BUSINESS MODEL ANALYSIS APPLIED TO MOBILE
BUSINESS
Giovanni Camponovo, Yves Pigneur
The University of Lausanne
Email: Giovanni.Camponovo@hec.unil.ch, Yves.Pigneur@hec.unil.ch
Keywords:
Business models, mobile business
Abstract:
Mobile business is a young promising industry created by the emergence of wireless data networks. Similar
to other emerging industries, it is characterized by a large number of uncertainties at different levels, in
particular concerning technology, business strategy and consumer demand. This paper focuses on the
strategic uncertainties, where a large number of actors are trying a number of strategic approaches to
position themselves in the most favourable position in the value system. This paper intends to apply a
business model analysis methodology in order to better understand the strategic approaches of these actors.
We argue that successful business models are likely to be the ones that best address the economic
peculiarities underlying this industry, like mobility, network effects and natural monopolies.
1. INTRODUCTION
Many definitions of mobile business focus on
enabling business transaction through wireless
devices, confusing mobile commerce and mobile
business. A commonly adopted definition, by
Durlacher, defines mobile commerce as "any
transaction with a monetary value that is conducted
via mobile telecommunication network" (MüllerVeerse, 1999). Similar to e-commerce, the focus is
on the exchange of products and services, but
without the constraint of a stationary user using
wired infrastructure. We prefer to adopt a broader
definition of mobile business, which includes "all
activities related to a (potential) commercial
transaction through communications networks that
interface with mobile devices" (Tarasewich et al.,
2002).
Mobile business is a very recent, but promising
industry created by the emergence and widespread
adoption of wireless data networks, which enable the
convergence of the Internet, e-business and the
wireless world (Kalakota and Robinson, 2002).
Similar to other emerging industries, mobile
business is characterized by a continuously changing
and complex environment, which creates important
uncertainties at the levels of technology, demand
and strategy (Porter, 1979). At the technological
level, uncertainties are typically caused by the rapid
technological development and the battle for
establishing standards, which are typical in the
beginning stages of the life cycle of an industry.
Concerning demand, despite a generalized
consensus about the huge potential of mobile
business services, nobody actually knows how to
exploit the new possibilities brought by technology
to create valuable services that the customers are
willing to pay. Finally, strategic uncertainties are a
common situation in emerging industries, whose
essential characteristic from the viewpoint of
formulating strategies is that there are no established
rules of the game. Consequently, actors must
experience with a variety of strategic approaches and
constantly reposition themselves in order to find the
most favourable competitive position in the industry
(Porter, 1979).
Based on these observations, we developed a
general research framework inspired by the works
on the Balanced Scorecard (figure 1). Our objective
is to conceive a market observation tool for the
mobile business industry. The underlying idea is that
we can better understand the reality by taking views
from different complementary perspectives and
putting them all together. The perspectives are
chosen to cover all the different uncertainties
mentioned above. Each perspective focuses on
certain aspects of the mobile landscape and requires
specific observation tools. The innovation
perspective deals with the future evolution of the
Focu s
T ECH N O LO GY
Ob ser v ed o b j ect s
I SSUES
Ob ser v at i on t ool s
Scen ar i o pl an n i n g
D EM AN D
I INNOVAT
NNOVATI ION
ON
per
perspect
specti ve
i ve
SERVI CES
Mar k et su r v ey
I INNDUST
D UST RY
RY
per
perspect
specti ve
i ve
MARKET
MARKET
pper
er sp
ect iivve
e
spect
SU PPLY
ACT ORS
FI
FINANCI
NANCIAL
AL
per
perspect
specti ve
i ve
Bu si n ess Mod el s
F I N A N CE
ACCOUNT S
Fi nanci al anal ysi s
Figure 1: Mobile Market Scorecard framework
mobile landscape and covers technological
uncertainties using a scenario planning approach.
The market perspective deals with the demand side
of the industry and analyzes demand uncertainties
using market surveys and adoption studies. The
industry perspective looks at the supply side and
assesses strategic uncertainties using competitive
analysis and business models overview. We also add
a financial perspective to assess the sustainability
and attractiveness of the different actors, services
and technologies.
While technological and demand uncertainties
have already been addressed in a number of
publications, strategic uncertainties remain largely
unexplored.
The objective of this paper is to study strategic
uncertainties by analysing the roles and relationships
of the different actors participating in the mobile
arena. For that purpose, this paper applies a business
model analysis methodology based on a formalized
ontology in order to better assess and compare the
strategic approaches of these actors.
The rest of the paper is structured as follows.
Section 2 exposes the principal characteristics of the
mobile business industry that enterprises must take
into account when designing their business models
and that will ultimately determine their success or
failure. Then, section 3 defines what a business
model is and why it is useful in attaining our
objective. After that, section 4 illustrates and
classifies the key categories of actors participating in
the mobile business and specifies their generic
business models. Finally, section 5 illustrates the
principal conclusions that can be drawn from our
work.
2. MOBILE BUSINESS
CHARACTERISTICS
The mobile business industry presents a number
of peculiar economic characteristics such as
mobility, network effects and proprietary assets.
Enterprises ought to take these characteristics
into consideration when they formulate their
strategic approaches . Indeed, successful business
models are likely to be those that best comply with
these particularities.
2.1 Mobility
It is commonly supposed that mobility is the
most important characteristic of mobile business,
because it represents its principal distinctive
advantage upon which mobile services can build
their value proposition. In fact, mobility brings
several unique benefits that can be related to a
number of attributes such as freedom of movement
(services can be used while on the move), ubiquity
(the possibility of using services anywhere,
independent of the user's location), localisation
(user's location information can be exploited to offer
location-based services), reachability (users can be
reached anywhere, anytime, from selected persons
and contexts), convenience (always at hand), instant
connectivity (always on) and personalization
(personal device, apt to store personal information)
(Müller-Veerse, 2000).
However, mobility also involves some
drawbacks, and wireless services are actually
inferior to their wireline counterparts in different
other dimensions. In particular, mobile applications
suffer from limited and more expensive bandwidth
and device limitations. Bandwidth limitations are a
consequence of radio spectrum being a fixed and
rare resource and its control being restricted to
license owners. Device limitations are due to the
portability requirement of mobile handsets that have
to be small and lightweight, letting limited space to
be used for screen, batteries and input/output
interfaces.
Even if valuable services can be entirely built
around mobility, exploiting the distinctive features
of the mobile channel, combining them with the
advantages of e-commerce services and other
channels would lead to substantial more value
delivered to the customer (Jarvenpaa, 2000).
2.2 Network externalities
Formally speaking, networks are composed of a
set of components , connected together by links.
These structures exhibit a characteristic economic
phenomenon known as network externality.
An externality occurs when a transaction
between two actors affects, as a side-effect, a third
party that is external to the transaction. A product
presents a network externality if the utility that a
user derives from consumption of the good increases
with the number of other agents consuming the good
(Katz and Shapiro, 1985).
According to Economides (Economides, 1996),
"the key reason for the appearance of network
externalities is the complementarity between the
components of a network, which is inherent in the
structure of a network, since many components of a
network are required for the provision of a typical
service". He further points out that "links on a
network are potentially complementary, but it is
compatibility that makes complementarity actual".
Network externalities can be direct or indirect.
When customers are identified with network
components, which is typical of two-way networks
such as telecommunication networks, the externality
is direct and results from the fact that a user joining
a network confers a benefit to all other network
members because the number of potential
interactions increases.
Rohlfs showed that network externalities play an
important role in the telecommunication market,
where the utility of joining a communication
network is positively related to the number of its
members (Rohlfs, 1974). In this case, network
effects take the form of being able to communicate
(call and receive calls) with a larger number of other
users. On the other hand, the increase of the number
of network members also produces negative
externalities such as network congestion.
Communication network also show signs of
indirect externalities, where users benefit indirectly
from network size. As an example, an extra
customer potentially increases the number of
services available to other customers, since by
increasing the demand for services, service
provisioning become more profitable and more firms
would be willing to offer them. Constance and
Gower (Constance and Gower, 2001) provide an
interesting representation of direct and indirect
network effects using the formalism of system
dynamics
Network externalities influence both consumers,
e.g. when they decide whether to adopt a new
technology (Frank and Heikkilä, 2002), and
producers, e.g. when they decide whether to
standardize their products to allow compatibility
with other producers, set the product quality and
chose the pricing policy (Economides, 1996).
2.3 Exclusive control over important
assets
The mobile business market is also characterized
by the existence of important assets that are under
the exclusive control of a firm. Exclusive control
may arise for a certain number of reasons: the
absolute rarity of a good, the existence of a
fabrication secret, a special privilege or a patent,
which gives its owner the exclusivity over a certain
asset, and the presence of particular cost structures
with increasing returns or very high initial
investments that cause natural monopolies to arise.
One first example is access to radio spectrum, a
necessary but finite resource, required by many
different industries like mobile telecommunications,
military, TV, radio, transport, navigation etc.
Spectrum access had to be regulated to ensure an
efficient and equitable use of this resource.
Consequently, the portion of spectrum allocated to
mobile communications is rather small and, except
for the very limited ISM frequency bands, it is
restricted to a few network operators owning the
license to operate on a particular frequency band.
Network operators also have total control over a
number of other important assets. By providing the
SIM card to their customers, mobile operators have
total control over them, since the communications
from and to a user must pass through the operator
network. In addition, by controlling the network, the
operator possess an unique access to valuable userrelated information such as a complete customer
profile, call patterns, location information etc.
Moreover, infrastructure deployment could be
considered a natural monopoly, because of the
substantial investments required to build a network
and the redundancy of additional networks. From a
societal point of view, a single monopolistic firm
could be a blessing, since it can satisfy demand
using a lower amount of resources than multiple
competing firms. Ho wever, it could exploit its
dominant position to raise prices above competitive
levels and earn above normal profit. Hence, driven
by regulatory policy and decreasing costs, and
because the cost of building a network has
considerably decreased over time, an oligopoly
structure with several competing network operators
has become possible.
2.4 Implications
Mobility adds a great deal of complexity to
application and services development, which
requires broader competencies that, in the short
term, are only accessible through partnerships or
acquisitions. Network effects necessitate that
devices and applications must be inter-compatible,
requiring partnerships to agree on common
standards and platforms. Very illustrative is the
example of Symbian, a consortoum bringing
together a large number of device manufacturers to
develop a common operating system. Finally, the
existence of indispensable assets exclusively
controlled by network operators requires firms to
collaborate with them, unless financial problems or
regulation impose them to open up access to these
assets to other firms.
From these characteristics, it follows that the
provisioning of complete mobile services solutions
requires the collaboration of a large number of
market players, with a particular consideration
towards network operators. In effect, until now, no
player managed to succeed in providing an end-toend solution between the content owner and the enduser on its own. Even the i-mode service of NTT
DoCoMo in Japan, benefit ing from a very dominant
market position and from the peculiar Japanese
context, was provided through important partnership
with device manufacturers and content providers.
Therefore, enterprises willing to compete in the
mobile industry ought to pay considerable attention
to the creation of a sustainable network of partners.
Hence, partnership management is likely to become
a core activity of many of mobile business
enterprises.
A sound, sustainable business model involving a
network of partners must focus on the question
whether it is feasible from an economic point of
view. Basically, it must consider the interests of
every participant, so that everyone has incentives to
participate, which essentially requires that the model
is profitable for each actor involved (Gordijn, 2002).
3. BUSINESS MODELS
Although the concept of business model is
widely used and seen as important, there is no
generally accepted definition of what a business
model is.
As explained by Petrovic, a business model
describes the logic of a "business system" for
creating value that lies behind the actual processes
(Petrovic et al., 2001). It can be seen as a detailed
conceptualization of an enterprise's strategy at an
abstract level, which serves as a base for the
implementation of business processes.
Many authors tried to identify the elements
composing a business model. An interesting
definition by Slywotsky defines a business model as
"the totality of how a company selects its customers,
defines the tasks it will perform itself and those it
will outsource, configures its resources, goes to
market, creates utility for customers and captures
profit" (Slywotzky, 1996). We adopt a similar
definition: a business model provides a description
of the roles and relationships of a company, its
customer, partners and suppliers, as well as the
flows of goods, information and money between
these parties and the main benefits for those
involved, in particular, but not exclusively the
customer (Bouwman, 2002).
In order to investigate the business models of the
different classes of actors in a consistent way, we
based ourselves on a formalized ontology for ebusiness models specified by Osterwalder and
Pigneur (Osterwalder and Pigneur, 2002), which fits
well with the above definitions. They understand
business models as consisting of four main elements:
1) the product innovation, that consist of the value
proposition the firm delivers to its customers; 2) the
customer relationship, defining the target customers,
the channels and relationship strategy; 3) the
infrastructure, containing the resources required by
the internal activities and the partnership network
that are required to produce the value proposition; 4)
the financial aspects, which ultimately determine the
profitability of the organization.
Application
Content
Regulation
Context
Needs
Needs
Communication
Technology
Figure 2: Mbusiness framework
In the next section, we will investigate the
business models of the principal classes of actors of
the mobile business landscape. Since we will focus
on generic classes instead of specific instances of
firms, we have to conduct our work at a sufficiently
abstract level: for each group of actors, we will
describe the value proposition, the key customers,
the core activities, the business partners and the
revenue flows. We will leave cost issues out of our
analysis, because the cost structure is too different
between the single enterprises. Furthermore, because
of the specificities of the mobile business industry,
we will focus more on partnerships than on the other
elements.
4. ACTOR'S OVERVIEW AND
THEIR BUSINESS MODELS
The previous sections illustrated why the mobile
business market is highly fragmented and the
provisioning of complete mobile services solutions
requires the collaboration of a large number of
different market players.
The literature contains a great number of
publications that illustrates the abundance of players
in the mobile field. Many authors share a similar set
of mobile business market key actors, which they
classify according to three general main classes:
technology, application and network. (MüllerVeerse, 2001).
We already stated in a recent paper (Camponovo
and Pigneur, 2002) that these three classes do not
give a complete view of the mobile landscape and
should be completed by other classes such as
regulation, end-user and enabling services (i.e.
payments).
We propose to classify the players according to
the framework illustrated in figure 2. At the centre
of the mobile business world are users, who have
mobility-related needs. In order to fulfil these needs,
we need three necessary and complementary
supporting blocks: communication (including the
different networks that provide transmission
capabilities), technology (composed by all the
required hardware, including network equipment,
mobile devices and platforms) and the services
(including applications, content and supporting
services). These blocks are then constrained by
regulation and social context. A graphical
representation of the whole industry, distinguishing
the actors in the different blocks and their principal
relationships is given in the appendix.
Similar to a recent paper (Lai et al., 2000), we
distinguish between prima ry and secondary actors.
The next subsections will investigate the primary
actors for each block we identified in our framework
(technology, communication, application, regulation
and user) and we will give a very short textual
description of the business model of the primary
actors we identified in each block.
4.1 Technology
Technology players provide the hardware and
software infrastructure needed to offer mobile
services to the end user. The primary participants in
this area are access device manufacturers and
network equipment vendors. Secondary players
include device retailers, component makers and
platform vendors that provide software platforms
such as operating systems, micro-browsers and
development platforms.
4.1.1 Device manufacturers
Value proposition. Provide the physical mobile
devices (mobile phone, PDAs, notebooks with
wireless cards) to end users that enable them to
access a mobile network and to run mobile
applications.
Target customers. Device retailers and network
operators' distribution channels.
Core activities. Research and development,
product design, production and marketing.
Business partners. Device manufacturers
purchase from component makers and application
developers (operating system, micro browser,
embedded software). They then assemble mobile
devices and distribute their products through device
retailers and network operators' distribution
channels. Network operators are very important
partners, because they usually subsidy the devices to
customers that sign a contract with them and are
very active to push the adoption of 3G handsets to
capitalize on their 3G network investments. Device
manufacturers may also partner with content
providers, application providers and portals in order
to help them to develop new mobile services that
would promote the adoption of new handsets and
develop mobile portals, where device manufacturers
can bring a strong brand and the possibility of
setting the default device configuration and the
others the complementary skills, content and
applications. Other partners include other device
manufacturers, to agree on common standards to
ensure application interoperability and exploit
network effects. Sometimes they are integrated with
network equipment vendors.
Revenue flows . Revenues come from sale of
devices to distributors. Additional revenues may
come from portal activities and service provisioning.
Examples. There are a variety of device
manufacturers, which we can distinguish between
mobile phone manufacturers integrated with
equipment vendors (Nokia, Eriksson, Siemens,
Motorola), other phone manufacturers (Sony,
Samsung), PDAs manufacturers (Palm, Handspring,
HP, Casio) and wireless card manufacturers (Agere,
Cisco and Linksys).
4.1.2 Equipment vendors
Value proposition. Provide the physical core
mobile network infrastructure (comprising air
interfaces, base stations, routers, switches and
backbone transport technologies) and the logical
infrastructure required to operate and manage the
network (including network management systems,
billing systems, network management systems,
application and service platforms, etc). They also
offer infrastructure related services such as network
design,
evolution
planning,
integration,
implementation, optimisation and operation.
Target customers. Network operators such as
cellular network operators, WLAN operators and
ISPs.
Core activities. R&D, production, system
development,
infrastructure
related
service
provisioning.
Business partners. Equipment vendors purchase
from component vendors and application
developers, assemble a variety of network
equipment and systems an sell them to network
operators, with whom they often partner and tightly
collaborate. They must also collaborate with other
equipment vendors to ensure interoperability and
offer multi-vendors solutions; for the same reason,
they usually are influent members of standardization
groups. In order to promote the adoption of new
generations of mobile networks, the actively support
and partner with application developers and content
providers. They sometimes partner or are integrated
with device manufacturers.
Revenue flows. They earn revenue from sale or
leasing of equipment and provisioning of services.
Examples. Companies operating this role
include Ericsson, Nokia, Motorola, Siemens and
Lucent.
4.2 Services
Mobile services are value-added services,
content and applications that the user can access on
his mobile device. The primary actors in this domain
are content providers and application providers.
Some authors distinguish these players in more
detail and identify content owners, content
aggregators, syndicators, mobile portals , application
developers, wireless ASPs and system integrators.
This category further includes e-business players
implementing a mobile strategy and supporting
services providers, which include payment agents
(as a primary player), security solution providers
(i.e. PKI encryption), trusted third parties,
advertising companies and professional service
providers (i.e. consultancies).
4.2.1 Content providers
Value proposition. Provide relevant data and
information products (such as news, music, video,
location-based information,...) and distribute them
using the mobile channel. The value proposition
often integrates a multi-channel distribution offering
that enables to broaden the reach and exploit the
complementary characteristics of different channels.
Target customers. Content aggregators,
syndicators and portals (which bundle content from
different sources together and re-distribute it to end
customers), and the end-customer itself through
direct distribution.
Business partners. Content providers often
partner with a variety of content aggregators and
portals in order to broaden the reach of their
products and with content owners, press agencies
and other media companies in order to get preferred
access to raw information. Other useful partners
include network operators to agree on a profitable
revenue sharing business model and payment agents
for micro-payment services. There might be
partnership agreements with application providers
for content management platforms.
Core Activities. Content collection, content
processing and formatting, content publishing,
content distribution, distribution agreements
management, ...
Revenue flows. Revenues come from
subscriptions fees, usage fees, syndication
agreements and airtime revenue sharing.
Examples. This role is particularly done by press
agencies (i.e. Reuters), media companies (i.e. CNN,
Bertelsmann) and content aggregators (i.e. Yahoo,
Videotext).
4.2.2 Application pro viders
Value proposition. Provide mobile applications
and platforms (such as middleware and application
servers). The value proposition may include
different application-related services such as remote
access to a variety of applications that are managed
in a central location, with hosting, implementation,
integration, support and maintenance services.
Target customers. Target customers include a
variety of players in the mobile value chain such as
network operators, portals, businesses, device
manufacturers and consumers
Business partners. Application providers often
partner with network operators, in order to ensure a
sufficient quality of services and gain access to
essential network services (i.e. location information)
and have a privileged contact with their customer
base. They also partner with device manufacturers,
in order to ensure compatibility with the different
existing and future devices and as a sales partner (to
exploit their brand). If they do not develop their own
applications, application providers purchase from
other application developers or establish a
partnership with them. Other application providers
and system integrators are also useful partners to
provide broader solutions and offer a single point of
contact to customers.
Core Activities. Application development,
integration, application management (versioning,
portability checking,...), infrastructure operation,
support and consulting services.
Revenue flows. They earn revenue streams from
sale of license fees, installation fees, rental
agreements for hosting, operation and maintenance
services, consulting services.
Examples. Mobile application providers are
mainly small, rather unknown start-ups. Examples
include iTerra, Geoworks, In-Fusio, Shockfish,...
4.2.3 Payment agents
Value proposition. Provide a method of
payment to end-users for cash-free purchases of
goods and services via the mobile phone. They can
also provide payment platforms to other businesses.
Target customers. End users, different service
providers.
Business partners. Payment agents usually
partner with different financial institutions (i.e.
banks, credit card companies) for payment
processing and gain access to their customers
accounts. Other valuable partners can be network
operators (for billing and collection services), device
manufacturers (device interoperability and special
payment features), hardware providers and
application developers (security solutions) and other
service providers.
Activities. Billing and collection, payment
platform development and management.
Revenue flows. Subscription and transaction
fees.
Examples. Payment agents comprise network
operators, banks, credit card companies, smartcard
companies and start-ups. Example include PayBox,
Sonera and Visa. More examples can be found in
(Müller-Veerse, 2001)
4.3 Communication
Communication players provide communication
services that enable mobile devices to access mobile
services. The primary actors are mobile network
operators (MNO) or carriers, and internet service
providers. If mobile network operators certainly are
among the most important players in the cellular and
other GSM or UMTS area, we can observe the first
self-organized networks, WiFi networks and large
scale wireless local area networks. Other players
include virtual operators and infrastructure
management service providers.
4.3.1 Mobile Network Operators
Value
proposition.
Provide
ubiquitous
communication services to end users, giving them
access to their network and other network operators'
networks and the Internet. Provide also various
network-related services such as location
information, user identification and billing services
to third parties.
Target customers. End customers, businesses,
application providers, virtual operators, ISPs, ...
Business partners. Operators purchase from
infrastructure vendors in order to build their
networks. They must set traffic agreements with
other network operators and ISPs in order to let their
customers to access other networks (i.e. other
operators' networks, the Internet). They also subsidy
and distribute handsets in order to build their
customer base. Given their central role in the mobile
business, they are required to partner with a great
number of other players including content providers,
application providers, service providers, virtual
operators and portals. These players are essential to
develop the market for 3G services, thus increasing
operators' revenues, and the operator can help them
with revenue sharing agreements and access to
network-related services (i.e. through open APIs,
such as OSA-Parlay).
Core Activities. Network operators have a
typical value network configuration (Stabell and
Fjeldstad, 1998). Their main activities are network
promotion and contract management (customer care,
sales, problem handling, invoicing,...), service
provisioning (service development and operations,
quality management,...) and infrastructure operation
(network planning, deployment, maintenance,
systems management,...).
Revenue flows. Network operators earn
revenues from their subscriber charging a
combination of subscription, airtime fees and
volume-based fees. They also earns revenues from
network services provided to other parties,
transaction fees (for their billing services) and may
earn revenues from portal activities.
Examples. This category includes traditinal
network operators (e.g. Swis scom, Vodafone,
Orange), virtual operators who provide services
through networks of other operators (e.g. Tele2), and
satellite network operators (Globalstar).
4.3.2 ISPs
Value proposition. Provide access to the
Internet network.
Target customers. Network operators, other
ISPs (traffic agreements) and end users.
Business partners. ISPs purchase from
infrastructure vendors for Internet equipment in
order to build their part of the network and the
gateways to other networks. They must set traffic
agreements with network operators in order to gain
access to customers and with other ISPs in order to
let their customers access the whole Internet. They
also may partner with content and application
providers in order to differentiate their offering.
Core Activities. Similar to operators, their main
activities are network promotion and contract
management
activities,
service
provisioning
activities and infrastructure operation activities.
Revenue flows. ISPs earn revenues from user
subscriptions and traffic agreements with other ISPs
and operators .
Examples. ISPs include both wireless ISPs such
as Jippi and NetAir (see example below), as well as
wired line ISPs such as Switch.
4.4 Regulation
Regulation-related players set the legal and
societal framework in which mobile business will
evolve and that constrains all the other players in the
mobile industry. They do not participate directly in
the provisioning of services, but have a huge
influence on the other players. Players in this area
include government, regulation authorities, and
standardization groups.
4.4.1 Regulation authorities
Value proposition. Set a legal framework which
balances the interest of the different stakeholders,
with the aim to provide a favourable economic
environment that enables enterprise to provide a
wide range of competitive telecommunications
services which satisfy the needs of the population.
Target customers. All the players in the mobile
landscape, including the end users.
Business partners. Regulation authorities
interact and consult all the implied parties in order to
develop an adequate legislation that best satisfies
and balances their diverging needs. They are
supervised by the government and are influenced by
different lobbies which represent the different
enterprises categories and consumer association.
Activities. Legislation development, frequency
allocation
management,
service
licences
management, market monitoring to ensure
compliance
with
legislation
and
antitrust
requirements.
Revenue flows. Licence fees, taxes.
Examples. Swiss regulation authorities are
OFCom and ComCom.
4.5 User
Case study example: NetAir
The following example intends to give an idea of
how to use our proposed framework. Because of the
limited space, we have deliberately chosen to
present a small enterpris e. NetAir SA is a startup
enterprise, currently in its creation stage., planning
to offer W ISP services starting on February 2003.
Value proposition. NetAir provides a bare
broadband wireless internet connection through the
wireless LAN 802.11b technology. The basic
version allows residential users to connect to a
hotspot covering his home, while the mobile version
allows mobile user to connect to any hotspot of the
NetAir network. The service is positioned as a lowcost alternative to broadband connections through
ADSL and cable modem. Users are offered a lowpriced wireless internet connection with limited
support, no additional services and minimal quality
of service guarantees (128 kbps minimal data rate).
Target customers. The basic service targets
residential customers wanting a wireless low cost
broadband connection to the Internet in their homes.
The mobile version targets mobile users equipped
with a laptop and a wireless card. From a technology
adoption cycle perspective (Moore, 1999), the firm
targets the consumer mass-market users, who are
typically interested by convenience and low prices.
On the other hand, it does not target early adopters
and businesses who are more interested in
performance.
Core Activities. The main activities performed
by NetAir are network planning, network operation,
maintenance, promotion and contract management.
The network consists of autonomous hotspots,
mainly hosted by partner users, connected to the
Internet by an independent ADSL connection.
Hotspots basically share the authentication and
security software.
Business partners. NetAir purchases network
equipment such as antennas, access points and
ADSL modems from equipment vendors. It also
rents ADSL lines from an ISP to connect its hotspots
to the Internet. NetAir plans to count on various
resellers such as computer stores. Moreover, NetAir
offers revenue sharing possibilities to users who host
NetAir hotspots (network equipment and ADSL
connection) on their properties.
Revenue flows . Net Air essentially gains
revenue from user subscriptions.
End-users, both businesses and consumers, are
also important players in this game, because they
ultimately can determine the success or failure of
mobile business. It might be useful to consider some
“vertical” players with particular mobility needs
separately, like those of the travel, logistics,
healthcare, retail and car electronics sectors. It seems
that no expert mentions consumer groups as actors,
yet some of them are very active against electronic
smog and will have a true impact on some decisions,
such as the deployment of UMTS infrastructure and
antennas
4.5.1 Consumer groups
Value proposition. Defend the interests of
consumers.
Target customers. End customers
Business partners. Consumer groups influence
different players in the mobile landscape, with a
particular attention to regulation authorities.
Activities. Consulting and information services,
legal assistance, lobbying.
Revenue flows. Subscription fees, donations.
Examples. Different consumer associations,
property owner associations.
5. CONCLUSIONS
Until now, the mobile industry was principally
analyzed using the value chain framework. A first
problem is that this framework is only well suited to
analyze traditional manufacturing industries, and
should be extended to consider other value
configurations such as the value net, which better
represents the mobile industry. (Stabell and
Fjeldstad, 1998). Furthermore, by applying a
business model methodology, we suggest that the
analysis should consider additional aspects such as
the value proposition, customer relationship and
business partners, rather than focusing on
infrastructure and activities alone.
Even without going into a detailed view of the
business models of the different actors participating
in the mobile landscape, it is apparent that the
economic characteristics underlying the mobile
business have a profound impact on the adopted
business models. As suggested from section 2,
partnerships are likely to be an important part of the
business models of most players, given that the
complexity of providing a complete end-to-end
solution
requires
many
complementary
competencies, which in the short term can only be
acquired through partnerships or acquisitions.
Furthermore, players require to collaborate with
network operators and device manufacturers, to
support interoperability (thus exploiting network
effects) and ensure access to essential proprietary
assets (a consequence of natural monopolies).
It is worth reminding that the mobile business
industry is a very recent one and that the different
players are still experimenting with a variety of
business models in order to conquer a sustainable
and profitable position in this industry. Hence, it is
yet premature to predict what business models will
prove to be sustainable.
The high levels of uncertainty about the future of
the mobile industry hinder the use of traditional
forecasting tools (Courtney et al., 2001). For that
reason, a scenario based forecasting approach (i.e.
(Flament et al., 1998), (Aarnio et al., 2001)) should
be employed to identify a set of scenarios describing
alternative future outcomes and the events indicating
that the market is moving toward one or another
scenario.
We argue that business models that explicitly
address mobility, network effects and natural
monopolies issues and that are profitable to all the
different players needed to provide an end-to-end
solution will be the mo st successful and sustainable.
Courtney, H., Kirkland, J., Viguerie, P. 2001, Strategy
under Uncertainty In McKnsey Quarterly, vol.
December 2001, pp. 5-14.
Economides, N. 1996, "The Economics of Networks",
International Journal of Industrial Organization, vol.
14, no. 4, pp. 673-699.
Flament, M., Gessler, F., Lagergren, F., Queseth, O.,
Stridh, R., Unbehaun, M., Wu, J., Zander, J. 1998,
Telecom Scenarios 2010 - a Wireless Infrastructure
Perspective, Royal Institute of Technology.
Frank, L., Heikkilä, J. 2002, "The Pricing Logic of
Services Paid by Mobile", 1st m-business conference,
Athens.
Gordijn, J. 2002, Value Based Requirements Engineering:
Exploring Innovative E-Commerce Ideas. Ph.D. thesis,
Vrije Universiteit.
Jarvenpaa, S. 2000, Internet Goes Mobile: How Will
Wireless Computing Affect Your Firm’S Internet
Strategy?, Working Paper.
Kalakota, R., Robinson, M. 2002, M -Business: The Race
to Mobility, McGraw-Hill.
Katz, M., Shapiro, C. 1985, "Network Externalities,
Competition and Compatibility", American Economic
Review, vol. 75, no. 3, pp. 424-440.
Lai, J., Mohan, A., Gustafson, G. 2000, Understanding the
Emerging Mobile Commerce Marketplace.
Moore, G. 1999, Crossing the Chasm, Harper Business.
6. ACKNOWLEDGEMENT
The work presented in this paper was partially
supported by the Swiss National Science Foundation
(FNRS) in the CNEC Mobile Commu nication and
Information Systems.
7. REFERENCES
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Business Models for Ebusiness", International
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8. APPENDIX 1: WIRELESS
ACTORS' MAP
SERV I CES
PAYMENT
SERVICE
PROVIDERS
Billing &
Payments
CONTENT
PROVIDERS &
AGGREGATORS
Content
PORTALS
Referrals
APPLICATION
PROVIDERS &
INTEGRATORS
Applications &
related services
Search engine, Directory
Content, Applications
Content
BUSINESSES
RETAILERS
Goods
U SER
CONSUMERS &
BUSINESS
USERS
T ECN OLOGY
Communication
services
Devices
DEVICE
RETAILER
COM M U N I CAT I ON
Devices
WIRELESS ISPs,
VIRTUAL OPER.
VENUES (WLAN)
Network
access
WIRELESS
NETWORK
OPERATORS
Devices
Equipment
DEVICE
MANUFACTURER
Components,
OS, Browser,...
Participation
NETWORK
EQUIPMENT
VENDORS
Regulation
REGU LAT I ON
Standards
Influence
REGULATION
AUTHORITIES
Influence
STANDARD.
GROUPS
Supervision
CONSUMER
GROUPS
Influence
GOVERNMENTS
Influence
PLATFORM
PROVIDERS