What is this class about? Digital business models are disrupting - - PowerPoint PPT Presentation

What is this class about?

Digital business models are disrupting 50‐year old companies in telecommunications, transportation, advertising, e‐commerce, automotive, insurance and many other industries.

What is this class about?

This course will explore the business models of software disruptors of the west such as Apple, Google, Facebook and Amazon, and the east such as Xiaomi and

• WeChat. The class uses a structured framework for

analysing business models with numerous examples so that students can apply it to their own business

• r case study.

What is this class about?

We will explore how software developers are not just the innovators but also the decision makers in modern competitive battles from mobile to cloud, and from consumer goods to enterprise software. And we will also explain how developers are the engine of digital business models, using examples from diverse industries – from healthcare to aviation.

How will we do that?

• 1. Introduction to Business Models
• 2. How Internet Companies use Digital Business

Models

• 3. Developers as the new Decision Makers
• 4. Developers as the Engine of Digital Business Models

Part 1 Introduction to Business Models

Nokia: 40 % world market share by 2007

• A. Osterwalder: The Business Model Canvas

Traditional business models

A Business Model describes the rationale of how an organization creates, delivers, and captures value.

What is a business model?

Question:

… value – for whom?

What is a business model?

Traditional business model examples

e-Commerce business: best selection, lowest price

Part 2 ‐How Internet Companies use Digital Business Models

The network effect is a phenomenon whereby a good or service becomes more valuable when more people use it. The internet is a good example. Initially, there were few users of the internet, and it was

• f relatively little value to anyone outside
• f the military and a few scientists.

Amazon’s Kindle

Amazon’s Echo

Amazon’s Dash Button

Business Models based on Network Effects

The network effect is a phenomenon whereby a good or service becomes more valuable when more people use it.

Got that? Time to take the next step.

What’s common across Asymmetric Business Models are the following three conditions:

• 1. A company identifies a complement in a different industry
• 2. Value is created by commoditizing that complement
• 3. The complement is bundled with the core product of the company, i.e. where

profits are generated.

Part 3: Developers as the new Decision Makers

crmsearch 2015

2.8m registered developers in 2016

Under Armour is a fashion brand that uses developers to engage communities of athletes. Developers use the Under Armour SDK to create engaging cross‐platform fitness experiences for web, mobile, and wearable devices.

But let’s take a step back. Who are these software developers?

Who are these software developers?

• A software developer is seen traditionally as a code

engineer, a person who is involved with the design, development and testing of software code.

• The definition of a software developer expanded

significantly with the smartphone era since 2007. Mobile apps now need not just to function well.

– They need to differentiate among millions of other apps. – They need to live up to high visual design standards. – Developers now need to engage and retain the user past the first use of the app.

Who are these software developers?

• Developers are therefore not just coders; they often need

skills in user interface design, marketing, and customer support.

• Developers need not have coding skills either. Software tools

have improved massively over the last 10 years; there are now software development tools that do not require any knowledge of coding; you can build a website code‐free with development tools from Squarespace.com. You can build a code‐free app with AppMachine.com. And you can program your thermostat to talk to your car and the weather forecast via IFTTT.com, again without using any code.

Who are these software developers?

• Developers can work in any industry; from games to

healthcare to agriculture; you will find developers wherever software needs to be created or integrated within an organization.

• Developers build software for a very diverse

spectrum of computing devices; from mobile apps, to websites, desktop apps and cloud (back‐end)

• services. Developers also program Internet of Things

services, such as a thermostat, a car navigation system, or a retail people tracking service.

Let’s consider a different question: How important are developers?

How important are developers?

• Developers are often seen as sitting at the bottom of

an organisation; as lacking decision making power.

• In the traditional definition of Information

Technology, decisions are taken at the very top of the

• rganisation, typically by the CIO (chief information
• fficer), CTO (chief technology officer) or VP (vice

president) of Engineering.

• However, developers at the middle and bottom of

the organisation are still the first to try out a new piece of software.

How important are developers?

• In the rapidly changing technology landscape, the

developers are usually the best informed and thus end up framing the decisions taken by the CIO or

• CTO. They are the endorsers, or validators for the

software buying decisions taken higher up.

• Effectively, developers decide what software not to

buy and generate the choices of software to buy.

• As a result, software companies have to win over

developers first, even if they don’t make the final purchase decision.

• Developers are the new decision makers.

The developer platforms landscape

As of Q3/2016

Motivations and business models of software developers

From software innovation to resellers

1990s:

Features the iPhone did not ship with FedEx allows any developer to tailor its logistics services Connect one item’s functionality to another item Find new users and markets Uber: Hotel and airline services Amazon developers sell Amazon’s products (affiliates) Twilio integrates SMS and telephony into apps Value can be captured with data, not just money Choice between iOS and Android, ‘app gap’ When Nokia, Microsoft, and Samsung joint in, it was already too late.

Developers as product extenders

Flappy Bird –2013‐2014

Creator: Dong Nguyen

SmartThings by Samsung

Just 5 products: A gub, 4 different types of sensors, and a power outlet, connect thousands of home devices and millions of apps.

Automatic.com

Automatic.com uses Amazon’s IFTTT.com

Connect the car signals to dozens of applications, cloud services and use cases

DJI

Create drone-based applications for real estate, insurance, disaster response, education, tourism, construction, meteorology and many more industries

Developers as resellers and distributors

Uber

• The transportation services company that has
• perations in 500 cities, 70 countries, and boasts 2

billion rides taken through its service.

• Uber works with developers to integrate the

company’s on‐demand transportation platform into new industries including airlines, hotels, events, food, healthcare, retail, media and public transit.

• Developers can now build a “request‐a‐ride” button

within their app that then gets the user to their destination with no hassle. Consider the convenience that this adds to a hotel booking, a shopping mall or a rock concert app.

Uber

• In both of these cases, developers are a sales

channel for Uber, helping the company reach new users in new industries.

• Uber also acts as an advertising platform, allowing

developers to send promotions to users that are taking an Uber ride, using contextual information like the user’s destination, pickup location, and travel time.

Walgreens

• Seeing developers as a sales channel is not limited to

the realm of Internet companies.

• Walgreens, the largest drug retailing chain in the

United States, works with developers to boost sales

• f its digital print services. The Walgreens Photo

Prints API allows users of mobile apps to print photos to any of the 8,000+ Walgreens locations in the US.

• Mobile app developers earn a 15‐20% commission

with every photo order that’s placed through their app.

Walgreens

• Walgreens wins by getting users into their store;

developers win by earning a commission; and users win by getting their favorite photos printed as a photobook, poster or folded card.

• Walgreens also offers a Balance Rewards program. It

enables developers to connect their fitness apps to the Walgreens rewards program. Users receive points for healthy activities like walking, running, and measuring their weight, blood pressure or blood glucose levels.

Walgreens

• A third developer offering is the Pharmacy

Prescription API which allows developers to connect their health apps to over 8,000 Walgreens pharmacies and quickly order refills of prescriptions.

Amazon

• Perhaps the company best known for using

developers as affiliates and resellers is Amazon.

• The e‐commerce giant launched its affiliate program

for web developers back in 1996; web developers placing links on their site to Amazon books can get a commission when the user purchases a book through that link.

Amazon

• Today developers who join Amazon’s Associates

program can earn up to 10% of commission from users who buy the products the developer advertised, and even further products that the user continues on to buy on the Amazon website.

• The Amazon Mobile Associates program allows

mobile developers to earn a commission on purchases made through their apps and games.

Amazon

• Finally, Amazon’s Dash Replenishment Service allows

developers and makers of connected devices to

• rder physical goods from Amazon when supplies are

running low ‐ like a Brita water pitcher that orders more water filters.

When will Machines take over? (YouTube)

Thank you for your attention! Final Exam starts at 10 a.m.