1. HELSINKI UNIVERSITY OF TECHNOLOGY Web and Mobile Technologies Enhanced Products and Services Institute of Strategy and International Business, HUT Jussi Autere Jussi.Autere@hut.fi, phone +358-9-451 3086

2. 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

3. 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

4. HELSINKI UNIVERSITY OF TECHNOLOGY What went wrong with the dot.com boom? Number of innovations Maturity of Technology Product technology innovation Production and business process innovation Adapted from Utterback, 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

5. 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

6. 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.

7. HELSINKI UNIVERSITY OF TECHNOLOGY Different approaches to mass- customization

8. 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

9. HELSINKI UNIVERSITY OF TECHNOLOGY Changes that change also business models

10. 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

11. 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

12. 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

13. HELSINKI UNIVERSITY OF TECHNOLOGY Who profits from the innovation? Teece, DJ, Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing and Public Policy, Research Policy 15 (1986), pp. 285-306.

14. 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

15. HELSINKI UNIVERSITY OF TECHNOLOGY Strategies for building business models Afuah, A and Tucci, CL, Internet Business Models and Strategies—Text and Cases, McGraw-Hill Irwin, New-York, NY, 2001

16. 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

17. 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