Dynamic Business Model Framework for Value Webs

Harry Bouwman, Ian MacInnes Delft University of Technology, Syracuse University w.a.g.a.bouwman@tbm.tudelft.nl, imacinne@syr.edu

Abstract

This paper develops a new framework for

explaining the dynamic aspects of business models in value webs. As companies move from research to roll-out and maturity three forces cause changes in business models. The technological forces are most important in the first phase, regulation in the second phase, and markets in the third. The forces cause change through influence on the technology, services, finances, and organizational network of the firm. As a result, partners in value webs will differ across these phases. A case study of NTT DoCoMo’s i-mode illustrates the framework.

. 1. Introduction

The purpose of this paper is to provide insight into

mechanisms behind changes in business models caused by radical or incremental technological, regulatory, and market changes. In the analysis of academic and business literature, for example [26], as well in a number of case studies we [6], [8] have done over time, we observed that business models are changing under pressure of changes in markets, the introduction of new technologies, or under regulatory constraints. Understanding the effects of external effects on business models can help develop guidelines for governance of business models with a special emphasis on organizations that work together in delivering value to end-customers. Therefore we develop in this paper a tentative model that helps us to analyze the involved mechanism. As a first test we use a well known case, i.e. NTT DoComo’s i-Mode, to illustrate our concepts.

2. Literature Review

Over the past few years the field of business

models has developed from defining business models, via exploring business model components and classifying business models into categories, to developing descriptive models (for an overview see [14]). First it is important to consider what a business model is. We largely agree with the definition of

Chesbrough and Rosenbloom that a business model is a blueprint for the way a business creates and captures value from new services or products [5]. A business model describes the way a company or network of companies aims to make money and create consumer value [6].

In various taxonomies a large number of business models are mentioned ([22]; [17]; [10]; [15]; [23]; [1]; [18]). The basis for these classifications varies. Some classifications are based on developments in the area of technology while others are based on marketing concepts or product types. In some classifications elements such as value creation or strategy play a role. However most classifications tend to be based on new opportunities offered by the Internet [1] and wireless and mobile alternatives. It is clear that technology is an important driver for the reconsidering of business models.

There are several basic elements of a business model. Many researchers ([1]; [3]; [7]; [12]; [20]; [22]; [25]) focus on business model elements such as service and product innovation, actors involved, relationships between actors, information and application architectures, as well as information and value exchange. Alt & Zimmerman [2] suggest that there are a few common elements that turn up in definitions of business models: · Mission: determining the overall vision, strategic

objectives and value proposition, but also the basic features of a product or service.

· Structure: this has to do with the actors and the role they play within a specific business environment (a value chain or web), the specific market segments, customers and products.

· Process: the concrete translation of the mission and the structure of the business model into more operational terms.

· Revenues: the investments needed in the medium and long term, cost structures, and the revenues that are generated. Afuah and Tucci [1] see business models as a

system of components (value, revenue sources, price, related activities, implementation, capabilities and sustainability), relationships, and interrelated

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technology. Mahadevan [10] emphasizes value creation, revenues, and logistics. As far as the buyer is concerned, value creation means a reduction in search and transaction costs. The seller can reduce costs associated with tracking customers, promotion and transaction costs, and benefit from a shorter turnover rate. The introduction of all sorts of intermediary parties on the Internet is assumed to increase the value stream for both the supply and the demand side. According to Mahadevan [10] this will lead to a virtuous cycle, which will finally materialize in virtual communities. These communities offer benefits to all parties concerned: companies, customers, market makers, and portals. Osterwalder & Pigneur [13] are far more systematic in his approach to the concept of business models. Based on the questions what a company has to offer, who it targets, how this can be realized and how much can be earned, he discusses four basic elements, i.e.: · product innovation and the implicit value

proposition, · customer management, including the description

of the target customer, channels, and customer relations,

· infrastructure management, the capabilities and resources, value configuration, web or network, partnerships

· financial aspects, the revenue models, cost structure, and profit. When comparing the different definitions of

business models, and based on extensive review of business model and service literature, analysis of white papers on (mobile, Internet and ecommerce) technical architecture, literature on (mobile telecommunication and Internet) value chains and organizational networks literature, and literature on financial and IT-investment, as well as a large number of case studies, Haaker et. al [6] distinguish some common components: · Service domain: a description of the value

proposition (added value of a service offering) and the market segment at which the offering is targeted.

· Technology domain: a description of the technical functionality required to realize the service offering.

· Organization domain: a description of the structure of the multi-actor inter- and, or intrafirm value network or web required to create and distribute the service offering, and to describe the focal firm’s position within this value network.

· Finance domain: a description of the way a value network intends to generate revenues from a particular service offering and of the way risks,

investments, and revenues are divided across the different actors in a value network.

· Although the focus in business model research is predominantly on internal factors, external factors, such as socio-economic trends, technological developments, and political and legal changes, , as is known from innovation literature [20], play an important role in defining the involved dynamics. Our research focuses on the interrelation between external drivers and the internal consequences.

The second major research area that we wish to identify is the distinction between static and dynamic business models. Our goal is to examine business model dynamics to determine how technological, regulatory, and market changes affect transitions in business models. How do companies adapt their business models when they are no longer adequate? Literature on business models, with a few exceptions ([1], ([4]; [9]; [24]), has taken a static view on business models whereas in practice we see these models, especially in dynamic industries such as mobile and Internet services, change over time. This means that business models not only have to be balanced at the outset, but also in all phases from development to exploitation.

The third major research area to be examined is the identification of dynamic phases for business models. There are several types of models in the existing literature that can be used to identify these phases: technology related models, innovation management, diffusion of innovation, and venturing. In Roger’s classic Diffusion of Innovation [19], a distinction is made between recognizing a problem, basic or applied research, development, commercialization, as well as diffusion and adoption, making clear that the relevant decisions and actions affecting the diffusion process of new technologies start in a very early stage. It may be assumed that the conceptualization of new business models develops parallel with the technology and therefore starts in an early stage. Rogers [19] discussed the diffusion of an innovation in a social system and defines it as a process. Rogers derives the four central elements of a diffusion process: an innovation, communication channels, time, and a social system. The role of time in the diffusion process manifests itself in the point in time at which an individual (or another adoption unit) decides to adopt the innovation: their innovativeness. In addition, time plays a role in the speed with which an innovation is being diffused within a social system: the rate of adoption. In the first phase of the process only a small portion of the members of a social system (the innovators) will adopt the innovation (so the rate of adoption is still low), but once the early adopters have joined in, the curve rises steeply (the

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diffusion process is gaining momentum after reaching critical mass) – and by the time the late majority has also adopted the innovation only the laggards are left, who will take considerable time before embracing the innovation. It is clear that in the domain of information communication technology based innovations, like mobile, interdependencies between involved actors both at the supply and the demand side, as well as in the interaction between both, lead to critical mass and network externality issues. In many cases new mobile and Internet innovations can only brought about by collaborating infrastructure, middleware and services providers. These type of collaboration, that are both intra- and interfirm, are not very structured and institutionalized, and although many times closely related to a traditional (internal) value chain, the mutual relations are less established. Therefore we speak of value networks or webs (see [8]). These value webs or networks of collaborating organizations and or departments tend to differ in the different phases of developing and exploiting business models.

In commercialization, the conversion of an idea from research into a product or service is relevant. Product and services have their own life cycles. Innovative products and services follow the cycle from being new, through development and maturity, towards a phase where new generations of products and services bypass the matured innovation. Rapid and frequent product and service innovation are prevalent in early phases. Later stages are characterized by stable product and service concepts with only incremental change. Cost reduction and cost-effective exploitation are important drivers ([21], p. 12). Every product, service or innovation goes through these phases from adoption of the concept, via implementation and exploitation, to maturity.

In venturing literature, the development process from business idea to established business is divided in different venturing stages. According to Mason and Rohner [11], four of these venturing phases can be distinguished: · Phase I: venture vision: validating the concept. · Phase II: alpha offering: building while planning. · Phase III: beta offering: testing the concept. · Phase IV: market offering: calibrating and

expanding. We expect that in each of these phases, different

business models, actors, and nodal companies are needed. Often one will find one nodal company in a value network which links the other companies together in order to create value.

Although different phases are distinguished in literature, and even the number of phase differs, three phases more or less are explicit in all approaches. A

first phase in which a technology or a concepts is developed, a second phase in which the concepts is gradually rolled out, and a third phase in which commercial exploitation is central.

The final major research area of our paper is to determine whether a distinction should be made between business model phases for start up companies and established businesses. MacInnes [9] emphasizes business models of a start up company discussing four phases relating to technological, environmental, market, and maturity problems. Haaker, Bouwman & Faber [6], based on extensive literature research and a large number of cases, look into the environment of a company as a driver for changes in business models, looking to changes in technology, regulation, and markets. 3. Dynamic Business Model Framework for Value Webs

Based on the literature review and existing classifications of phases in the development, roll out, and marketing of new innovative technologies and related businesses, Figure 1 presents our framework for business models that identifies phases for both start-up and established companies. Although the phases are suggesting a linear process, it is clear that feedback loops play an important role. This is especially the case if business models do not develop as planned. Furthermore it will be clear that dynamics play a role not only during transition from one phase to another, but also between and within the four domains that constitute a business model. Basically we make a distinction between a phase in which R&D and technology play a dominant role. Discussions are centered around service or product definitions, investment in new technologies, and collaboration with relevant (technology) providers.

The shift from Phase I to II is characterized by testing of concepts, small scale roll out, field experiments, and initial introduction. In this phase the roll out of technology, testing of alpha and beta versions, and the embedding of the new technology in an organizational domain becomes more relevant. The service and supporting technology is not yet totally developed and still open to changes and reconfiguration. Possible shifts in service definition or technology architecture with implications for involved partners, can still take place. The gathering of market data on acceptance of the new product starts as well as the initial marketing of the product and service. The shift from Phase II to III is characterized by focus on commercial exploitation. Market experiments proved to be successful. Adoption rate is passing

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critical mass. The focus shifts from capturing markets to retention of market share, in other words customer satisfaction. In the third phase, market adoption gradually spreads and exploitation on a day-to-day basis, operations, and maintenance are key activities.

At first technology is the most important driver for the development of new business models. The emergence of new mobile, wireless, and data networks enable increased reach of businesses while at the same time middleware and multimedia applications offer new opportunities for enriched, customized, and secure communication. However, we do not expect technology developments alone to drive changes. In general we see correlations between technology developments, market response, and regulatory regimes. Both market developments and regulation can also trigger opportunities for the development of new product and services. Changes in market conditions or regulation enable new product and/or service definitions fulfilling customer needs as well as underlying business models. If new services are introduced, a number of important issues arise. On a service level these include service and customer value definition, choice for a generic or niche target market, and delimitation of target group. The definition of assumed customer value includes the value of services the user is expected to receive. As far as technology is concerned the basic questions are as follows. How do technical systems support the service? How does it make the service available? What is the basic architecture? How are choice for network, middleware and applications solved? The following questions are related to technology. Who is going to provide for the technological resources needed? Who has access to relevant assets such as data or mobile networks and applications? Who has access to content, users, and user data? Organizational issues are not only related to these practical questions, but also deal with more strategic issues. How does the service fit within existing strategies? Are the selected providers of technology really adding value? Are all of the critical resources and capabilities necessary to deliver the service available within the organization or within the partner network? Among the most relevant questions are those related to investments. Are partners prepared to invest or should outside funding being sought? Who is prepared to share risks? What are the expectations about revenues and how to share these among the involved partners? These decisions are based on more than costs and benefits as calculated through net present value, or internal rate of return. Intangible and strategic benefits also have to be considered.

The nature of questions change in the next phase: the role out of the service. In this phase it has to

become clear that the product or service complies with regulation with regard to issues such as fair competition, telecommunication regulation, privacy, intellectual property rights, and content regulation. Regulators as well as competitors are becoming aware of the new product and services offered, and will look into possible implications for regulation as well as prepare a strategic response. New innovative technologies or alternative versions of existing applications can be incorporated. We assume that in the role out phase the conditional effects of regulation are most decisive. Changes in marketing factors and technology can affect the service and business model, but are less conditional in nature. The impact on the business model is lower in the roll out phase.

It can be expected that, due to the experiments in the role out phase, more information on market changes, the operations of technology, and user perception of ease of use and utility, are collected and therefore impact the business models. We expect branding, scalability, both from a marketing and a technical perspective to be important issues. In this phase redefinition of service and business models take place. With the roll out of the service new partners might emerge, shifting the company from an R&D focus towards a more market oriented or commercial approach. Market know-how is a more important asset. Practical issues such as pricing and possibly bundling, have to be solved.

Finally the transition from the roll out to the exploitation phase will be decided upon by market acceptance. Technology issues merely deal with scalability, operations, and maintenance. Periodically new updates have to be installed. The basic technical design is not discussed. Regulation is more related toward surveillance of existing rules so that they are obeyed and followed.

In the mature phase of a service and a business model question with regard to the value being delivered, customer satisfaction and retention of customers become relevant. In the technology domain update of software, applications, operations, and maintenance are issues. Organizational issues deal with process optimization, and on operational management. With regard to financial issues, relevant issues are related to revenue generation on basis of commercial exploitation, maintenance and operation costs, and orientation to effectiveness and cost reduction.

All the presented questions raised in the three phases are used in the analysis of the impact of opportunities offered by technology, market changes, and regulation on the business model. 4. Case Study Methodology

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Based on the framework presented above and the

presented questions, we discusses shifts between phases, drivers in technology, as well as the market and regulatory domains for each phase and more specific issues to be dealt with in the service, technology, organization and financial domain that constitute a business model. The specified questions drove the collection of the data as well as its analysis. We made use of existing case descriptions as well as other available analysis of the selected case, i.e. NTT DoCoMo i-mode. We chose this example to illustrate our model because it is well known and because it fits in an industry that experienced important technological, market and regulatory changes.

5. Case study of NTT DoCoMo i-mode

We looked into development of mobile data services, focusing on the development of i-mode in Japan and Europe. We first analyze the external factors that led NTT DoCoMo to change its strategies and then we examine the way that the company adjusted its business model to successfully adapt to the changing circumstances. We adapted information from Ratliff [16]. 5.1. Phase I 5.1.1. Environmental Factors

One could argue that deregulation was one of the factors that began the wave of innovation in the wireless industry. The liberalization of telecommunication markets began in the late 1980s in a few developed countries with a larger number following the privatization and liberalization trend throughout the 1990s. This also occurred in Japan.

Until 1985 Nippon Telephone and Telecommunications (NTT) was a government owned monopoly. The Japanese wireless market at that time was heavily regulated. Subscribers were only permitted to lease handsets and subscription fees were among the highest in the world. In 1994 the Ministry of Post and Telecommunications initiated the liberalization of the market by allowing users to own the handsets. This minor change in regulation opened market expansion as well as technological opportunities.

Until the liberalization of the market, wireless technologies were focused primarily on the transmission of voice. The main technological developments were happening around issues of security, reliability, and emergency location. In 1992

when NTT DoCoMo was spun off from NTT the Internet was a promising and unchartered territory. This offered NTT DoCoMo the opportunity to experiment, first by using a dedicated private network and subsequently with a less ambitious exploratory project that took advantage of packet based transmissions to deliver data and allowed users to have an “always on” connection. In this early stage the company was looking for and experimenting with alternatives that could potentially succeed in the market.

This case clearly illustrates the impact that the market environment has on a company’s business models. The liberalization of the telecommunications sector allowed companies to expand their markets and many carriers all around the world were looking for business opportunities. This was a time when wireless adoption had accelerated and appeared to have endless possibilities. In Japan specifically the conditions were optimal for a technological breakthrough in mobile connectivity.

Table 1. Development of i-mode: 1997-1998

Concept i-mode Japan Technology Development of mobile data

services Market 1997: Competition wireless

voice market: negative impact market share form 80% declined to 60%

Drivers

Regulation Deregulation of voice market Service

Target group: young females Technology CPE small device, big screen Organiza-tional arrange-ments (value web)

Task force for data communication opportunities (Keiichi Enoki: business experience; Takeshi Natsunoe: Internet start up; Mari Matsunaga: publishing). Content Providers: acquire content, generate internally DoCoMo focus on network. Creation of Gateway Business Department as gateway, market maker

Business Model Concepts

Economics Content reselling to customer on basis of subscription

NTT DoCoMo had identified a promising market

segment. It focused its attention on young urban adults with high disposable incomes and a propensity to try new gadgets. In addition there were individuals that spent much time commuting and given their limited living spaces spent much of their time outside in the streets, in restaurants and other public areas. Another factor that contributed to the success of the mobile Internet in Japan was the high price of broadband access at home. A wireless Internet

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connection was thus a significantly cheaper alternative. 5.1.2. Business Model Effects

In terms of organizational structure, NTT DoCoMo was forced to adapt after it was spun off from NTT, which had a nationwide installed base and a well known reputation. When the company was divested it was forced to differentiate itself and find alternative markets. The culture of the organization was thus different. Unlike NTT, DoCoMo was more flexible, more entrepreneurial, and took more risks by introducing technologies that were not 100% proven. Its president also broke from the traditional Japanese business practice when he brought in outside marketing expertise.

The services and technology aspect of the business model go hand in hand in this first stage. The company was able to distinguish an offer of value to its subscribers by allowing them to be permanently connected. Packet switched technology also allowed faster transmission of data, which resulted in speedier downloading of pages.

They also created value to partners providing content. They did this in an unprecedented move. Until then the rest of the world had used WAP for data transmission, DoCoMo developed the WHTML a standard that was compatible with HTML and thus made it easier for content ponders to modify their existing web pages to the i-mode wireless phone.

The revenue base for the services printed through i-mode also broke away from the traditional way of charging for wireless services. Instead of charging by time the company decided instead to charge a flat monthly fee plus a small fee per 128-bit packet. This revenue model also called for creative billing alternatives. DoCoMo made arrangements with its official content suppliers to collect the charges and get a 9% share of that revenue. 5.2.1. Phase II: Environmental Factors

Of all the environmental factors affecting business

models, regulation is the slowest to change. The initial regulatory changes were not generally followed by additional measures. It is important to note nonetheless that the liberalization that had happened as well as the successful introduction of i-mode attracted numerous competitors to the market. This was a situation that NTT in general had little experience with given that it had enjoyed a monopoly status.

The rapid adoption of wireless devices that happened internationally as a result of liberalization

created great enthusiasm for the technology and services provided using these networks. Many companies were investing in the third generation of wireless services. In Europe the U.S. companies had been working on Wireless Application Protocol (WAP). At that time Japan’s decision to use a different standard for the transmission of data was seen with skepticism.

Table 2. Development of i-mode: November

1998 - February 1998 Techno- logy

Drivers

Market Initially no public attention: focus on aggressive marketing campaign 6 month after introduction 2 million subscribers

Service Marketing: role model(s), for initial target group Ryokok Hirosue, shift to older male market; Masahiro Tamura. Branding: alliance with Sumitomoto Bank. Broadening services: critical mass of services Official i-mode sites by 800 content providers, and 40,000 voluntary sites, i-mode compatible in 2001

Techno- logy

Virtual private portal for consumer access - always on - cHTML for access of content, in combination with HTTP and SSL - Java J2ME as script language - choice for JAVA middleware above MPEG-4; BREW platform - wireless phone system: established payment mechanism

Busi-ness Model Con-cepts

Organiza-tional arrange-ments (value web)

Walled garden approach: DoCoMo center of gravity Balance value web, incorporating component manufacturers, handset manufacturers (specifications defined by DoCoMo), equipment manufacturers (W-CDMA technology), Service Providers (JAVA-based), Content Aggregators; Enterprise Solutions Providers and Content Providers

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Economics

Cross subsidization by DoCoMo of handset (between ¥ 20,000 and ¥30,00) Fixed fee (¥ 300), charge for data packages (¥ 0.3 per packet). Lower than price for ISP (¥ 2,000) Official i-mode sites: fee from subscribers via telephone bill Voluntary sites: collect fee themselves. 9% of official content providers revenues for DoCoMo Advertisement revenues 30% of i-mode sites (premium) charge subscribers Risk reduction by DoCoMo if subscriber defaults on payment

The market conditions had changed considerably

from the first stage. Many telecommunications carriers had acquired large debts due in part to the large amounts of money that they spent on spectrum. The demand for wireless services was slowing down around the world. They were also experiencing excess capacity as a result of their earlier expansion efforts.

The market circumstances for NTT DoCoMo were nonetheless considerably different from the other carriers. The early success of i-mode had generated a self-reinforcing cycle where the wide adoption of users led to greater interest from content producers. The expansion of content and services further attracted new users. The company also benefited from i-mode success because these users spent 15% more time on the phone, generating 25% to 30% in additional revenue. The market environment for NTT DoCoMo was thus considerably more favourable than that of its counterparts. 5.2.2. Business Model Effects

In the second phase NTT DoCoMo had realized

that much of its success was in part due to the quality of its partners. The organizational structure of the company relied on a network of close partners that shared research and development and together created new services. Because of the company’s close relationship with its content providers it was able to provide advice to customize sites for i-mode. The company was thus able to leverage its wireless networks and services as a result of its close relationship with both handset manufacturers and content developers. The close relationship that exists among these companies have led some critics to accuse it of favouritism, but what we consider to be a network of closely collaborating firms or a value web.

While NTT DoCoMo had made arrangements with many companies to support i-mode, the company made the decision to have as open system, allowing

unsanctioned third parties to provide i-mode content, further expanding the spectrum of services available to its subscribers. The network of partners allowed users to pay their bills through electronic banking as well as other services or products. Users could obtain traffic and weather information as well as maps and restaurant recommendations based on the user’s location.

In this second phase of the NTT DoCoMo business model the focus of its technology strategy was not as much on experimentation. Instead the company adopted a strategy that is termed as “kaizen,” which means gradual improvement of the technology. The main objective is to capitalize on the successes and add new features based on those successes as well as market trends. Among the technological advances introduced by the company in this second stage were color screens, small executable java based applications that allowed its subscribers to play games and other software applications. The company also enhanced its security features

The revenue model did not change significantly from its first phase. The company nonetheless continued its search for additional revenue streams. As one might expect these additional resources came from the expansion of partners. Alliances with game developers could allow its users to play in real time with other people and allow NTT DoCoMo to collect fees from game sessions. The company also established a partnership with Dentsu, an advertising company. This would allow the company to collect yet more revenue from click-throughs. 5.3.1. Phase III: Environmental Factors

The regulatory environment in this third phase

remained the same. There was nonetheless a regulatory obstacle that NTT DoCoMo was faced with when it expanded to Europe and the U.S. The allocation of spectrum in these regions had left a limited amount for third generation wireless services. In addition, security concerns made the U.S. government reluctant to release the part of the spectrum allocated to the military into commercial applications

In the third phase of our dynamic business model framework we expect the company to continue its trend of gradual improvement. This was not the case for NTT DoCoMo. As its domestic market began to saturate the company needed to expand. This was going to be a difficult challenge as NTT DoCoMo’s success relied an standards that were only used in Japan. This happened in spite of the fact that the company worked with its European counterparts to ensure that the technology standards in these two

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regions were compatible for the third generation of services.

The transition was not smooth. Around the world the financial difficulties of telecommunicates carriers slowed progress on the technology. Carriers moved to a “2.5” generation instead of directly into the third. It was more economical for them to slightly upgrade their existing networks by adding packet switching transmission and achieving greater speeds. Neither European nor American corporations were willing to invest in a brand new network to offer third generation wireless services

Table 3: Development of i-mode: 2001 -

Present

Technology Drivers Market 30 million users in 2001; 38

million in 2003 FOMA services 330,000 (April 2003) i-mode users: higher retention rates Easy switch between content providers enabled by DoCoMo

Service Broad acceptance: market share of 56% in 2001. Voice data board accepted

Technology Data-rate 28.8 kbps. Shift to 3G (from 9.6 kbps to 64 kbps, moving up to 384 kbps), Vertical applications i.e. M2M applications, LBS, Camera, Streaming video. Freedom to Multimedia Access concept (W-CDMA). Network problems; congestion due to traffic demand, 3G as alternative solution. Trials show problems with handset and poor connection rates

Organiza-tional arrange-ments (vale web)

Relationships with content providers redefined: not only the walled garden approach, but also a more open format for content providers was defined

Business Model Concepts

Economics $2.8 billion (Ratliff, 2002, p. 57)

Influences of the market environment become

more evident in the third phase. The expansion to Europe that the company wanted would require some adjustments. First, unlike Japan, Europe did not suffer from the complex Japanese alphabet. I-mode with a system of menus made data entry and selection much easier. In Europe the population was much accustomed to the QWERTY Keyboard. Also both Europeans and Americans have accessed the Internet through personal computers at home, school, or work.

Many Japanese, in contrast, had their first Internet experience through i-mode. Third generation wireless is still in the early stages in both of these continents and the introduction of i-mode services through wireless devices has been impeded by the introduction of wi-fi services that allow personal computers and laptops to access the Internet wirelessly. 5.3.2. Business Model Effects

In terms of organization, NTT DoCoMo had

realized that continued success of its service and technology depended on further market expansion. In this third phase the company decided to explore the European market. Following a similar strategy as that used in Japan, NTT DoCoMo relied on European and American partners to provide local market expertise.

In this case the company wanted to ally with carriers that had sufficient spectrum lo provide i-mode type services as well as those that were willing to adopt the standards developed for i-mode. The company’s network of allied businesses relied on other telecommunications carriers because they brought a large installed base of subscribers to the relationship in addition to sharing similar corporate cultures.

The bundle of services provided during this third phase did not change. In Japan the company relied on simply maintaining and gradually expanding services through its partners but the business model related to the provision of services did not change. The company nonetheless may need to reconsider the way it provide services in European and American Markets due to the significant technological, market, and regulatory differences that exist in these regions. This may require NTT DoCoMo to adjust its business model.

Because the success of i-mode type services depends on the amount of content and services provided to its subscribers, an additional barrier to its expansion plans in Europe and the U.S. was to convince content providers in these countries to offer their services using i-mode. Alliances with AOL and Time Warner were thus key components to strategy for these regions

The greatest technological challenge for DoCoMo was to convince carriers in both Europe and the U.S. to adopt the standards that it developed for Japan. The technology strategy of the company is to buy minority interest in key companies. The intent is to help them make the transition to i-mode standards. The ultimate technological goal of the company is to establish a bundle of standards that it could continue to develop and license

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The revenue stream in this third phase in the Japanese market was based on maintaining existing offerings. In the International arena NTT DoCoMo realized, however, that they could not be simply carriers. In such a role they would face formidable competition and opposition. Rather than direct competition, NTT DoCoMo wants to generate revenue from the licensing of its technology. 6. Conclusion and discussion

We have demonstrated in this paper a new

framework for analyzing the dynamic nature of business models. Although this framework is generic, large part of the model have been developed on analysis specifically in the mobile domain, moreover we applied it specifically on a mobile case. Business models change as collaborating firms move from research to roll-out and maturity as a result of influence from forces such as technology, regulation, and markets. Firms will seek out new partners as they move from stage to stage and forces wax and wane in their influence. This paper was designed to outline the framework and illustrate it through a case. It is now necessary to examine some comparative cases to further test the framework. 7. References

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Figure 1. Dynamic business model framework for value webs

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