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 or 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 of relatively little value to anyone outside of 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
2.8m registered developers in 2016 crmsearch 2015
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 organisation, typically by the CIO (chief information officer), 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:
Twilio Amazon developers integrates Find new sell Amazon’s SMS and users and products (affiliates) telephony markets into apps Value can be Features the captured with iPhone did data, not just not ship with money Connect one Choice item’s between iOS functionality and Android, to another ‘app gap’ item When Nokia, FedEx allows any Microsoft, and Uber: Hotel and developer to tailor its Samsung joint in, airline services logistics services 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 operations 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 of 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.
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