)
Group Discussion • Q1: What is the basic business model of Fjällräven? (4/9 blocks
from BMC) hqp://www.rallraven.us/pages/responsibiliEes – Who are the key customers? (mass, niche, segmented, diversified)? – What is the value proposiEon? (what customer need is saEsfied? design, brand/status, price, performance?)
– Channels? (how are customers reached? Own stores, partner stores, web sales?)
– Revenue streams? (sales, rent, licensing, ads?) • Q2: How do they make use of Facebook as part of their business
model? hqps://www.facebook.com/Fjallraven – Do they engage in community building? (as per Culnan, et al., see next slide) -‐> Block ‘Customer RelaEonships’ in BMC
– Which community building acEviEes do they include / exclude?
Key community building acEviEes (based on Culnan, et al.):
-‐ ConEnually populate the site with engaging content: -‐ Also have execuEves or other company ‘celebriEes’ post and interact
with community members -‐ Provide incenEves for parEcipaEon (e.g., recogniEon)
-‐ Don’t menEon the company in every conversaEon
-‐ Balance freedom with control and accountability; be selecEve in deleEng content
-‐ Be sensiEve to the norms and policies of the plalorm you use
… there may be something else that you’ll find important
BMC
For next Eme…
• Readings (on Learn): – Remneland-‐Wikhamn, et al. (2011) – Füller, et al. (2007) – Di Gangi, et al. (2010) – And opEonal readings J
• During reading think about: – What is innovaEon? – What is digital innovaEon? – What are the key characterisEcs of digital innovaEons? – What kind of challenges do these characterisEcs introduce into business organizaEons?