Mohsen Javdan. Dr. Mohammad Fathian

Transcription

1 Developing a framework for assessing B2C mobile business models Mohsen Javdan Department of Industrial Engineering, Iran University of Science and Technology, Dr. Mohammad Fathian Department of Industrial Engineering, Iran University of Science and Technology, Abstract: Currently with the help of developing and expanding Mobile and wireless network technologies, new and numerous opportunities have created for starting mobile business models. In this field several researches have performed worldwide that want to assess the mobile commerce environment from different aspects in order to select proper alternatives. In this paper, with the aim of assessing content provider mobile business models, firstly the m-commerce roles, mobile business models, and different classifications and approaches will be explored. After that by studying current frameworks for evaluating mobile business models and choosing Osterwalder outline as a base model, we develop a hierarchical structure for comparing mobile business models. On the bases of this structure Mobile business models evaluating factors are also extracted from the literature. Keywords: Mobile commerce, Mobile business models, business model evaluating framework 1.Introduction After bursting dot.com bubble in 2000, many researchers have focused on business models, particularly electronic business models. On the other side communication and telecommunication network technologies is growing everyday and has created countless opportunities to start new electronic businesses. Among these technologies, mobile technology has the most growth and a lot of innovative business models are made to take advantage of its benefits. So in order to using mobile business models by organizations and entrepreneurs, we must first evaluate the mobile business models. 1

2 In February of 1999, when i-mode wireless web service was initiated in Japan, It was wildly successful, a racting over 1 million new customers every month for the first two years (Afuah,2004). DoCoMo, i-mode launcher Japanese company, had the right business model, the right technology, the right partnerships, and the right target segment. Currently in Developed and Developing countries such as Japan, Hong Kong, Taiwan, South Korea and Singapore, the proper strategies and associated mobile technologies have provided. There are a few researches in mobile business model policy making and also assessing mobile commerce components. Most of the past researches about strategies and mobile business models just review some parts of the problem. Limited evaluations were performed in m-commerce applications and services. Since there are several roles within the m-commerce value chain, developing single solution for all the m-commerce roles, is not possible. So content provider, one of the fundamental and important role of m-commerce, is considered to developing a framework for assessing mobile business models. This paper designs a proposed framework for assessing content provider mobile business model basis of a business models evaluating framework and also available factors in related papers. 2. Mobile business worldwide status During these years, mobile and wireless market has been the most attractive one in the world and moving forward every day. UNCTAD annual report said that in 2005 the number of mobile subscribers is more than 2 billion consisting of 40% Asian (UNCTAD, 2006). Private researches show that by 2008 the number of worldwide mobile subscriber will be 3.2 billion. In developed countries Mobile industry growth is due to increasing use of innovative services such as SMS, roaming, access to internet and music download. For example, more than one third of European was expected to have cell phones with internet ability (Kelley & McCarthy2006), Nevertheless currently more than three forth of them that have such cell phones have not used internet ability. But there are some signs of potential growth about B2C services. For example 40 percent of music downloads in Asia and Europe was done with mobile phones in Based on Juniper researches, m- commerce market will be expected to have 23 billion transactions by M-Business players and roles 2

3 M-Business is generally characterized by a variety of business partnerships often involving a large number of organizations from content providers to WASPs to mobile network operators. While no two value chains are the same. As figure 1 illustrates, the delivery of m-commerce applications and services involves a number of players. They generally fall into one or more of the following categories: Infrastructure equipment vendors, Software vendors, Content providers including advertisers, Content aggregators, Mobile Network Operators (MNOs) including virtual ones (VMNOs), Mobile portals, Third-party billing providers, Mobile device manufactures, Wireless application services providers (WASPs), Location information brokers(sadeh, 2002). Each actor maybe concentrates on the specific part of value creation process. They can aim to this goal by performing the appropriate business model(s) which provide close relationship with customers, involves individuals, businesses and business partnerships. Users with this business models can place themselves at the center of the value chain. 4. Mobile Business Model Classification Using current e-business model categorization into M-Business is challenging. Because wireless channel has its own differences due to communication channel characteristics, consume patterns, Industry maturity, etc in comparison with traditional channel like wired Internet. So in this paper the focus is on mobile business models classification as a separate part of electronic commerce not the subset of it. 3

4 Advertiser Location Info Broker Infrastructu re Provider Handset Manufactur e Virtual MNO WASP Software vendor 3rd party billing provider Customer Mobile Portal Mobile Network Operator Content owner Content Provider Content Aggregator Equipment vendors Value Creation By exploring mobile business model literature, three categories will be found in general. The first classification is based on the value chain elements, e.g. Sharma and Nakamura (2003) and Norman Sadeh (2002) have this approach. In this classification, the actors in Mobile business value chain are introduced and then for each one, relevance mobile business model is defined. On the other hand, the second categorization is consistent with traditional e-commerce business model categories such as Business to Consumer, Business to Business and Business to Employee. Leem et al. (2004) has this point of view about mobile business model classification. At last, third categorization has no specific approach. For example some of them are based on mobile applications and services categories like i- mode service classification which was introduced in Japan for the first time. The others ones have their own viewpoint. For instance Componou and Pigneur (2002) presented a Business model category which is based on m-commerce needs. Table1 shows the difference categorization. It can be clearly seen that there are a lot of actors in m- Commerce value chain for which we can propose a business model. In this paper, we focus on B2C mobile business models in order to develop a framework for assessing such models. 4

5 Author Mobile Business Models Approach Norman Sadeh Infrastructure equipment vendors, Software vendors, content Value Chain providers, content aggregators, Mobile Network Operators, Mobile portals, Third-party billing providers, Mobile device manufacturers, Wireless Application Service Providers(WASPs), Location Information Brokers Sharma and Nakamura Leem et. al. Camponovo and Pigneur Content service provider, advertising and publishing services, device manufacturers, operators, WLAN operators, platform services, fixed wireless integration, 3G services B2C: Commerce, Intermediary, Information B2B/B2E: Firm infrastructure, procurement & Inbound Logistics, Operations, Outbound Logistics, Marketing and Sales, After-sales Service & Supporting Systems Technology: device manufacturers, equipment and platform provider Application: application provider, content provider, content aggregator, Mobile portal Access: Mobile Network Operator, Internet Service Provider Table 1: m-commerce Business Model categories 5 Wired classification Customer Need 4.1. Mobile B2C business model In general, the current M-commerce applications include B2B, B2C, and Business-to- Employee (B2E). B2C currently dominates these applications (Kannan & Chang, 2001). Actually m-commerce services are designed for individual end-users. M-services are categorized in different groups and cause various revenue sources and business models. The services form the Business to Consumer model. These services include: news, directory, guidance, purchase, entertainment, financial, ticketing and so on. In addition, possible revenue sources are subscription fees, Transaction fees, and different forms of reference and commission fees. These revenue sources can be combined with each other. In this paper we consider the classification which is developed by Leem et al. (2004) They subdivide the mobile B2C business model into commerce, intermediary and information models. A commerce model provides mobile contents and/or services for direct commercial transaction. Commerce refers to a business model which provides transactionbased service and/or content such as ticketing, reservation, download, music, etc. The digital model delivers intangible values game, mp3, ebook, etc. The physical model deals with marketing and sales of physical goods electronic appliances, books on the mobile channel, including offline logistics. The service model supplies communication and/or reservation, etc. An intermediary model delivers mobile contents and/or services from other sources to customers such as stock-related sites, news, weather information, etc.

6 And an information model provides personalized information to customers mobile terminals generally on a push basis. Each B2C category and its examples are listed in Table 2. In the next part we explore some Business model evaluation framework in order to determine a basis for assessing B2C mobile business models. 5. Business model Assessing frameworks A last, but nevertheless very important and challenging field of business model research concerns the definition of indicators, business model measurement and evaluation (Osterwalder, 2004). A number of authors have written on this question, attacking the problem from different angles (Afuah, 2003; Hamel, 2000; Gordijn, 2002; Ng, 2005). The following sections describe the researches on this field of study. Table2: Mobile B2C business model and its examples 5.1. Afuah and Tucci assessing framework Afuah and Tucci (2003) appraise business models on three levels. Namely profitability measures, profitability predictor measures and business model component attribute measures. The first level embraces earnings and cash flows, two frequently used indicators by analysts. If a firm's earnings or cash flows are better than those of competitors, this would mean that it has a competitive advantage. The second level comprises profit margins, revenue market share and revenue growth. Again, a firm has a competitive advantage if these measures indicate a better performance than competitors. The third and capital level provides benchmark questions for each of Afuah and Tucci's business model components (see Table 3). 6

7 Level 1 Profitability Earnings Cash flow Level 2 Profitability predictor measures Margins Market share Revenue share growth rate Component attribute measures Positioning Value Scope Price Revenue Level 3 Activities Implementation Capabilities Sustainability Cost structure Table3: Business Model Appraisal Levels (Afuah and Tucci, 2003) Allan Afuah (2004) stated the business model components including positions, resources, activities, costs, industry s factors and cost. Nevertheless he is inspired by Michael Porter (2001) views about five competitive forces. Afuah believes that a business model includes the profit-oriented aspects of strategy and operational effectiveness Osterwalder assessing framework Osterwalder (2002a, 2002b, 2002c, 2003, 2004) believes that the best way for assessing one business model is to define the measures and indicators in consistent with main components of that business model. He suggests a framework which emphasizes on the following four areas that a business model has to address: Product measures that assess the originality of the value proposition and identify what the organization has to build for learning, long term growth, and innovation (creativity, employee capabilities, motivation, turnover, stock options, etc). Customer measures that evaluate the relationships of the organization with its customers (retention, acquisition, satisfaction, profitability, etc) and the appreciation of the value proposition by the customers (functionality, quality, price, timeliness, brand image, availability, shopping experience, etc). Infrastructure measures that identify the internal and outsourced activities of the value chain and processes with the greatest impact on customer satisfaction and financial objectives (design, build, delivery, service, etc). And finally, 7

8 Finance measures that serve as the focus for the objectives and the measures of all the other perspectives and concern revenue growth cost management, asset utilization and market capitalization, etc). He splits the four pillars of the business model into nine interrelated business model building blocks or elements which presented in Table Hamel Evaluation Framework Hamel (2000) identifies four main business model components that range from core strategy, strategic resources over value network to customer interface. These components are related to each other through three bridges and are decomposed into different subelements Gordijn Evaluation Framework The probably most advanced proposition for evaluating business models is outlined by Gordijn (2002) and is part of their e3-value method. They propose studying the economic feasibility of an e-business idea in quantitative terms by creating a profit sheet and assessing the value of objects for all actors involved. This is possible because their method is highly actor-, network- and value-centered and focuses and the value exchanges among business model participants Weill and Vitale Evaluation Framework Weill and Vitale (2001) have a slightly different approach; they give a systematic and practical analysis of eight so called atomic e-business models. These atomic business models can be combined to form an e-business initiative. Every one of these atomic e- business models is analyzed according to its strategic objectives and value proposition, its sources of revenue, its critical success factors and its core competencies. 8

9 Table4: The nine business model building blocks (Osterwalder, 2002) 6. B2C mobile business model evaluation In order to assess B2C mobile business models, we consider one of the above frameworks as a basic one. Assessing indicators in explored frameworks have a lot of commons due to the same approach. Osterwalder framework is the most complete one and has sufficient citation in comparison with other framework. So, Osterwalder business model framework is considered as a basic for assessing B2C mobile business models. We then explore the mobile business model evaluation indicators and measurements which are extracted from past researches Mobile business model evaluation indicators There is a little resource in literature about mobile business model evaluation indicators and the majority of researches in m-commerce study m-applications and m-services. In spite of that we try to embed these indicators in our basic framework, Osterwalder Business model Ontology. We then explored papers in online academic journals and finally two studies with the subject of mobile business model evaluation were selected. In the next part the indicators in each paper is described. 9

10 Wu and Hisa Wu and Hisa (2004) investigated the business model differences among Web-based, M- and U-commerce in terms of five attributes: value proposition, market segment, cost structure, and profit potential and value network. These business model dimensions are accordance to Afuah and Tucci (2003) business model evaluation Framework. In each dimension for m-commerce they proposed some indicators that we use them to embed into osterwalder framework as a B2C mobile business models evaluation framework. Table 5 illustrates dimensions and indicators for mobile business model. Factors Value proposition Market segment Cost structure Profit potential Value network Indicators 1. Mobility 2. Localization 3. Personalization 4. Convenience 1. Regional market 2. Mobile device users 3. Business mobile workers and young people 4. Targeted customer base 1. Technology cost, application development cost, networking and content delivery cost 2. Content creation cost 3. Logistic cost for physical goods and logistic cost for information goods 1. Improved efficiency of mobile workforce and task 2. Revenue of mobile servicing and networking fee 3. Networking and service charge 1. Telecom operators 2. Mobile service, application, and content providers 3. Mobile device manufacturers 4. Internet and mobile portals Table5: m-commerce business model evaluation factors and indicators Leem and et al Leem et al. (2004) suggests a framework for measuring and analyzing mobile B2C business models and services. The framework is based on four perspectives: use environment, interface, perception and information which are shown in table 6. In a use environment, factors related to general customer satisfaction include the mobile service data transmission level, pricing level, and utility level. The interface index consists of interaction, information representation, contents and a system to measure customer satisfaction on the mobile interface. Perception is divided into easiness and usability, 10

11 considering how easy or usable a customer feels when he or she uses a mobile service. The information index is intended to measure quality of mobile information and service. A total of four indices use environment, interface, awareness and information comprise the representative indices. Representative indices Effectiveness indices Measurement indices Use environment Data transmission Pricing Utility Data transmission level Pricing level Variety of service Convenience of service Handheld device firmness Interface Perception Interaction Information representation Contents System Easiness Usability 11 Use flexibility/suitability Information readability/harmony Content consistency Network speed Easiness level Usability level Information Information service/product Exactness Update Table6: Analysis structure for assessing on mobile B2C model (Leem et. al., 2004) 6.2. Developed mobile B2C business model assessing framework With regard to selecting osterwalder framework as a basis for B2C mobile business model assessment, we extract the indices from the two previous researches and imbed them into the basic framework. In the next sections we describe the evaluation framework separated by building blocks of business model including: customer interface, product, infrastructure management and financial aspects Value proposition The value propositions for M-commerce are mobility, localization, personalization, and convenience (Wu & Hisa, 2004). The primary advantage of mobile technology is to provide a superior value-for-time offering. The agility and accessibility provided by mobile devices is convenient for users in retrieving information and performing transactions from virtually and location on a real time basis. Additionally, mobile devices are typically used by a sole individual that is ideal for a personalized target marketing services Target customer The majority of M-commerce services are young people or mobile business workers who have digital literacy (Clark, 2001; Feldman, 2000; Zhang & Yuan, 2002). Former researches show that the main parts of most mobile services are young users (Anckar & Incau, 2002). On the other hand the M-commerce market area is regional and narrower than Web-based commerce; the customer bases are much smaller (Kannan & Chang, 2001).

12 Distribution channel With respect to target customer combination of B2C mobile business models and how they access to services, we have following distribution channels: Mobile internet, SMS, software applications, wireless local networks and ad-hoc networks for end users and traditional electronic channels including internet and intranet Communication Communication involves infrastructure, bandwidth and customer profile resources. Hence, a company that attempts to enter the M-commerce market may require high development and investment costs in negotiating with the mobile operator industry. Predictably, the emerging ubiquitous technology will create new interoperable network infrastructure and software platform standards Value Configuration Providing, producing and delivering the content are performed with the help of following activities: Gathering customer information about location, profile, preferences and shopping history etc. This kind of information gathered from different resources including location information broker, Mobile Network Operator, Traditional portals etc. Value is configured by repacking and reformatting information for distribution over the mentioned distribution channels Capability Capabilities in B2C Mobile Business models including access to frequency spectrum, to data carrier, to customer profile and preferences, and having strong links with mobile value chain elements especially end-users, large customer base, access to handset first screen, knowledge and experience in established connection with customer and finally access to different kind of information resources Partnership Partnership arrangement for providing information and services or revenue sharing with MNOs, WASP, Mobile Portal, location information broker, content owner, content aggregator, news agencies and payment agents Cost structure Technology cost, application development cost, access to network and content delivery, Content production and logistic cost for information product (Wu & Hisa, 2004) Revenue model Revenue sources are from customer subscription, customer transaction, revenue share gathered with mobile operator, various models of guarantee like advertising, reference and commission fee in addition to syndicate arrangements and revenue sharing of access to mobile network. Our proposed framework for assessing B2C Mobile business model with the related indices is described in Table7. 12

13 7. Concluding Entering and presence in mobile commerce environment needs continuous assessing and proper selection of mobile business models. In other words each enterprise with the aim of delivering mobile information and services, must decide about how performs activities over one or more mobile business model. In this regard the proposed mobile business model assessing framework can be a basic for management decision making for startup enterprises. Business model component Customer Interface Business model building block Target customer Distribution channel Relationship Effectiveness factors Young people, mobile worker, regional market, portal and content aggregator demand, Interaction, Information, representation, contents, system Easiness, Usability Product Value proposition Mobility, Localization, Personalization, convenience Financial aspects Revenue Model Revenue of mobile servicing and networking fee Cost structure Providing resources cost Infrastructure management Value configuration Activities for delivering services and information to endusers 13 Measurement indices Age and gender Movement level Market size Demand levels Use flexibility/suitability Information readability/harmony Contents consistency Network speed Easiness level Usability level Exactness Update Speed of delivery Customer Consistency Depends to business model Depends to business model Enterprise position through the value chain Capability Abilities in value chain Access level to channels Access level to customer Knowledge level Partnership Partnership Bargaining power arrangement level Table7: Proposed B2C mobile business model assessing framework

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