HELSINKI UNIVERSITY OF TECHNOLOGY

Web and Mobile Technologies Enhanced Products and Services

Institute of Strategy and International Business, HUT

Jussi AutereJussi.Autere@hut.fi, phone +358-9-451 3086

HELSINKI UNIVERSITY OF TECHNOLOGY

Contents

• The trends that increase the importance of the Web and mobile technologies

• Changes that do not change business models

• Changes that change business models

HELSINKI UNIVERSITY OF TECHNOLOGY

The Web hype is over, but .. • .. some of the changes it brought along are here to stay

– The Web is currently changing business models and operating practices of almost every industry

– New mobile applications will emerge, even though slower than anticipated 1-2 years ago

– There are lot of changes everyone has to adapt• Increasing speed of communications• The overheads of running global business becoming smaller• Easier to find information about potential suppliers, customers and partners• It is becoming difficult to hide problems from customers and partners. E.g.

problems in product quality soon become common knowledge

HELSINKI UNIVERSITY OF TECHNOLOGY

What went wrong with the dot.com boom?

Num

ber of innovations

Maturity of Technology

Product technology innovation

Production and business process innovation

Adapted fromUtterback, JM. Mastering the Dynamics of Innovation—How Companies Can Seize Opportunities in the Face of Technological Change, 1994

Big investments in business processes too early

HELSINKI UNIVERSITY OF TECHNOLOGY

New customer interfacing and servicing technologies change

products • Now the maturity of Web technologies is reaching the stage when the era or process innovations has emerged– The infrastructure is there, but profitable business

models are lacking– Mobile infrastructure is 2-3 years behind Web

• Products can be enhanced to meet new business models• Enhancements are not always enough, but the structure

of the whole industry can change

HELSINKI UNIVERSITY OF TECHNOLOGY

Changes that do not change business models

• Components of a Business Model:– What (product key features and structure)– To whom (customer segment and reason to buy)– How (channel and earning logic)– Why?

• Changes that do not change the Business Model– Price, cost, quality, producing legal entity, value added product

features, etc.

HELSINKI UNIVERSITY OF TECHNOLOGY

Different approaches to mass-customization

High

Low

IVMass-.productionwith moreefficient tools

IIIMass-customizationby configurationprocess (new phase ofmake-to-order)

Low High

Changedone inproduct

Change done by process

IMass-customization byintelligentproducts

IIIntelligent mass-configurable products(replacing handicraftand one-time projects)

HELSINKI UNIVERSITY OF TECHNOLOGY

Prepare for mass-customization • The Web interface can give customer enough information about potential

choices and illustrate the results of the choices– Mass produced standard products or expensive tailoring or configuration are still the

norm– Dell is already a success story

• Sales configurator software alone seldom can not do the job of making mass-customization possible– Product architecture and modularity needed to support the choices– How to model the physical and functional interdependencies between the choices?

• Even Dell has problems: not all the chassis fir all the offered PCI cards• Modern and well functioning PDM systems needed• TAI research suggest that even ERP and supply-chain systems need to be changed to use

product centric data structures

HELSINKI UNIVERSITY OF TECHNOLOGY

Changes that change also business models

HELSINKI UNIVERSITY OF TECHNOLOGY

Disintegration of value chains– Beneath the surface of most companies, you find three

kinds of businesses• A customer relationship (or intimacy) business

• A product innovation business

• An infrastructure business (including production and other non-innovation producing operations)

– The Web and new mobile technologies reduce the strength of forces that keep businesses together

• The role of corporation as information and resource management hub reduces

• More open standardized interfaces to build products on

HELSINKI UNIVERSITY OF TECHNOLOGY

Consequences of disintegration of value chains for R&D

• The R & D organization unit has to choose whether it is new technology developer, customer solution integrator, or making infrastructure more efficient– Corporate organizations are not any more supporting second

class new technology development

• New configurations of value chains become more probable– Mergers and acquisitions become more and more common

– More possibilities for new business model innovations

HELSINKI UNIVERSITY OF TECHNOLOGY

Modern technologies and innovations a never isolated

• In practice, making an innovation out of an invention needs always complementary assets

• Marketing, selling, installation etc. resources and assets• Technological infrastructures where the product fits. New

communications infrastructures (Web, mobile) have increased role of these

• Production and logistics assets• Financial resources

• The competitive advantage offered by new invention can be easy or hard to imitate

HELSINKI UNIVERSITY OF TECHNOLOGY

Who profits from the innovation?

High

Low

IVInventormakes money

IIIParty with bothtechnology and assetsor with bargainingpower makes money

Freely Availableor Unimportant

Tightly Held andImportant

Imitability

Complementary Assets

IDifficult tomake money

IIHolder ofcomplementaryassets makesmoney

Teece, DJ, Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing and Public Policy, Research Policy 15 (1986), pp. 285-306.

HELSINKI UNIVERSITY OF TECHNOLOGY

Strategies how to handle the new technologies

• The strategies how to deal with an innovation depends on the role R&D organization (or the company to which it is embedded) has– Customer intimacy organization usually analyzes the risks

which new innovations impose and how to acquire the new technologies

– New technology R&D organizations usually analyze how to get a hold to critical complementary assets to profit from their innovation

HELSINKI UNIVERSITY OF TECHNOLOGY

Strategies for building business models

High

Low

IVBlock

IRun

IITeam-up Joint venture Strategic alliance AcquisitionInternal development

IIIBlockTeam-up Joint venture Strategic alliance Acquisition

Freely Availableor Unimportant

Tightly Held andImportant

Imitability

Complementary Assets

Afuah, A and Tucci, CL, Internet Business Models and Strategies—Text and Cases, McGraw-Hill Irwin, New-York, NY, 2001

HELSINKI UNIVERSITY OF TECHNOLOGY

Problems for established players facing new technologies

• Make or buy?– Usually the established organizations are rather well aware of the potential new

technologies that pose threats to their existing operations– The establish players many times even participate in the early stage

development of new technologies, but then they fail to take the technology to mainstream

– The problem of management of an establish player is that usually the party that it gets its information is the R&D unit in charge of the previous technology generation. It transmits biased information

– Research of Afuah (AMJ 2001:1211-1239) suggests that the most feasible strategy is to make the early stage research and even 1st generation product development self, but then spin off the unit

HELSINKI UNIVERSITY OF TECHNOLOGY

Conclusions• The Web is changing both traditional products and the

way of providing them to customers– Mobile technologies are starting to do the same

• If there is no forces changing industry structure, the focus area is many times how to exploit the possibilities to meet more exactly the real customer need

• The probability of changes in business models for R&D organizations increases– Need for analysis of complementary assets and players