Slides from a course I teach titled "The Internet Economy - Business Models and Strategies" 20 hrs of classroom interaction. During class students read 3 HBR articles, build a business model canvas BMX, view the BMC through theories and discuss how to create and shape new emerging industries

1. THE INTERNET ECONOMY,
STRATEGIES AND BUSINESS
MODELS, E-BUSINESS)
Ville Saarikoski

2. CONTENTS – PRELIMINARY PLAN
 Mon
 The Internet revolution,
 Frameworks and definitions
 Earning, creating value with information
 Case
 Tue
 Value creation and value capturing in a network environment
 Playing the right game – Game theory
 Business networks
 Cases
 Mon
 Network theories: six degrees, long tail, the commons (dilemma of the commons)
 The structure of the Internet
 E business/ e-commerce tools
 Tue
 Disruptive innovation
 Open innovation
 Groundswell
 Creating new market space
 Creating new markets
2

3.  Mon
 Business model canvas
 Nettipohjaiset liiketoimintamallit
 Tue
 Exam
CONTENTS – PRELIMINARY PLAN

5. SETTING THE SCENE
 May you live in interesting times – a chinese
saying, what you wish to your enemy

6.  Nokia – the ”burning platform”
 The Post Office, The mail man’s bag
 Music, from selling DVD,s and CD´s to selling digital music and
subscriptions e.g. Spotify
 Newspapers declining amount of readers, search for new digital
business model
 The paper industry
 The retail shops and supermarkets challenged by e-commerce
 Universities challenged by online education
 Health care moving to ehealth, eprescriptions, patient records etc
 Changing structures e.g. airlines from brick to click i.e. value creation
with information
=>1) Pick up a market creating company, understand theory and apply
theory to case ( a good theory, explains, predicts, categorises),
=>2) look at it from an industry perspetive
THE MACRO SCENE IN FINLAND - OLD STRUCTURES REACH A
”TIPPING POINT” AND EXPERIENCE A ”MELT DOWN”? => UNDERSTAND THE
LOGIC OF THE NEW ECONOMY:

7. THE GROWTH OF THE E-ECONOMY
 Infrastructure
 Interesting new companies…
 ….Choose a company which you believe is
building and redefining the market

8. FRAMEWORKS, DEFINITIONS

9. PESTEL
PESTEL – technology has always changed society. The
internet is a technology and it is changing our society. It is
also challenging what we perceive to be ethical. An
understanding of the internet will help in understanding
ethical and hence political questions we will face.

10. Individual
Society
Corporation
Click
Society
CorporationBrickl
Service
Technology
Laudon
Saarikoski

11. DEFINING E-COMMERCE AND E-BUSINESS
 E-commerce is the use of the Internet and the web
to transact business
 E-business refers primarily to the digital enabling of
transactions and processes within a firm, involving
information systems under the control of the firm
 P 49 Laudon e-commerce

12. EIGHT UNIQUE FEATURES OF E-COMMERCE –
LAUDON P 52-55
 Ubiquity: it is available just about everywhere at all times
 Global reach
 Universal standards
 Richness. Earlier there was a trade off between richness
and reach
 Interactivity: an online merchant can engage a
consumer in ways similar to a face to face
 Information density
 Personalization/customization
 Social technology: user content generation and social
networking
Note Prahlad: The New Age of Innovation N=1 R=G

13. SEGMENTATION
 B2B,
 B2C
 C2C
 Peer to peer
 Mobile commerce

14. CREATING VALUE WITH INFORMATION

15. THE INFORMATION SOCIETY CREATES AND
CAPTURES VALUE WITH INFORMATION
 Knowledge – can not always be codified, see tacit
knowledge
 Information – can be codified
 The vision of friction free commerce provided by
information i.e. perfect information market – no
transaction costs – reality information asymmetries
exist
 The limits of rationality
 Kahneman
 Herbert Simon Bounded rationality

16. JAMES SUROWIECKI – THE WISDOM OF THE
CROWDS
 On YouTube
http://www.ted.com/talks/james_surowiecki_on_the_turn
ing_point_for_social_media.html
 How much do I weigh?
 Information cascades: Angela Hung, Charles Plott p 62
 experiment: which shows if you believe that you will be
rewarded for the group being right you will tell the truth,
however…
 Co-ordination problems
 Brian Arthur, El Farol Problem
 Schelling points: where to meet
 Que behaviour
 Imitation is a rational response to our own cognitive
limits

17. INFORMATION ECONOMY – EARNING WITH
INFORMATION – VALUE CREATION, VALUE
CAPTURING
 Characteristics of information
 Sunk cost
 Costly to produce, cheap (=>0) to reproduce => the changing role
of copyright
 Service provider should avoid commodotization i.e price
comparability
 Focus on marketing, note samples can be given for free at no
cost, low variable cost offers great marketing possibilities =>
pricing strategies see www.marketingexperimenst.com
 Focus on segmentation (identifying customers), versioning,
personalised pricing,
 If members of different groups systematically differ in their
price sensitivity, you can profitably offer them different prices.
Student and senior citizen discounts are prime examples.
• Information asymmetry

18. INFORMATION ECONOMY – EARNING WITH
INFORMATION – VALUE CREATION, VALUE
CAPTURING
 Lock-in/switching costs:
 If an organization chooses to standardize on a particular
product, it may be very expensive for it to make the switch
owing to the costs of coordination and retraining. Again
Microsoft serves as an example
 Bundling
 Positive feedback, preferential attachment
 Network effects:
 If the value to an individual depends on how many other
members of his group use the product, there will be value to
standardizing on a single product. Microsoft has exploited this
desire for standardization with its Microsoft Office suite.
 Sharing:
 In many cases it is convenient for the individual user to manage
or organize all information goods that he or she will want to
consume. Information intermediaries such as libraries or system
administrators can
 Platforms, ecosystems

19. LECTURE 2

20. COMPANIES IN NETWORKS
6/19/2014 Laurea-ammattikorkeakoulu 20
Håkansson, Ford,
Snehota, Gadde,
Waluszewski

21. VALUE CREATION VALUE CAPTURING – EXAMPLES
OF THE GAMES BUSINESSES PLAY
 Auction in which both the winner and the second placed have
to pay up
 Destroying your own assets
 Each player can donate to the community and the community
will give a payoff double the contribution and divide it equally
among the players
 Collaborative tasks game
http://www.fiksuhuuto.com/
See also: Jacobides theme of
research the causes and
consequences of the division of
labour, between and within
organizations

22. THE GAMES BUSINESSES PLAY – VALUE
CREATION, VALUE NET FRAMEWORK
 The Right Game – use game theory to shape
strategy HBR July - August1995, Adam
brandenburg and Barry J Nalebuff
 The importance of value creation and value
capturing in Value Networks
 PARTS, Players, added value, rules, tactics, scope

23. THE VALUE NET , THE RIGHT GAME HBR
1995
Company
Supplier
Substitutor Complementor
Customer

24. COMPETITIVE EDGE IN BUSINESS
Pay-offs
Innova Dolla
1 1
3 2
2 4
4 3
Innova strong in
R&D, Dolla
financially strong.
The Business
question should I
invest in R&D?
INNOVA
low
high
DOLLA
high
high
DOLLA
low
low

25. GAME THEORY
 Businesses (and systems) evolve into a balance,
This balance is not necesarily the best choice
(optimum)
LIISA
PEKKA
Keeps mouth shut Talks
Keeps mouth shut 1, 1 5, 0
Talks 0, 5 3, 3

26. THE NEW ECONOMY, THE NEW OPTIMUM
The optimum
structures of
the industrial
economy
The new
optimum
structures of
the internet
economy

27. GAME THEORY AND SHOULD I
COLLABORATE?
COMPETITOR A
COMPETITOR
B
Don’t cooperate cooperate
Don’t cooperate B=5, A=5 B=12, A=2
cooperate B=2, A=12 B=9, A=9
The figure shows B´s payoff and A´s payoff. Try and apply the logic of the
prisoners dilemma to understand why the companies end up not collaborating.
A market understanding to what collaborating or not could mean. If e.g. A is
given to understand that B is co-operating so A will do nothing and will wait for
joint efforts to emerge and be decided upon. B will quietly build a factory and
captures the market. B=12, A=2,
The answer: Look at what your best choice would be if your competitor a) co-
operates, b) does not co-operate
Johnson, Scholes, Whittington p 243, Exploring Corporate Strategy

28. THE STANDARS GAME, INFORMATION RULES ,
SHAPIRO P 250
Weak team´s choice B
Strong teams
choice A
Willing to fight Wants standard
Willing to fight Standards war A tries to block B
Wants standard Voluntary
standard

29. CLASSIFICATION OF GAMES
Classification Example
Taphtuvatko siirrot samanaikaisesti vai
peräkkäin? *
What is the amount of competition or
collaboration between players*
Is the game played once and the players will
never ever meet againa?*
Do all the players have the same information?*
Can the rules be changed?*
Are contracts binding?*
Zero sum games
*Source The Oxford Handbook of strategy p 878-881

30. CASES
 Valio
 Personal trainer & Gym
 YTK
 Chosing where you live
 The governance structure in a house of
apartements

31. KONIGSBERG PROBLEM – SEVEN BRIDGES

32. LECTURE 3 EARNING ON THE INTERNET – A
HUGE INFORMATION NETWORK

33. EARNING ON THE INTERNET – A HUGE
INFORMATION NETWORK
Combining the logic of earning with information and
earning in a network and moving it into a macro
environment i.e. the Internet

34. HOW TO CREATE NEW MARKETS? – WHICH
MARKET IS/ARE EMERGING?
• Focus on
• Put theory into practice
• Lobby for new laws and regulations
• Regulators will ensure that competition will
exist also in new environments
• Create new structures (destroy old
structures) e.g. new ecosystems,
• New business models
• Focus on Lead users
• Establish market creating products
6/19/2014 Laurea University of Applied Sciences 34

35. EXAMPLE THE EMERGENCE OF THE MOBILE
MARKET
 Liberalisation of the telecom market in Finland in 1994 created
competition and encouraged new markets to emerge
 GSM 1994 and 97-98 a vision: ”mobile into your pocket”
 New infrastructure 3G, UMTS
 In Finland changes in telecom law e.g. allowing bundling of phone and
subscription, number portability,
 Progress in creating a dataroaming market by establishing cap prices in
the EU
 Business model: toward monthly flat rate pricing
 Key market creating products: mokkula (c 2004-2005) a data
connection to your computer, I-phone, (both arrivals from the outside to
Finland), smart phones 2011
 Structures: three competitors, service operator and new market
entrants changed the rules of the market
 Future: ?

36. SIX DEGREES

37. SIX DEGREES - COMMUNICATION IS NOT ABOUT
AVERAGES!
LOOK AT THE DATA FROM A NEW PERSPECTIVE –
SEARCH FOR THE SUPER NODES
 How many sms messages do you send per month?
 How many calls do you make per month?
 How many pictures do you take and send?
 How many contacts do you have on your phone?
 How many hours of music do you have on your phone?
 How many times do you access the Internet per day from ypur
mobile?
 How many bookmarks do you have on your mobile phone?
 Which member of parliament sends the most Chrismas Cards?
http://www.savonsanomat.fi/teemat/eduskuntavaalit/il-kari-
k%C3%A4rkk%C3%A4inen-suoltaa-joulukortteja/627307

38. SIX DEGREES THE SUPER CONNECTED,
MALCOLM GLADWELL, TIPPING POINT
 How many do you know? First agree on what knowing means. Second
pick randomly 20 names in your language by e.g. picking the first name on
every 20`th page in a telephone directory
 Alanen, Brunell, Forssman, Harkonsalo, Hjelt, Ikäheimo, Jääskeläinen,
Keinänen, Korhonen, Kyötikki, Lehikoinen, Lindström, Martinmaa,
Mäkinen, Nyfors, Parviainen, Pulkkinen, Riijärvi, Saikkonen, Setälä,
Summanen, Tihinen, Vaara, Volanen, Åkerblom
 Concepts structural holes, strong weak ties, the mathematics of
networks
 http://en.wikipedia.org/wiki/Network_science
 http://en.wikipedia.org/wiki/Social_network_analysis
 http://en.wikipedia.org/wiki/Interpersonal_ties
 http://en.wikipedia.org/wiki/Social_network
 http://verkkopalvelu.vrk.fi/Nimipalvelu/default.asp?L=1

39. SIX DEGREES (DISTANCE IN NETWORKS) THEORY:
MILLGRAM, WATTS, STROGATZ
 Communication is about the flow of
information in a network. Marginal price
goes to zero => the individual’s willigness to
spread links and information, ”to spin the
web” increases. => from price per minute or
per message (transaction based pricing) to
flat rate
http://en.wikipedia.org/wiki/Six_degrees_of_separation
25.8.2010 http://gizmodo.com/5620681/all-300000-biggest-websites-
visualized-with-their-
icons?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A
+gizmodo%2Ffull+%28Gizmodo%29&utm_content=Google+Reader

40. Six degrees
Create communities that can scale up
and busines models that benefit from
scaling
Capture interest economy, huomiotalous, (Sarasvuo)
Participation economy, osallistumistalous (Hintikka)

41. Albert Edelfelt 1887, Ruokolahden Eukot kirkonmäellä,
Ateneum
GRAHAM BELL INVENTED THE PHONE, BUT DID NOT SEE
FACEBOOK
Huhuverkko (rumour
network),
Puskaradio, (bush
radio)
Viidakkorumpu
(jungle drum)

42. THE LOGIC OF FLAT RATE
 The problem
 1 costs 1,99 10 cost 19,90? (physical product)
 1 message costs…. 10 messages cost? Same price (information product)
 Our social networks are not evenly distributed, communication is not about averages
 Flat rate pricing allows for connectors to emerge; the individual starts sharing links
 When pricing is flat i.e. marginal pricing is zero, superconnected nodes emerge e.g. blogs
with millions of readers, people with thousands of friends
 The distance between nodes in a network, which has superconnected nodes shrinks. A
scale free (six degree network) emerges. The flow of information in a network increases.
The network becomes interconnected.
 The Internet is scale free. The Internet has flat rate pricing
 Mobile networks used transaction based pricing (per minute, per message, per kilobyte).
Only when the pricing model (business model) changed, did the mobile Internet start to
spread

44. The Long Tail
Chris Anderson (2006) The Long Tail: What happens
to demand when supply is no longer limited

45. The Long Tail and
change
Chris Anderson (2006) The Long Tail: What happens
to demand when supply is no longer limited
Remeber: Bricks and Clicks, The Virtual world
combines with the physical world

46. Combining six degrees and the Long tail -
Companies should focus on building from the the tail.
Create communities that can scale up
and busines models that benefit from
scaling
Capture interest economy, huomiotalous, (Sarasvuo)
Participation economy, osallistumistalous (Hintikka)

47. THE NEW LOGIC OF SHARING, LIMITED
RESOURCES BECOMING UNLIMITED, OPEN
DATA, OPEN RESOURCES - THE DILEMMA (TRAGEDY) OF
THE COMMONS, RESURSSINIITTY, RESURSSIALUSTA
Copyright
Copy left (Asset
of user)
Phone number
Number
portability (Asset
of user)
Limited
Frequencies
Wlan hotspots
(Asset of user)
Code
Open code
In your
Business??
Bus routes
Information accesible to user
(open data)
http://www.julkinendata.fi/,
Reittiopas
Yochai Benkler “Sharing and shared efforts become more
feasible, because of developments in technology” The
Wealth of Networks: How Social Production
Transforms Markets and Freedom

48. THE DILEMMA OF THE COMMONS,
REORGANISING RIGHTS...CHANGES IN LAW
 Resource based view vs unlimited resources
 Some recent reorganisations of rights
 Creative Commons, restructuring of copyright Lawrence Lessig.
Copy left instead of copyright
 Number portability
 Non licensed frequencies (WLAN)
Yochai Benkler, Some economics of wireless communications.
Harvard Journal of Law and Technology Volume 16 Number 1 Fall
2002
 Yochai Benkler “Sharing and shared efforts become more feasible,
because of developments in technology” The Wealth of
Networks: How Social Production Transforms Markets and
Freedom
 Public sector information becomes open
http://www.lvm.fi/c/document_library/get_file?folderId=964902&na
me=DLFE-10617.pdf&title=Julkinen%20data

50. WHAT RESOURCES CAN YOU IDENTIFY THAT ARE
BEING TRANSFERRED INTO THE OPEN
ENVIRONMENT?
WHAT OPEN RESOURCES (OPEN DATA) ARE YOU
BENEFITTING FROM?
FROM OPEN DATA TO BIG DATA

52. KEY INTERNET TECHNOLOGIES
 Packet switching
 Client server computing

53.  TCP/IP Architecture and protocol

54. UNDERSTANDING HOW THE INTERNET WORKS
 http://www.youtube.com/watch?v=gJ5h4_0mllI
tcp/ip
 http://www.youtube.com/watch?v=Zfmk0GtANNs
client server architecture
 How the internet works
http://www.youtube.com/watch?v=7_LPdttKXPc

55.  http://www.youtube.com/watch?v=yU9oMOcRsuE
the first packet switch i.e. router
 http://www.youtube.com/watch?v=rHHpwcZiEW4
ucla´s Leonard Kleinrock on packet switching and
early internet
 http://www.youtube.com/watch?v=L8VpthhRaEg
packet switching

56. LECTURE 4
GENERAL THEORIES TO HELP
SHAPE MARKETS
Ville Saarikoski

57. HOW TO CREATE NEW MARKETS? – WHICH
MARKET IS/ARE EMERGING?
• Focus on
• Put theory into practice
• Lobby for new laws and regulations
• Regulators will ensure that competition will
exist also in new environments
• Create new structures (destroy old
structures) e.g. new ecosystems,
• New business models
• Focus on Lead users
• Establish market creating products
6/19/2014 Laurea University of Applied Sciences 57

58. EXAMPLE THE EMERGENCE OF THE MOBILE
MARKET
 Vision: ”mobile into your pocket”
 New infrastructure 3G, UMTS
 Laws:
 In Finland changes in telecom law e.g. allowing bundling of phone and subscription,
number portability,
 Progress in creating a dataroaming market by establishing cap prices in the
EU
 Business model: toward monthly flat rate pricing
 Key market creating products: mokkula (c 2004-2005) a data connection to
your computer, I-phone, (both arrivals from the outside to Finland), smart phones
2011
 Structures:
 three competitors, service operator and new market entrants changed the rules of the
market
 Liberalisation of the telecom market in Finland in 1994 created competition and
encouraged new markets to emerge
 Future: ?

59. Name: 00601 Operative Systems and Commerce
FOCUS: INDIVIDUAL TRAVEL PLAN
E-SERVICE
CONNECT TO
REAL WORLD
VALUE
SERVICE PROVIDER /
BUSINESS MODEL
WHO IS
LOOSING?
COMMUNITY
MY
E-TOOLS
1
2
3
4
5
59
Bricks and
clicks
VALUE
CREATION/CAPTURING
IN A NETWORK
- value to me
- value to company
- value (cost, time, quality)
- blog
- web site
- wiki
- contact networks
-videomeeting
connectpro
- e-library
-- e-survey
Change in the
way of doing
things =
innovation =>
focus on the
process
flow of goods, information and
resources in a repair cycle
http://en.wikipedia.org/wiki/Lo
gistics
From data to
networking
Use this framework to
identify changes in value
creation and capturing after
adoption of services like
online booking and the
availability of online
customer recommendations

60. THE MUSIC INDUSTRY
 Excercise: Look at the video.
 Try and plot all the different earning cases on to the
business model canvas and identify the key elements
that remain the same through different cases.
 Discuss and identify cases on how the music industry is
changing.
 Take an example company and discuss how that
company can act in the market place to create a new
market.
 The video
 http://www.youtube.com/watch?v=Njuo1puB1lg
 CwF, Connect with fans
 RtB, Reson to buy

61. THE E-HEALTH INDUSTRY
 Excercise
 Identify a new entrant to the market
 Discuss its business model
 Look into possible new infrasrtucture elements it is
attempting to build on e.g. patient records,
eprescriptions,
 Look into databases and are these databases
hierarchical or is power given to the users? To what
extent is open data thinking allowed and applied to the
creation of new services?

62. POSITION YOUR BUSINESS IN A NETOWORK –
PORTER FIVE FORCES 1979
Present
competition
By present
competitors in the
market place
Barganing power of
customers
Threat of new entrantThreat of substitutors
Barganing power of
suplliers
http://en.wikipedia.org/wiki/Porter_five_forces_analysis

63. GROUNDSWELL THE USER LEAD REVOLUTION –
IDENTIFY THE ROLE OF THE USER!
Individual
Society
Corporation

64. GROUNDSWELL CHARLENE LI, JOSH BERNOFF 2008
– IDENTIFY THE ROLE OF THE USER
 What is groundswell p 9(verkkovalta)?
 A social trend in which people use technologies to get things they
need from each other, rather than from traditional institutions
like corporations
 The strategy for corporations: If you can´t beat them, join them
 The BIG principle for mastering the groundswell p 18: Concentrate
on the relationship, not the technologies
64

65. TECHNOLOGIES AND CLASIFICATION P 18-
People
creating:
blogs,
user
generate
d
content
People
connectin
g: social
networks
and virtual
worlds
People
collabora
ting: wikis
and open
source
People
reacting
to each
other:
forums
ratings,
and
reviews
People
organizin
g
content:
tags
Accelarat
ing
consump
tion: rss
and
widgets
How they
work
Participatio
n
How they
enable
relationshi
ps
How they
threaten
institutional
power
How you
can use
them
See next slide for example

66. EXAMPLE: BLOGS
• How they work:A blog is a personal (or group) journal of
entries containing written thoughts links and often pictures
• Participation: Blog reading is one of the most popular
activities in Groundswell with one in four online Americans
reading blogs (2006). Video reviewing is also popular.
Podcasters and even podcast listeners are rare
• Participation: The authors of blogs read and comment on
others blogs. They also cite each other adding links to other
blogs from their own posts
6/19/2014 Laurea University of Applied Sciences 66

67. EXAMPLE CONTINUED:
• How they threaten institutional power: Blogs, user generated
video and podcasts aren´t regulated, so anything is possible.
Few YouTube video uploaders check first with the subjects of
their videos. Companies frequently need to police employees
who post unauthorized content about their employees and
their jobs
• How you (a company) can use them: First listen, read blogs
about your company. Search for blogs with most influence.
Start commenting on those blogs
6/19/2014 Laurea University of Applied Sciences 67

68. THE PROFILES, THE SOCIAL TECHNOGRAPHICS
PROFILE – KNOW YOUR CUSTOMER? P 40
• Creators:
• publish a blog,
• publish own web pages,
• upload video you created
• upload music you created
• write articles and post them
• Critics:
• publish a blog,
• post ratings/reviews of products or services
• comment on someone else´s blog
• contribute to on line forums
• contribute to/ edit articles in a wiki

69. THE PROFILES, THE SOCIAL TECHNOGRAPHICS
PROFILE – KNOW YOUR CUSTOMER? P 40
• Collectors:
• Use Rss feeds
• Add tags to web pages or photos
• Vote for web sites online
• Joiners:
• Maintain profile on social networking sites
• Visit social networking sites
• Spectators:
• read blogs
• watch video from other users
• listen to podcasts
• read online forums
• read customer ratings/reviews
• Inactives:
• None of these activities
http://www.youtube.com/watch?v=kGJTmtEzbwo

70. 70
Innovators dilemma: why a garage based
company can succeed when an incumbent
(large company) fails (Business aikido)
http://www.innosight.com/

71. THE INNOVATORS DILEMMA – COMPANIES TRADITIONALLY
FOLLOW A VALUE PROPOSITION, THE CHALLENGE OF
OVERSHOOTING CUSTOMER NEED => POORER IS BETTER
71

72. WHY DID WESTERN UNION THE LEADER
IN THE TELEGRAPH BUSINESS NOT
INVEST IN THE TELEPHONE
 The established processes, resources and values
encouraged investing in present customers.
 The Phone was in its early stages a short distance
mediium – performed porly on long distances
 Western Union saw that the phones performance in long
distance was getting better, but it continued investments
along its present value performance base
 When the future was evident, it was already too late

73. EXAMPLES OF DISRUPTIVE INNOVATION –CAN
YOU FIND ANY?

74. DISRUPTOMETER

75. STRATEGIACANVAS EXAMPLE
( x-akselilla kuvataan asiakkaiden arvoja ja y-akselilla yrityksen ja sen
kilpailijoiden tarjontaa )

76. Poista
• Ylimääräiset toiminnot tai
tekijät poistetaan
• Asiakkaalle tarjotaan lopulta
sitä mitä he oikeasti
haluavat
• Esim. Omenahotelli
Supista
• Turhat kustannukset poistetaan
• Asiakas ei joudu maksamaan
ylipalvelusta
• Esim. IKEAn itsepalvelukassat
Paranna
• Jo olemassa olevia tuotteita tai
palveluita parantamalla lisätään
asiakastyytyväisyyttä
• Asiakkaiden tarpeiden
selvittäminen ja niihin
vastaaminen
• Esim. Apple
Luo
• Tarjotaan asiakkaille jotain uutta
mitä toimialalla ei ole aiemmin
ollut saatavilla
• Uusien toimintojen tulisi synnyttää
kysyntää, sekä muuttaa toimialan
ajattelutapaa
• Esim. Verkkokauppa
Uusi
lisäarvokäyrä

77. USE THE STRATEGY CANVAS TO CREATE A
BLUE OCEAN STRATEGY
http://en.wikipedia.org/wiki/Blue_Ocean_Strategy
http://www.blueoceanstrategy.com/

78. THE CHRONOLOGICAL DEVELOPMENT OF MODELS
OF INNOVATION (TROTT 5 TH EDITION P 26)
78
Date Model Characteristics
1950/60 Technology-push Simple linear sequential process; emphasis on R&D; the
market is a recepient of the fruits of R&D
1970 Market pull Simple linear sequential process; emphasis on marketing;
the market is the source for directing R&D; R&D has reactive
role
1970`s Dominant design Abbernathy and Utterback (1978) illustrate that an innovation
system goes through three stages before a dominant design
emerges
1980`s Coupling model Emphasis on ontegrating R&D and marketing
1980/90 Interactive model Combinations of push and pull
1990´s Network model Emphasis on knowledge accumulation and external linkages
2000`s Open innovation Chesbrough´s emphasis on further externalisation of the
innovation process in terms of linkages with knowledge
inputs and collaboration to exploit knowledge outputs
Excercise: draw these models on the innovation filter

79. 79
http://www.desai.com/our-approach/innovation-
funnel/tabid/88355/Default.aspx 15.2.2012
From innovation process to open
innovation

80. OPEN INNOVATION - CHESBROUGH
80
http://en.wikipedia.org/wiki/Open_innovation

81. CONCEPT 1:THINK OF YOUR BUSINESS AS A SERVICE BUSINESS – OPEN
SERVICE INNOVATION CHESBROUGHP37
81
Service-Based view of transportation
Selection
of vehicle
Delivery of
vehicle
Maintena
nce of
vehicle
Informatio
n and
training
Payment
and
financing
Protection and
insurance
Car purchase
or lease
(product-
focused
approach)
Customer
chooses
Customer
picks from
dealer
stock
Customer
does this
Customer
does this
Customer
dealer, or
third party
Customer
provides
Taxi Supplier
choose
Customer
is picked
up
Supplier
does this
Supplier
does this
Enterprise car
rental
Customer
chooses
from local
stock
Customer
picks up or
is picked
up
Supplier
does this
Supplier
does this
By the day Customer is
responsible
Zipcar Customer
chooses
from local
stock
From
Zipcar
locations
Supplier
does this
Supplier
does this
By the hour Customer
purchases from
supplier

82. Concept 2: Innovators must co-create with customers
 The value of tacit knowledge
 e.g. example riding a bicycle: go faster to stay up,
 balancing on a rope…
 One way:
 Let the customer themselves provide the information,
 Let the customer have control of the process
82
FOUR STEPS TO OPEN SERVICE INNOVATION:
Make
reservation
Arrive at
restaurant
Ask for
table
Go to
table
Receive
menu
Order drinks
and food
Eat Order
bill
Pay Visit
restroom
Leave
Chesprough Open services
innovation p 59

83.  Concept 3: Open innovation accelerates and
deepens service innovation
83
FOUR STEPS TO OPEN SERVICE INNOVATION

84.  Concept 4: Transform your business model with
services
84
FOUR STEPS TO OPEN SERVICE INNOVATION
Grocer Chef
Target market Consumers Diners
Value Proposition Wide selection, quality
price
Dining experience
Core elements Rapid inventory turns,
choosing correct
merchandise
Great food, skilled cooks,
atmosphere
Value chain Food suppliers, related
items, logistics,
information technology,
distribution centers
Fresh produce, local
ingredients, quality
equipment,
knowledgeable and
couteous service
Revenue mechanism Small markup over cost,
very high volume, rapid
inventory turns
High markups over cost,
low volume, alcohol, tips
Value network, ecosystem Other services on
premises, parking
Cookbooks, parking,
special events

85. THE MESH, LISA GANSKY,
WWW.MESHING.IT
6/19/2014 Laurea University of Applied Sciences 85
Eg. hammer Mesh sweet spot
Eg. Tooth brush? Eg. Smart phones
How
often
do
you
use it
Often
Seldom
CostCheap
Expensive
p 22
Own-to-mesh
http://www.ted.com/talks/lisa_gansky_the_f
uture_of_business_is_the_mesh.html

86. 4. PESTEL
 P – Poliittinen
 Kansainväliset sopimukset, EU-, alue- ja kehittämispolitiikka yms.
 E – Ekonominen
 Talouskehitys, talouskriisit ja lamat
 S – Sosiaalinen
 Ikärakenne, arvot, syntyvyys ja kulutuskäyttäytyminen
 T – Teknologinen
 Informaatio- ja tietoliikenne sekä virtuaalimaailma
 E – Ekologinen
 Ympäristötietoisuus, ilmastonmuutos ja infrastruktuurin muutos
 L – Lainsäädännöllinen
 Lainsäädännön rajoitukset

87. MIHIN KÄYTETÄÄN?
Menetelmällä
 Kartoitetaan muutosilmiöitä toimintaympäristöstä
 Selvitetään ilmiön tai organisaation nykyistä tilaa ja
tulevaisuutta
 Tunnistetaan, millaisiin muutoksiin on osattava
varautua strategiaa määriteltäessä

88. 6. BOSTON CONSULTING GROUP MATRIX

89. 5. ANSOFFIN IKKUNA TYÖKALUNA
 Pohditaan erilaisia vaihtoehtoisia polkuja yrityksen kasvuun
 Arvioidaan millaisia panostuksia ja riskejä eri vaihtoehtoihin
liittyy
Tuotteet/palvelut
Markkinat
Nykyiset Uudet
Nykyiset
Kasvu
nykyisten
markkinoiden
avulla
Kasvu markkina-
vaihtoehtoja
lisäämällä
Uudet
Kasvu
tuotetarjontaa
laajentamalla
Kasvu
moni- alaistumalla

90. TECHNOLOGY ROADMAPS
 Try and guess, how technology will change the
business
90

91. LECTURE 5 BUSINESS MODELS
Chapter 5

92. BUSINESS MODEL P 325
 Business model: a set of planned activities
designed to result in a profit in a market place
 Business plan: a document that describes a firm´s
business model
 E-commerce business model: a business model
that aims to use and leverage the unique qualities
of the internet and the world wide web

93. EIGHT KEY ELEMENTS OF A BUSINESS MODEL
P 325
 Value proposition
 Revenue model
 Market opportunity – market space
 Competitive environment
 Competitive advantage
 Market strategy
 Organizational development
 Management team

94. REVENUE MODELS
 Advertising: a compan provides a forum for
advertisements and receives fees from advertisers
 Subscription revenue model: a company offers its
users content or services and charges a subscription fee
for access to some or all of its offerings
e.g. XBoxLive, Match.com, ancestry.com
 Transaction fee revenue model: a company receives a
fee for enabling or executing a transaction e.g. eBay (x
% of transaction)
 Sales revenue model: a company derives revenue by
selling goods, information, or services e.g. amazon sells
books
 Affeliate revenue model, a company steers business
to an affiliate and receives a referral fee or percentage
of the revenue from any resulting sale. (sisäänheittäjä)

95. CATEGORIZING E-COMMERCE MODELS
 B2B and B2C
 Major business to consumer models
 Etailer online retail stores
 Community provider
 Content provider
 Portals
 Transaction Brokers
 Markert creator
 Service provider

97. BUSINES MODEL GENERATION
Definition: A
business model
answers the
question how value
is created and
captured
www.businessmod
elgeneration.com
http://www.youtube.c
om/watch?v=QoAOz
MTLP5s business
model canvas 2 min
http://www.youtube.c
om/watch?v=8GIbCg
8NpBw Osterwalder
53

98. CASE
 http://www.youtube.com/watch?v=Njuo1puB1lg
 RtB
 CwF

99. BUSINESS MODEL GENERATION 9-ELEMENTS
(BUILDING BLOCKS) OF THE CANVAS
 Customer Segments
 mass market, niche market, segmented, diversified,
multisided platforms (or multisided markets)
 Value Propositions
 Newness, performance, customization, getting the job done,
design, brand/status, price, cost reduction, risk reduction,
accessibility, convenience/usability
 Channels
 Customer Relationships
 personal assistance, dedicated personal assistance, self-
service, automated service, communities, co-creation
 Revenue Streams
 asset sale, usage fee, subscription fees,
lending/renting/leasing, licensing, brokerage fees, advertising

100. BUSINESS MODEL GENERATION 9-ELEMENTS
(BUILDING BLOCKS) OF THE CANVAS
 Key Resources
 physical, intellectual, human, financial
 Key Activities
 production, problem solving, platform/ network
 Key Partnerships
 optimization and economies of scale, reduction of risk
and uncertainty, acquisition of particular resources and
activities
 Cost Structure
 cost driven (driving down costs), value driven, fixed
costs, variable costs, economies of scale (e.g. lower
bulk purchase rates), economies of scope(e.g. same
channel supports multiple products)

101.  Unbundling business models
 customer relationship businesses, product innovation
businesses, infrastruture businesses
 The Long Tail (selling less of more)
 Multisided Platforms
 bring together two or more ditinct but interdependent groups
of customers e.g. Visa, Google, eBay
 Free as a business model (Freemium) includes Bait
and Hook
 Non paying customers are financed by another customer
segment e.g. Metro, Skype
 Open Business Models
 companies systematically collaborate with outside partners to
create and capture value
BUSINESS MODEL GENERATION – 5
PATTERNS