Designing and operating a business model is a non-trivial task for any entrepreneurial firm. The choice of business model is important because (a) it is consequential for the organization of the firm and its production processes, and (b) because it impacts the revenue structure of the firm (e.g., volume, timing, and distribution). Furthermore, while a business model rarely provides a source of sustained competitive advantage, it can be a risk-mitigation tool and thus affect the firm’s chances for survival. A firm’s business model can be analyzed along two dimensions that look at how the firm transacts with external actors in the value system, and how it transacts with customers. Using these dimensions, a framework of four ideal type business models and how they affect a firm’s chances for survival is presented. Strategic implications for each business model ideal type are discussed and placed in a context where creative freedom and firm survival need to be balanced against profits and quick turnarounds. It is for these reasons that the framework is specifically relevant for project-based e-businesses such as video game developers, creative agencies, movie producers, and app creators. Illustrations of how the four business models apply to serious games in healthcare will be presented. Presentation presented at the Sino-Dutch Serious Games in Healthcare Symposion 2015 (November, 23, 2015, Groningen, Netherlands)

1. Healthy Business Models?
Joost Rietveld, PhD
Rotterdam School of Management, Erasmus University (NL)
rietveld@rsm.nl - www.strategyguide.nl

2. What Is A Business Model?
 Business model: The essence of a business model is in defining how a firm delivers,
captures, and creates value:
 Value creation: Created by organizational members across the value chain, only realized
when consumers’ perceived benefit exceed price
 Value capture: The redistribution of exchange value across organizational members in
the value chain
 Value delivery: Revenue models and distribution platforms (e.g., iOS, Google Play).
Affected by technological change and facilitated BMI
 BM innovation: novel reconfigurations of any or all of the above (firm level)

3. Focal Firm
Customer (e.g. end-user,
corporate customer)
Partners (e.g. suppliers,
service providers)
Value delivery (e.g.
distribution platform,
revenue model)

4. BM Innovation In Value Creation
 Technological change allows for novel ways to entice customer payments through
‘free’, or discovery-driven value propositions:
 PRO: Delaying or mitigating customer payments may help customers determine their use
value especially when valuation prior to consumption is ‘problematic’
 CON: More accurate valuation of perceived benefits will only lead to greater value
creation when price < Willingness-To-Pay

5. BM Innovation In Value Capture
 Technological change facilitates business model innovation in value capture by
allowing for greater disintermediation, or disintegration, from partners in the value
chain:
 PRO: If the focal firm suffers from value chain envy. I.e. partners capture disproportionate
amount of value in perception of focal firm
 CON: May not lead to increased firm performance when partners posses (specialized)
complementary assets that help increase overall value creation

6. A Typology of BM For Games
Disintermediation
Customer
engagement
Work-for-hire
(de-facto)
Artist-led-distribution
Multisided Freemium
High
Low
High
Low

7. Work-For-Hire
 Low on disintermediation: Project commissioner assumes all risk but also dictates
project guidelines and deliverables (integrated model)
 Low on customer engagement: End-users cannot really try the game before
spending money; fixed price – high risk option
 Few monetization schemes (income from meeting project milestones)
 Low focus on marketing, publisher/ project commissioner does this
 Disconnect between players and developer
 Restricted creative autonomy
 Example: Most triple-A game studios
Disintermediation
Customer
engagement
Work-for-hire
(de-facto)

8. Artist-Led-Distribution
 High on disintermediation: Total creative freedom as no longer restricted by the
demands of the financier/project commissioner
 Low on customer engagement: End-users still cannot really try the game before
spending money
 Low-high makes for a very risky value proposition – high consumer information
asymmetries, no financial safety net!!
 Few monetization schemes (income from a finished good to community of fans)
 Moderate marketing spent, do we really need it?!
 Example: Most indie game studios
Disintermediation
Customer
engagement
Artist-led-
distribution

9. Freemium
 High on disintermediation: Developer engages directly with the end-user without
interference from corporate customer
 High on customer engagement: Consumers can, and are actually enticed, to
engage with the content for free, accelerate progress through in-game purchases
(it’s a service!)
 Many revenue streams to tap into customer heterogeneities
 Content refinement through analysis of user-behavior is paramount (A/B testing)
 Users tend to value free products less (only 5% spends money)!
 Example: Most games on social networks (e.g. Farmville, Candy Crush)
Disintermediation
Customer
engagement
Freemium

10. Source:
http://www.mediatonicgames.com/

11. Multisided
 Low on disintermediation: Income comes in large part from corporate customers,
after content gains traction in market
 High on customer engagement: Consumers can, and are actually enticed, to
engage with the content for free – attracts corporate customers
 Service-like value proposition, many revenue streams (e.g., ads, placements)
 High marketing spent, ramp up user acquisition to build a monetizable installed base –
common denominator
 Most complex, yet most potentially lucrative business model (create a platform).
 Very few pure examples: IAmPlayr
Disintermediation
Customer
engagement
Multisided

12. “It is a blended business model, so we de-risk the
business with that. We have two revenue
opportunities that are –what we believe-
complementary. This puts less pressure on us to get
every penny out of our users, so we can concentrate
on user experience and retention. We are providing a
service which we keep on adding to, and we hope to
build a relationship with our users over a longer
period of time. We don’t have to push too hard,
because we have revenue from brand integrations.” –
CEO

13. Serious Applications In Health Care
 Move away from:
 Game development blind-sided from any business vision
 Unidimensional identification of customers (players ≠ payers ≠ financiers)
 Playing = paying perspective (offer services, monetize later/other stakeholders)
 Serious health games as engagement platforms:

14. Final Thoughts
 Choice of business model is a pre-prototype decision!
 Choosing and designing a business model is a non-trivial task:
 It is consequential for the organization of the firm and its production processes
 It impacts the revenue structure of the firm (e.g., volume, timing, and distribution)
 Clear distinction between users (players) and customers (payers)
 A business model rarely provides a source of sustained competitive advantage, it can be a
risk-mitigation tool and thus affect the firm’s chances for survival
 Achieve sustainability through oscillation and/or transition mechanisms

15. Thank You /谢谢
rietveld@rsm.nl / www.strategyguide.nl