Service Innovation and Business Models

Western economies are highly dependent on service innovation for their growth and employment. An important driver for economic growth is, therefore, the development of new, innovative services like electronic services, mobile end-user services, new financial or personalized services. Service innovation joins four trends that currently shape the western economies: the growing importance of services, the need for innovation, changes in consumer and business markets, and the advancements in information and communication technology (ICT).

See the publication in the business model book for mobile services here.

Design Trade-offs for Electronic Intermediaries

Electronic commerce offers intermediaries new opportunities for facilitating the transfer of information, goods and services between business customers and suppliers. Designing exchanges is a complex undertaking because of the many design options on the one hand and the diverse, and sometimes conflicting, interests of customers, suppliers and the intermediary to be considered on the other. Our research provides constructive support for balancing interests beyond simple prescriptions like 'creating win-win situations.' We developed an exchange design model and patterns focusing on trade-offs for electronic intermediaries based upon four in-depth case studies.

See the publication in Electronic Markets here.

The Internet as preferred channel

I have started working on a new project in the area of multi-channel management. I plan to approach multi-channel management from a service perspective. What will be the benefit of this? And what does it mean? I don’t really know yet, but it seems an interesting endeavour. Let me illustrate this with an example. In multi-channel management the Internet is often perceived as the preferred channel, in particular of the supplier. One of the main arguments is the expected cost-efficiency of the Internet channel. Is this really true?

Grönroos differentiates in his book on Service Management and Marketing between three types of relationship costs for both customer and supplier: direct, indirect, and psychological costs. The Internet channel may be cost-efficient with respect to the direct relationship costs (such as the catalogue, ordering, and invoicing) but may be less cost-efficient with respect to indirect and psychological costs (such as correcting mistakes or handling complaints).

The relevance of business models: Business model functions

The particular functions of business models will be related to the application areas. A common application area of business models is innovation. A business model can be used for mediating between market and technology. Another application area of business models is the tactical level that brings strategy and operations together. Sometimes, business models are even considered as part of strategy. Business models can also produce business requirements that can be used in information system development.

When one takes a comprehensive perspective, it can even be argued that business models are a management approach that supports the process of designing, implementing, operating, and improving the way one or more firms deliver a specific service. Maybe the other functions discussed above can be seen as different subfunctions of business models as a management approach.

In practice different applications of business models come together. We take the application of business models for electronic business as an example. Electronic business models are often presented as an innovation in a particular industry, for example, direct sales via the Internet. Moreover, a business model enables one to try out different varieties of direct sales. The direct sales model can also be seen as a strategic move to compete with incumbents who make use of intermediaries and, therefore, cannot make a move towards direct sales easily. The specification of the direct sales model can serve as an input for the information systems development identifying building blocks such as a catalogue and online payment.

Electronic Offering Model

In the early days of e-commerce there was considerable attention to understanding the phenomena. Nowadays, there is less attention for this in the research community. In the mean time business presence on the web is still extending, both in a traditional (Web1.0) and new way (Web2.0). Therefore, it is still important to preserve and develop our understanding of doing business on the Internet.

While working on new service development and service design I studied the NetOffer model of Grönroos. It is a model of Internet offerings based upon the Grönroos Augmented Service Offering model. Grönroos refers in the notes at the end of the article to the ICDT model of Angehnr (article). I was not very enthusiastic about the way the NetOffer model deals with information and communication. Therefore, I had the idea of combining the Netoffer model and the ICDT model into the Electronic Offering model, as presented below. I hope to soon write more about it and evaluate the model with a case study.

Designing for Acceptance: Exchange Design for Electronic Intermediaries

My PhD research was on designing electronic intermediaries. I published my PhD thesis in November 2006. Below is a short summary.

Electronic business has brought many success stories as well as failures. Intermediaries are a particularly interesting application domain: on the one hand, they are given opportunities by electronic business to reinvent their value logic, while on the other they are threatened by opportunities for customers and suppliers to deploy electronic business to do business directly. Designing for Acceptance addresses the acceptance of electronic intermediaries by studying the design of the exchange. For example, should a web catalogue provide price information and should it consider an extension with transaction functionality?

Developing the right exchange design is a complex undertaking because of the many design options and the interests of multiple actors that need to be taken into account. Four cases were studied: Tapestria (interior fabrics), SeaQuipment (maritime products), Meetingpoint (insurances) and Voogd & Voogd (insurances). The results are an exchange design model and patterns that are derived from numerous case lessons and are supported by insights from theories on electronic intermediaries, acceptance and business design.

The exchange design model offers a systematic insight into generic exchange design themes that are relevant to the interests of customers, intermediary and suppliers. Exchange design patterns discuss specific trade-offs with respect to one or more themes. This study contributes to current knowledge by providing support for balancing interests in exchange design beyond simple prescriptions like ‘creating win-win situations.’ The exchange design themes and patterns are convenient instruments that offer constructive support for developing a vague electronic business idea into a concrete service concept.