Margherita Pagani: Digital business strategy & value creation

1. © M. Pagani 2014 EMLYON Business School DIGITAL BUSINESS STRATEGY AND VALUE CREATION Margherita Pagani EMLYON Business School 1 Conference «Data, Digital Business Models, Cloud Computing and Organizational Design» Paris, 25 November 2014

2. © M. Pagani 2014 EMLYON Business School MOTIVATION The multi-channel digital revolution coupled with the development of interactive digital technology, virtualization, peer-to-peer networks etc. generate much more complex and dynamic ecosystems for growth and innovation The profits and competitive advantages of participation in a given value network reside dynamically within the chains, accumulating at the positions of greatest value and/or power (control points). The enterprises that hold these positions have a great deal of control over how the network operates and how the benefits are redistributed (Rülke et al. 2003)

3. © M. Pagani 2014 EMLYON Business School ARGUMENT Support the Double Helix Model (Fine 1998) in framing the dynamic cycle of value creation and value capture points in digitally-enabled networks following the emergence of: (1) an incremental innovation and (2) cross-boundary industry disruptions Paper published in MISQuarterly in 2014 and selected finalist for the “Best European Paper”

4. © M. Pagani 2014 EMLYON Business School OUTLINE Conceptual framework The opinion Methodology and supportive arguments Implication to research/practice

6. © M. Pagani 2014 EMLYON Business School THE VALUE NETWORK PERSPECTIVE Digital business strategies call for coordination across firms along product, process and service domains, thereby creating complex and dynamic ecosystems (Moore 1996; Iansiti and Levien 2004; Adner 2006) for growth and innovation. Products and services increasingly have embedded digital technologies, and it is becoming more difficult to disentangle business processes from their underlying IT infrastructures (e.g., El Sawy 2003; Orlikowski 2009).

7. © M. Pagani 2014 EMLYON Business School THE VALUE NETWORK PERSPECTIVE View of the value network as a configuration of control points, which comprise the various service transactions involved in implementing the functional components required to deliver a product or service offering (Basole and Rouse 2008) Control points are analyzed in terms of how, and to what extent, they create and capture value, and in what forms.

9. © M. Pagani 2014 EMLYON Business School 9 Open architectures vibrant edge Pressure for openness/ disintegration Policy tussles Innovator market power Frustration and subterfuge at the edges Proprietary System profitability Centralized control vertical integration proprietary standards Incentive to integrate & lock in advantage Competitive triggers Regulatory triggers Competitive triggers 3 THE OPINION 1 2 3 4 Incremental innovation Cross-boundary industry disruptions The double helix model (Fine 1998) to frame the dynamic cycle of value creation and value capture points in digitally-enabled network

10. © M. Pagani 2014 EMLYON Business School  H1 : when the industry structure is vertical and the product architecture is integral, the emergence of an incremental innovation push toward a horizontal and modular configuration and a fragmentation of value creation and value capture points  H2: if an industry has a horizontal structure, the emergence of a disruptive digital business strategy pushes toward more vertical integration and integral product architectures generating an incentive for the innovator to integrate and create a lock in advantage THE OPINION

12. © M. Pagani 2014 EMLYON Business School EMPIRICAL SETTING: THE BROADCASTING INDUSTRY DigitalTV Incrementalinnovation Analog TVAnalog TV Digital TVDigital TV MSPsMSPs MSPs-Cross-boundary industrydisruptions

13. © M. Pagani 2014 EMLYON Business School DATA COLLECTION 45 Semi structured interviews with industry experts from 15 leading companies in Europe and US in order to understand the ecosystem challenges Analysis of 8 years leading industry journals Longitudinal data collected on a sample of 792 firms in Europe and US (april 2000-may 2008): 15% content providers, 15% semiconductor and electronic suppliers, 13% broadcasters, 17% software, 14% terminal providers, 12% platform aggregators, 14% Telcos Internal, external validity and reliability 13

14. © M. Pagani 2014 EMLYON Business School DATA ANALYSIS PROCESS • Core and edge capabilities are the key explanatory variables along with types of relationships among firms. We control for unobserved differences across firms by including firm dummies in a firm-generation panel (Wooldridge, 2002): yigt = β0 + Xigtb + Dil + Tt d + aig+uigt yigt : firm i’s market share in a generation g in year t ; Xigt : vector of independent and control variables; Di : vector of dummies for each firm; Tt : vector of dummies for each year; aig : unobserved heterogeneity for a firm in a generation that is assumed to be uncorrelated with the explanatory variables; uigt is the error term.

15. © M. Pagani 2014 EMLYON Business School Black box modeling (Norgaard et al. 2000) Phase 1 – Empirical results Phase 2 - Selection of the model structure (graph- generating model) Phase 3 - Model estimation and validation: two meetings with practitioners and academics 15 DATA ANALYSIS PROCESS

16. © M. Pagani 2014 EMLYON Business School TYPOLOGY OF CONTROL POINT CONSTELLATIONS Closed vertically integrated model Loosely coupled coalition model Multi-sided platforms 16

17. © M. Pagani 2014 EMLYON Business School TYPOLOGY OF CPCS Closed vertically integrated model Loosely coupled coalition model Multi-sided platforms 17

18. © M. Pagani 2014 EMLYON Business School 18 Phase 1 : Analog TV Need of the single company to develop along the vertical dimension of the value chain Functional components Matsushita Microsoft Telefonica MCI BT BIB BSkyB News Corporation Midland Bank Digital Video Laboratories Sony General Magic 7% Colombia /Tristar 100% Viva 20% Iris Associates Integrated Systems Edge Research Approach Software Soft Switch Tivoli Telecom ArgentinaSTET IBM Stream (cable TV) BBW Planet Interactive Digital Solutions 3DO Planet Internet US West Continental CableVision Bravo UK Gold UK Living Flextech Telewest Sega Channel Warner Bros Titus (Japan) European Business News General Magic 7% AT&T World Partners Lotus Time Warner Entertainment Matsushita Microsoft Telefonica MCI BT BIB BSkyB News Corporation Midland Bank Digital Video Laboratories Sony General Magic 7% Colombia /Tristar 100% Viva 20% Iris Associates Integrated Systems Edge Research Approach Software Soft Switch Tivoli Telecom ArgentinaSTET IBM Stream (cable TV) BBW Planet Interactive Digital Solutions 3DO Planet Internet US West Continental CableVision Bravo UK Gold UK Living Flextech Telewest Sega Channel Warner Bros Titus (Japan) European Business News General Magic 7% AT&T World Partners Lotus Time Warner Entertainment Hardware Software Telecoms Packaging Content creation Functional components Matsushita Microsoft Telefonica MCI BT BIB BSkyB News Corporation Midland Bank Digital Video Laboratories Sony General Magic 7% Colombia /Tristar 100% Viva 20% Iris Associates Integrated Systems Edge Research Approach Software Soft Switch Tivoli Telecom ArgentinaSTET IBM Stream (cable TV) BBW Planet Interactive Digital Solutions 3DO Planet Internet US West Continental CableVision Bravo UK Gold UK Living Flextech Telewest Sega Channel Warner Bros Titus (Japan) European Business News General Magic 7% AT&T World Partners Lotus Time Warner Entertainment Matsushita Microsoft Telefonica MCI BT BIB BSkyB News Corporation Midland Bank Digital Video Laboratories Sony General Magic 7% Colombia /Tristar 100% Viva 20% Iris Associates Integrated Systems Edge Research Approach Software Soft Switch Tivoli Telecom ArgentinaSTET IBM Stream (cable TV) BBW Planet Interactive Digital Solutions 3DO Planet Internet US West Continental CableVision Bravo UK Gold UK Living Flextech Telewest Sega Channel Warner Bros Titus (Japan) European Business News General Magic 7% AT&T World Partners Lotus Time Warner Entertainment Functional components Matsushita Microsoft Telefonica MCI BT BIB BSkyB News Corporation Midland Bank Digital Video Laboratories Sony General Magic 7% Colombia /Tristar 100% Viva 20% Iris Associates Integrated Systems Edge Research Approach Software Soft Switch Tivoli Telecom ArgentinaSTET IBM Stream (cable TV) BBW Planet Interactive Digital Solutions 3DO Planet Internet US West Continental CableVision Bravo UK Gold UK Living Flextech Telewest Sega Channel Warner Bros Titus (Japan) European Business News General Magic 7% AT&T World Partners Lotus Time Warner Entertainment Matsushita Microsoft Telefonica MCI BT BIB BSkyB News Corporation Midland Bank Digital Video Laboratories Sony General Magic 7% Colombia /Tristar 100% Viva 20% Iris Associates Integrated Systems Edge Research Approach Software Soft Switch Tivoli Telecom ArgentinaSTET IBM Stream (cable TV) BBW Planet Interactive Digital Solutions 3DO Planet Internet US West Continental CableVision Bravo UK Gold UK Living Flextech Telewest Sega Channel Warner Bros Titus (Japan) European Business News General Magic 7% AT&T World Partners Lotus Time Warner Entertainment Hardware Software Telecoms Packaging Content creation

19. © M. Pagani 2014 EMLYON Business School Multimedia Packaging and services Network and Infrastruct. Equipment Provision Software Hardware 19 (Telecom Service Provision) Government Service ProviderTier 1 SubsystemTier 2 Component Auxiliary Enablers Broadcaster Terminal providers Software Content creator TLC Tier 2 Component Tier 1 Subsystem Service Provider Value Control point in value creation Control point in value capture Value network of the analog TV Core Competencies Edge Competencies Existing relationships or contractual links Potential relationships or contractual links Electronic publisher creation Content

20. © M. Pagani 2014 EMLYON Business School 20 Value creation logic Presence of giant strongly connected components Value capture logic Value is captured by the giant Primary activity categories - Content provision - Packaging - Network provision - Conditional access Main interactivity Sequential relationship logic Primary activity - Pooled interdependence - Sequential Key cost drivers - Scale - Capacity utilization Key value drivers - Market positioning and access to new capabilities - Possibility of user channel control - Shifting to value chain areas with higher added value - Facing competition of companies in connected sectors - High Costs of New Digital technologies Business value system - Interlinked chains structure Model 1 - Closed vertically integrated model

22. © M. Pagani 2014 EMLYON Business School 22 Connectivity (Cable network) STB distribution Content delivery Content Acquisition & aggregation Comcast TV content production Advertising Content production 3P TV Content distribution 3P TV Content Production (studios) 3P Film Distribution 3P Film Production (studios) Connectivity (private content capture network) Connectivity (private content capture network) Content distribution TV Distribution (Screen) TV Viewing (TV/DVD) TV Manufacture (Screen) DVD player distribution DVD player manufacture Playing DVDs DVD retail – Content Acquisition & aggregation USB Connectivity PDA distribution PDA video software Portable product PDA creation PDA OS creation DRM Sonic MyDVD Software distribution DVD burning Sonic MyDVD Software creation Online sharing Internet connectivity Online distribution (YouTube, MySpace, etc.) Yahoo! TV TiVo EPG Online TiVo programming PC Manufacture (screen/DVD) PC distribution MS Windows distribution MS Windows Creation PC Viewing and manipulation USB WiFi Digital TV in US (case study) Recording/ TV interface TiVo Manufacture (EPG + DVR) TiVo Distribution (EPG + DVR) B&M Post Online TV listings Yahoo! TV TiVo EPG Conditional Access Tuner EPG DVR STB manufacture Conditional Access Tuner EPG DVR N. Klym, 2008

23. © M. Pagani 2014 EMLYON Business School 23 Content Provider Network Provider Concessionario MUX Pubblicità Capogruppo Canali di prprietà Canali di terzi Other LEGEND Content Provider Network Provider Licence owner Advertising Holding Tv channels owned Third channels Technical production MUX TIMedia MTV Italia La7 Cartapiù La7 Music Box Primocanale MUX 1 RAI Rai 1 Rai 2 Rai 3 MUX 2 RAI Rai Sport Sat Rai Edu 1 Rai News 24 Rai Doc Rai Utile MUX RTI BBC World Rete 4 Class News Video Italia TV Coming soon 24 ore TV Boing Mediaset Premium MUX HSE Canale d MUX Dfree Sportitalia La Châine Info Video Italia TV Canale 5 Italia 1 MEDIASET RTIPublitalia Videotime Sipra Rai Way Rai Sport Rai Education al Rai News Tele PA Rai Fiction Rai Cinema Ballandi Ent . BBC World Class Editori Radio Italia Anica Flash Il Sole 24 ore Turner Inc . Fascino PGT Mediavivere Endemol Italia Magnolia Einstein Major Americane CONI / Lega Calcio Elettronica Industriale HSE Broadcasting Telecom Italia La7 Televisioni S.p.A. TIMedia MTV Italia S.r.l. MTV USA Telecom Italia Media Broadcasting Cairo Communication Cairo TV MTV Pubblicità S.r.l. Maurizio Rossi Ed. Giglio Group Elefante TV BBC NBC HBOFBC MediaGroup Discovery / History Channel Frenter S.r.l. Holland Coordinator and Service company EurosportTF1 Interactive Group S.r.l. Radio e Reti Direzione Produz TV Owner controls Content providers Multiplex Concession 60,43% 100% 49% 51% 51% 49% 100% 100% 100% 100% 100% 50% 50% 50% 99% 100% 100% 100% 100% 100% Rai S.p.A MUX TIMedia MTV Italia La7 Cartapiù La7 Music Box Primocanale MUX 1 RAI Rai 1 Rai 2 Rai 3 MUX 1 RAI Rai 1 Rai 2 Rai 3 MUX 2 RAI Rai Sport Sat Rai Edu 1 Rai News 24 Rai Doc Rai Utile MUX 2 RAI Rai Sport Sat Rai Edu 1 Rai News 24 Rai Doc Rai Utile MUX RTI BBC World Rete 4 Class News Video Italia TV Coming soon 24 ore TV Boing Mediaset Premium MUX RTI BBC World Rete 4 Class News Video Italia TV Coming soon 24 ore TV Boing Mediaset Premium MUX HSE Canale d MUX HSE Canale d MUX Dfree Sportitalia La Châine Info Video Italia TV Canale 5 Italia 1 MUX Dfree Sportitalia La Châine Info Video Italia TV Canale 5 Italia 1 MEDIASET RTIPublitalia Videotime Sipra Rai Way Rai Sport Rai Education al Rai News Tele PA Rai Fiction Rai Cinema Ballandi Ent . BBC World Class Editori Radio Italia Anica Flash Il Sole 24 ore Turner Inc . Fascino PGT Mediavivere Endemol Italia Magnolia Einstein Major Americane CONI / Lega Calcio Elettronica Industriale HSE Broadcasting Telecom Italia La7 Televisioni S.p.A. TIMedia MTV Italia S.r.l. MTV USA Telecom Italia Media Broadcasting Cairo Communication Cairo TV MTV Pubblicità S.r.l. Maurizio Rossi Ed. Giglio Group Elefante TV BBC NBC HBOFBC MediaGroup Discovery / History Channel Frenter S.r.l. Holland Coordinator and Service company EurosportTF1 Interactive Group S.r.l. Radio e Reti Direzione Produz TV Owner controls Content providers Multiplex Concession 60,43% 100% 49% 51% 51% 49% 100% 100% 100% 100% 100% 50% 50% 50% 99% 100% 100% 100% 100% 100% Rai S.p.A Content Provider Network Provider Concessionario MUX Pubblicità Capogruppo Canali di prprietà Canali di terzi Other LEGEND Content Provider Network Provider Licence owner Advertising Holding Tv channels owned Third channels Technical production MUX TIMedia MTV Italia La7 Cartapiù La7 Music Box Primocanale MUX 1 RAI Rai 1 Rai 2 Rai 3 MUX 2 RAI Rai Sport Sat Rai Edu 1 Rai News 24 Rai Doc Rai Utile MUX RTI BBC World Rete 4 Class News Video Italia TV Coming soon 24 ore TV Boing Mediaset Premium MUX HSE Canale d MUX Dfree Sportitalia La Châine Info Video Italia TV Canale 5 Italia 1 MEDIASET RTIPublitalia Videotime Sipra Rai Way Rai Sport Rai Education al Rai News Tele PA Rai Fiction Rai Cinema Ballandi Ent . BBC World Class Editori Radio Italia Anica Flash Il Sole 24 ore Turner Inc . Fascino PGT Mediavivere Endemol Italia Magnolia Einstein Major Americane CONI / Lega Calcio Elettronica Industriale HSE Broadcasting Telecom Italia La7 Televisioni S.p.A. TIMedia MTV Italia S.r.l. MTV USA Telecom Italia Media Broadcasting Cairo Communication Cairo TV MTV Pubblicità S.r.l. Maurizio Rossi Ed. Giglio Group Elefante TV BBC NBC HBOFBC MediaGroup Discovery / History Channel Frenter S.r.l. Holland Coordinator and Service company EurosportTF1 Interactive Group S.r.l. Radio e Reti Direzione Produz TV Owner controls Content providers Multiplex Concession 60,43% 100% 49% 51% 51% 49% 100% 100% 100% 100% 100% 50% 50% 50% 99% 100% 100% 100% 100% 100% Rai S.p.A MUX TIMedia MTV Italia La7 Cartapiù La7 Music Box Primocanale MUX 1 RAI Rai 1 Rai 2 Rai 3 MUX 1 RAI Rai 1 Rai 2 Rai 3 MUX 2 RAI Rai Sport Sat Rai Edu 1 Rai News 24 Rai Doc Rai Utile MUX 2 RAI Rai Sport Sat Rai Edu 1 Rai News 24 Rai Doc Rai Utile MUX RTI BBC World Rete 4 Class News Video Italia TV Coming soon 24 ore TV Boing Mediaset Premium MUX RTI BBC World Rete 4 Class News Video Italia TV Coming soon 24 ore TV Boing Mediaset Premium MUX HSE Canale d MUX HSE Canale d MUX Dfree Sportitalia La Châine Info Video Italia TV Canale 5 Italia 1 MUX Dfree Sportitalia La Châine Info Video Italia TV Canale 5 Italia 1 MEDIASET RTIPublitalia Videotime Sipra Rai Way Rai Sport Rai Education al Rai News Tele PA Rai Fiction Rai Cinema Ballandi Ent . BBC World Class Editori Radio Italia Anica Flash Il Sole 24 ore Turner Inc . Fascino PGT Mediavivere Endemol Italia Magnolia Einstein Major Americane CONI / Lega Calcio Elettronica Industriale HSE Broadcasting Telecom Italia La7 Televisioni S.p.A. TIMedia MTV Italia S.r.l. MTV USA Telecom Italia Media Broadcasting Cairo Communication Cairo TV MTV Pubblicità S.r.l. Maurizio Rossi Ed. Giglio Group Elefante TV BBC NBC HBOFBC MediaGroup Discovery / History Channel Frenter S.r.l. Holland Coordinator and Service company EurosportTF1 Interactive Group S.r.l. Radio e Reti Direzione Produz TV Owner controls Content providers Multiplex Concession 60,43% 100% 49% 51% 51% 49% 100% 100% 100% 100% 100% 50% 50% 50% 99% 100% 100% 100% 100% 100% Rai S.p.A MUX TIMedia MTV Italia La7 Cartapiù La7 Music Box Primocanale MUX 1 RAI Rai 1 Rai 2 Rai 3 MUX 1 RAI Rai 1 Rai 2 Rai 3 MUX 2 RAI Rai Sport Sat Rai Edu 1 Rai News 24 Rai Doc Rai Utile MUX 2 RAI Rai Sport Sat Rai Edu 1 Rai News 24 Rai Doc Rai Utile MUX RTI BBC World Rete 4 Class News Video Italia TV Coming soon 24 ore TV Boing Mediaset Premium MUX RTI BBC World Rete 4 Class News Video Italia TV Coming soon 24 ore TV Boing Mediaset Premium MUX HSE Canale d MUX HSE Canale d MUX Dfree Sportitalia La Châine Info Video Italia TV Canale 5 Italia 1 MUX Dfree Sportitalia La Châine Info Video Italia TV Canale 5 Italia 1 MEDIASET RTIPublitalia Videotime Sipra Rai Way Rai Sport Rai Education al Rai News Tele PA Rai Fiction Rai Cinema Ballandi Ent . BBC World Class Editori Radio Italia Anica Flash Il Sole 24 ore Turner Inc . Fascino PGT Mediavivere Endemol Italia Magnolia Einstein Major Americane CONI / Lega Calcio Elettronica Industriale HSE Broadcasting Telecom Italia La7 Televisioni S.p.A. TIMedia MTV Italia S.r.l. MTV USA Telecom Italia Media Broadcasting Cairo Communication Cairo TV MTV Pubblicità S.r.l. Maurizio Rossi Ed. Giglio Group Elefante TV BBC NBC HBOFBC MediaGroup Discovery / History Channel Frenter S.r.l. Holland Coordinator and Service company EurosportTF1 Interactive Group S.r.l. Radio e Reti Direzione Produz TV Owner controls Content providers Multiplex Concession 60,43% 100% 49% 51% 51% 49% 100% 100% 100% 100% 100% 50% 50% 50% 99% 100% 100% 100% 100% 100% Rai S.p.A MUX TIMedia MTV Italia La7 Cartapiù La7 Music Box Primocanale MUX 1 RAI Rai 1 Rai 2 Rai 3 MUX 1 RAI Rai 1 Rai 2 Rai 3 MUX 2 RAI Rai Sport Sat Rai Edu 1 Rai News 24 Rai Doc Rai Utile MUX 2 RAI Rai Sport Sat Rai Edu 1 Rai News 24 Rai Doc Rai Utile MUX RTI BBC World Rete 4 Class News Video Italia TV Coming soon 24 ore TV Boing Mediaset Premium MUX RTI BBC World Rete 4 Class News Video Italia TV Coming soon 24 ore TV Boing Mediaset Premium MUX HSE Canale d MUX HSE Canale d MUX Dfree Sportitalia La Châine Info Video Italia TV Canale 5 Italia 1 MUX Dfree Sportitalia La Châine Info Video Italia TV Canale 5 Italia 1 MEDIASET RTIPublitalia Videotime Sipra Rai Way Rai Sport Rai Education al Rai News Tele PA Rai Fiction Rai Cinema Ballandi Ent . BBC World Class Editori Radio Italia Anica Flash Il Sole 24 ore Turner Inc . Fascino PGT Mediavivere Endemol Italia Magnolia Einstein Major Americane CONI / Lega Calcio Elettronica Industriale HSE Broadcasting Telecom Italia La7 Televisioni S.p.A. TIMedia MTV Italia S.r.l. MTV USA Telecom Italia Media Broadcasting Cairo Communication Cairo TV MTV Pubblicità S.r.l. Maurizio Rossi Ed. Giglio Group Elefante TV BBC NBC HBOFBC MediaGroup Discovery / History Channel Frenter S.r.l. Holland Coordinator and Service company EurosportTF1 Interactive Group S.r.l. Radio e Reti Direzione Produz TV Owner controls Content providers Multiplex Concession 60,43% 100% 49% 51% 51% 49% 100% 100% 100% 100% 100% 50% 50% 50% 99% 100% 100% 100% 100% 100% Rai S.p.A Digital TV in Italy (case study)

24. © M. Pagani 2014 EMLYON Business School Value network of the digital TV Control point in value creation Tier 1 SubsystemTier 2 Component Electronic publisher Content creator Content creation Multimedia Packaging and services Network and Infrastruct. Equipment Provision Software Hardware Broadcaster Software developer ISP GovernmentAuxiliary Enablers Consumers Service Provider TLC Tier 2 Component Tier 1 Subsystem Service Provider Value Terminal providers Control point in value capture Consumers Core Competencies Edge Competencies Existing relationships or contractual links Potential relationships or contractual links

25. © M. Pagani 2014 EMLYON Business School 25 Value creation logic Focus on a specific phase of the value chain managing relations with partners along the value chain Value capture logic - Network operators have an advantage - SP collect revenues directly from final users and distribute them among the other upstream stages of the value chain - Broadcasters gather relevant additional revenues from indirect sources Primary activity categories - Content provision - Content and interactive service packaging - Network provision - Managing relationships with customers and partners Main interactivity Symmetric/Asymmetric Interactivity relationship logic Primary activity - Pooled interdependence - Sequential - Reciprocal Key cost/value drivers - Scale Business value system - Referred hubs structure Model 2 - Loosely coupled coalition model

27. © M. Pagani 2014 EMLYON Business School 27 Side 4 Side 3 Side 1 Side 2 Core Competencies Edge Competencies NetworkNetwork End userEnd user peerspeers Control point in value creation Control point in value capture PlatformPlatform aggregatorsaggregators Value network of the Multi-sided platforms

28. © M. Pagani 2014 EMLYON Business School 28 Value creation logic Bringing together two or more distinct groups of customers, building an “infrastructure” that creates value by reducing distribution, transaction, and “search” costs Value capture logic In multi-sided networks cost and revenue are on each side. The platform incurs costs in serving all the groups and can collect revenue from each, although one side is often subsidized Primary activity categories - Network promotion - Service provisioning - Infrastructure operation Main interactivity Simultaneous, parallel relationship logic Primary activity - Pooled interdependence - Reciprocal Key cost drivers - Scale - Capacity utilization Key value drivers - Capacity utilization Business value system - Layered and interconnected networks structure Model 3 – Multi-sided platforms

29. © M. Pagani 2014 EMLYON Business School 29 Centralized control vertical integration Incentive to integrate & lock in advantage 3 THE MODEL Incremental innovation Cross-boundary industry disruptions Business Process 1 Business Process 2 Business Process 3 Closed verticallyClosed vertically integratedintegrated Loosely coupledLoosely coupled coalitionscoalitions Multi-sidedMulti-sided platformsplatforms Towards theTowards the emergence of aemergence of a giant component?giant component? Pressure for openness/ disintegration

31. © M. Pagani 2014 EMLYON Business School IMPLICATIONS • To understand who controls the network we need to explore in depth where the value is created and who captures this value: – Value in the customer access – Value in Common Infrastructure – Value in Modularity – Value in content access – Value in Orchestration • In some cases, acquiring control positions for the access of the final users (as a customer gatekeeper) was coupled by a parallel upstream integration of content control leading to the integration of different stages of the value chain of the same entity.

32. © M. Pagani 2014 EMLYON Business School IMPLICATIONS  We support the double helix model (Fine 1998) and discover three models that characterize the control point constellations of the multimedia industry.  In order to survive in an increasingly uncertain and complex environment, the firm has to transform its "organizational intelligence" into a new “relational intelligence”, enacting an open communication process with its stakeholders.  Which outcomes occur, how frequently they occur, and with what consequences, are all questions that can only be resolved by thinking jointly about structure and dynamics and the relationship between the two.

Margherita Pagani: Digital business strategy & value creation

CBOD ANR project U-PSUD

Margherita Pagani: Digital business strategy & value creation