Biz model 1.2 why are they important

Technology Management Strategy (MT4002):

Why are Business Models important?

A/Prof Jeffrey FunkDivision of Engineering and Technology Management

National University of Singapore

They have a big impact on business success◦ Many examples of why some firms succeeded more than others

can be explained in terms of business models Business models need constant modifications as

changes in technology etc. occur◦ But many firms do not modify their business models

Changes in business models can also explain growing success or failure of certain countries

The variety (and pace?) of technology change and thus need for new business models may be accelerating

Why Business Models?

Computer-related Video-game Mobile Phones Other Consumer Electronics Internet Broadcasting Semiconductor Transport Medical Equipment

MT4002 Addresses Success or Failure of Firms in Many Industries

They need constant modifications particularly when there are changes in ◦ Technology◦ Customer needs◦ Market segments◦ Performance, price, and costs◦ Levels of vertical (dis)integration◦ Number of firms in industry◦ Regulations and laws (e.g., deregulation)◦ Scale (e.g., more or less economies of scale)◦ Stage of industry lifecycle

One Reason why Biz Model Impacts on Success and Failure is… (1)

But many firms do not modify their business models as changes occur

And thus they◦ they lose market share◦ they are acquired or gradually disappear

One Reason why Biz Model Impacts on Success and Failure is… (2)

They have a big impact on business success◦ Many examples of why some firms succeeded more than others

can be explained in terms of business models Business models need constant modifications as

changes in technology etc. occur◦ But many firms do not modify their business models

Changes in business models can also explain growing success or failure of certain countries

The variety (and pace?) of technology change and thus need for new business models may be accelerating


Success of Japanese firms partly came from new business model that involved:

Value proposition◦ emphasize quality including reliability, durability, and low

number of internal defects Scope of activities

◦ vertically integrated in firm or business group (keiretsu) Method of strategic control

◦ high quality in both design/development and manufacturing◦ low inventory (just-in time manufacturing)◦ Kaizen, continuous improvement

Biz Model can also Partly Explain Success and Failure of Countries

But many changes have occurred over the last 20 years◦ U.S., Taiwanese, Singaporean and other firms have learned

about quality, inventory control, and Kaizen◦ These firms have used low-cost and relatively high-quality

manufacturing from China to reduce importance of Japan’s advantages in manufacturing

Result is products from other countries have quality that is comparable to Japanese quality (and costs that are much lower)

Biz Model can also Partly Explain Success and Failure of Countries (2)

Other changes have occurred◦ Emergence of vertical disintegration enabled entry of new firms

that have lower scopes of activities in computers, semiconductors, consumer electronics, etc.

◦ Japanese firms have been slow to reduce their scopes of activities partly because they don’t like to sell companies, fire employees, and there are no startups in Japan

◦ But U.S., Taiwan, and Singapore have startups in semiconductor, computer, and biotechnology sectors

Result is falling shares for Japanese firms in ◦ Computers◦ Semiconductors◦ Consumer electronics

Biz Model ….Success Failure of Countries (3)

They have a big impact on business success◦ Many examples of why some firms succeeded more than

others can be explained in terms of business models Business models need constant modifications as

changes in technology etc. occur◦ But many firms do not modify their business models◦ One example of how business models require change can be

found in so-called disruptive technologies Changes in business models can also explain growing

success or failure of certain countries The variety (and pace?) of technology change may be

accelerating


Finally, Technology Change may be Accelerating◦ Frequency of discontinuities is increasing

These discontinuities often require changes in business models

Understanding how and when changes in business models are needed, is essential to business success


Industry Examples

Photography 1. Movement from film to digital bits, also new devices (e.g., camera phones)2. New methods of transferring data between individuals (fixed versus wireless Internet transfers) and between devices (e.g., PCs and cameras) owned by individuals (e.g., USB, memory cards)3. New ways to manage photos, i.e., content

Television 1. Movement from analog to digital and to high-definition television2. Movement to a new generation of digital video disks (DVDs)3. New methods of broadcasting such as over the Internet4. New mobile devices (e.g., digital tuners in mobile phones)

Music 1. Movement from CDs (compact discs) to MP3 players2. New mobile devices (e.g., i-Pod type devices and mobile phones)3. New methods of selling music (e.g., social networking sites)

Examples of Technological Changes Currently Occurring (1)

Industry Examples

Books 1. Emergence of e-books2. Use of laptops and i-Pad to read books

Computer/IT

1. Much cheaper laptop computers2. New “computers” such as tablet computers and smart phones3. Utility computing/cloud computing/software as a service4. Networks of RFID tags and smart dust

Human Computer Interface

1. From keyboards to touch displays2. Many kinds of touch displays; 3. Gesture-based interfaces4. Voice-recognition; 5. Neural interfaces

Telecom/IT 1. New forms of mobile phones, applications for mobile phones, and wireless networks (e.g., WiFi, ultrawideband)

2. New forms of wireline networks: e.g., integration of optics and computing on the same substrate, i.e., optical computing



Industry Examples

Semicon-ductors

1. New types of materials and processes such as nanotechnology2. New types of designs such as System on Chip (SoC), configurable processors3. New types of applications such as micro-electronic mechanical systems (MEMS), bio-electronic ICs such as laboratory on a chip, DNA sequencers and synthesizers, or drug delivery via an implanted or digested chip

Displays 1. Touch displays2. LCDs backlit with LEDs 3. Organic light emitting diodes (OLEDs)4. Electrophoretically Controlled Nematic (EPCN) liquid crystal

display5. 3D Displays6.Augmented reality7. Holographic displays


Industry Examples

Lighting 1. Compact fluorescent light bulb2. LEDs 3. Smart LEDs

Electricity 1. Wireless electricity2. Renewable energy sources such as solar cells: crystalline

silicon, micro-crystalline silicon, thin film amorphous silicon, thin film CdTe, CIGS (Cadmium Indium Gallium Selenide), organic cells, dye-sensitized cells

3. Other renewable such as wind turbines, fusion, geothermal4. Smart grids


Industry ExamplesAutomotive 1. Hybrid (battery and engine) vehicles

2. Plug-in vehicles; Hydrogen; Bio-fuels3. Autonomous vehicles

Education 1. Internet-based education

Healthcare 1. Movement to Internet-based information systems2. Nanotechnology-based treatments for cancer3. New forms of surgery4. New medical equipment5. Bionic eyes and other implants

Other Internet

1. 3D content, video, social network2. Social networks3. Utility computing (e.g., Software as a service)4. Mashups; video conferencing5. Business support services

For more ideas See my slide share account http://

www.slideshare.net/Funk98/presentations Based on my MT5009 module (Analyzing Hi-

Tech Opportunities)◦ Slides on when new technologies become

economically feasible◦ Some slides by me, some by students

http://www.slideshare.net/Funk98/presentations



U.S. Venture Capital Funding (B$) is Partly Driven by High Frequency of Technological Change

Software 5.1

Communications & Networking 3.0

Semiconductors 1.6

Other IT 2.2

Total IT 11.9

Biopharmaceutical 3.8

Medical devices 2.0

Other healthcare 1.0

Total healthcare 6.9

Other industries 3.5

Total all industries 22.3

Source: Dow Jones 2006 Venture Capital Industry Report

All Industries in 2010 26.45 Billion USDAerospace and defense 97Agriculture and forestry 34Biopharmaceuticals 3,246Business support services (mostly Internet) 2,516Communications and networking 1,027Construction and civil engineering 141Consumer information services 4,552Electronics and computer hardware 1,282Financial institutions and services 631Food and beverage 100Healthcare services (mostly Internet) 1,144Household and office goods 71Machinery and industrial goods 188

All Industries Billions of USD

Materials and chemicals 413Media and content 343Medical devices and equipment 2,249Medical software and information services 478Non-renewable energy 296Personal goods 47Renewable energy 2,118Retailers 182Semiconductors 764Software 3,762Travel and leisure 133Utilities 141Vehicles and parts 460Wholesale trade and shipping 0

Every one of these new technologies requires a new business model

Finding the appropriate business model is difficult This will cause incumbents and many new entrants to fail This provides opportunities for firms with good business

models

New Technologies, New Business Models

There are many changes driving a need for new business models

Although technological changes are the most obvious, there are others

Opportunities for new entrants and incumbents continue to be created

The goal of MT4002 is to help you ◦ understand these opportunities◦ their impact on business models◦ create business models

In Summary