Business Models for Networked Infrastructure Ken Peffers UNLV September 2004

Business Model Components Business Concept Organizational Capabilities Value to Stakeholders

Business Concept Market Opportunity Products Competition Barriers to entry? Five forces? Strategy for capturing dominant position Options to evolve the business

Capabilities People and partners Knowledge, skills Organization and culture Operations Marketing and sales Leadership and mgmt processes Business development/innovation processes Infrastructure

Value Benefits returned to stakeholders Benefits returned to the firm Market share and performance Brand and reputation Financial performance Value of the firm

Focused Distributors Offer products and services within focused niche or industry Types Retailers Marketplace Aggregator Infomediary Exchange

Retailers Assume control of inventory Non-negotiable price Examples: Toys-R-US Higher asset levels than other Revenue model: margins on sales

Marketplaces Don’t assume control of inventory Non-negotiated price Transaction completed online Ex: E-Loan Revenue model: transaction fees

Aggregator Don’t assume control of inventory Buyers can shop but can’t complete purchase online Buyers can shop, then go offline to purchase Ex: InsWeb Revenue model: fees for referrals

Infomediary Provides information on a variety of content Barriers to entry low Personal Infomediary Center Links to a variety of sources of information about security and related issues Identity theft SARS Revenue model: fees for users, advertising fees, etc.

Exchanges Avoid control of inventory May or may not complete transaction online Prices negotiable Provide infrastructure for transactions Example: Ebay Revenue model: transaction fees

Portals Horizontal Portals Broad access to content and services Ex.: AOL, Yahoo! Vertical Portals Deep content in focused niche or industry Ex. Covisint (auto industry) Affinity Portals Deep content targeted toward specific audience Ex.: AARP

Producers Design, make and may directly market Manufacturers Coordinate physical channels Information After sales service Service Providers Offer services through wide range of channels Ex: AMEX and Singapore Airlines Educators

Evolving Business Models Enhance Add functionality and features Makes it difficult for imitators to catch up Product Expansion Add new products Sales synergies, cross selling Extend the business model New geographic areas Extended model type Exit unprofitable businesses