Network configuration,customer centricity,and performance of open business models: A solution provider perspective

While research has shown a positive impact of open business models on value creation, it has remained silent on the configuration of the corresponding partner networks and their effect on performance. Studying three cases of solution providers which involve external service partners for solution delivery, we find that solution customer centricity – the degree to which the focal firm focuses on solution customers in the joint delivery of solutions – moderates the relationship between partner networks and open business model performance. For open business models with low solution customer centricity, a network configuration characterized by many weak ties to service partners leads to superior performance. Conversely, for open business models with high solution customer centricity, few but strong ties to partners lead to superior performance. Based on these findings, three ideal configurations of networks for open business models are derived: the controlled, the joint, and the supported model.     

Compartmental market models in the digital economy—extension of the Bass model to complex economic systems

Compartmental models are widely used in epidemiology, engineering, and physics to describe the temporal behavior of complex systems. This paper presents how compartmental models may be applied to the digital economy—more specifically, how the Bass model can be extended to more complex economics systems such as markets with customer churning, competition, multisided platforms, and online games. It is demonstrated that it is straightforward to establish the equations describing the various economic systems under study, however, the equations are often too complex to be solved analytically in the general case. Though the paper presents simple and idealized cases, the solutions may, nevertheless, uncover important strategic aspects that otherwise may be hidden by complexity in the general case, for example, the reasons for slow initial market growth. The paper also discusses how the developed models may be used to evaluate digital economic market evolution and business policy.     

Development and implementation of customer solutions: A study of process dynamics and market shaping

A broad, dynamic network perspective on solution processes remains scarce. This article presents the process of developing and implementing customer solutions and its effects on the wider business environment by investigating customers and suppliers in the global mining industry (Australia, Chile, and Sweden), analyzing the deployment of a new customer solution, and assessing the changes to the competitive environment and focal firms' relationships with other customers and suppliers. It shows that the forces that drive customer and supplier interests and motivation to co-develop customer solutions may change over time, thus redefining the aim and scope of solutions and creating failure risks. Customers present problems; suppliers respond, on the basis of not only the feasibility of the customer-specific solution but also of their evaluation of future solutions in a broader market; then suppliers aim to standardize successful solutions across markets. Customers want close supplier relationships and unique solutions but also like standardized and repeatable solutions, so they can share development costs with competitors and expose the supplier to competition to avoid lock-in effects. From a network perspective, a novel solution can have a market-shaping effect and evoke reactions from other actors who want to enhance their market position. However, these changes are not necessarily deliberate, and the dynamics that market introductions of solutions trigger may be difficult to predict.     

Migrating from products to solutions: An exploration of system support in the UK defense industry

This article explores the acquisition of business solutions in complex systems environments, through insights drawn from current literature and a study of the UK defense industry. We seek to counter-balance the dominance of literature focusing on the supplier perspective, as well as provide richer distinctions between different kinds of system suppliers involved in providing business solutions. We do this through the detailed examination of customer support offerings and business relationships that exist at the system customer-supplier interface. Our findings provide a map of solutions models that exist in the UK defense context. These include: (1) product system support, (2) life cycle product system support, (3) functional system support, and (4) enterprise system support. Using these models, we highlight the continued relevance of a product orientation and the challenges involved in adopting a true customer orientation when delivering business solutions. System suppliers seeking to reposition from the supply of product system support towards more integrated and customer-oriented forms of support require a significant organizational step change.     

On the creation and evaluation of e-business model variants: The case of auction

E-business model variants aim at creating customer value through differentiation. At the core are two major components of the business model concept—business process and customer value. Focusing narrowly on these components, this paper provides a new and systematic way to identify both, create potentially competitive variants, and to evaluate them quantitatively. With a clear presentation of the whole business process, it is possible to highlight key sub-processes, and increase a shared understanding between multiple stakeholders. Moreover, understanding customer preference and the expected market share of potential variants can allow managers to benefit from clear value propositions for variants' potential profitability. Our method also promotes rapid and efficient consensus-building about the most competitive variant. Taken together, our proposed method will help both managers and researchers refine the business model more precisely. An e-auction case in Korea is presented to illustrate the empirical application of our method in detail.     

Dynamic pricing models for ERP systems under network externality

Enterprise Resource Planning (ERP) systems vendors face great challenges to enhance their market position and maximize their profits. Being able to simultaneously predict the diffusion of an ERP and to determine the right price to charge to a customer is a complex task. Earlier work has demonstrated evidence of network effect in the diffusion of ERP software in industries. In light of this evidence, we investigate in this paper the benefit of a dynamic pricing strategy for ERP systems vendors in a business network governed by a quantitative diffusion model. Based on a real scenario in the automotive industry, those quantitative models are integrated into a simulation-based optimization approach to tackle the problem. Our findings are promising and establish the foundation of a powerful decision support tool for ERP systems vendors.     

Leveraging brand equity in business-to-business mergers and acquisitions

Every acquisition provokes a branding decision—should the acquirer absorb the acquired business by renaming it under its own name to convey to the market that ownership and the way of doing business has changed, or should it allow the acquired company to continue trading under its old name so as to avoid damage to its existing customer franchise? This is a complex management decision but one which apparently receives little attention. This paper draws on the B2B branding and M&A literatures to create a model of brand equity transfer. The model assumes that rebranding of an acquired company under the name of the new parent can yield positive benefits if the new parent has higher brand equity than the acquired company. A case study of an acquisition of a national construction materials company by a larger international group provides an illustration of the transfer process.     

Customer referencing as business actor engagement behavior – Creating value in and beyond triadic settings

The rising impact of customer engagement is increasingly evident in business markets. This paper studies customer referencing as an important manifestation of engagement behavior in the business-to-business (B2B) context. To extend extant research, which has thus far examined referencing almost exclusively from the seller's viewpoint, we study how referencing affects value creation in business networks. We explore resources contributed and gained though referencing and the resulting value outcomes for the entire reference triad (the seller, the reference customer, and the prospective buyer). Empirically, the paper draws on an extensive field study conducted in knowledge-intensive business service industries. The results explicate how customer referencing affects value creation within and beyond the triad, by i) enhancing or impairing actors' internal processes; ii) strengthening or damaging relationships between the triad actors; and iii) facilitating exchange in their broader business network. The paper contributes to research on customer referencing by explicating its role in value creation on a network level. As one of the first studies on engagement in the B2B context, this paper contributes to the emerging actor engagement research by analyzing how influencing behavior operates in a business network. These insights can help firms to facilitate exchange in complex markets.     

Solution business models: Transformation along four continua

Using a business model perspective, we identify four continua that are of specific relevance for industrial firms transforming toward solution business models: customer embeddedness, offering integratedness, operational adaptiveness, and organizational networkedness. Using these continua, we explore the opportunities and challenges related to solution business model development in two different business logics that are of particular importance in an industrial context: ‘installed-base’ (IB) and ‘input-to-process’ (I2P). The paper draws on eight independent research projects, spanning an eleven-year period, involving a total of 52 multinational enterprises. The findings show that the nature and importance of the continua differ between the I2P and IB business logics. IB firms can almost naturally transition toward solutions, usually through increasing customer embeddedness and offering integratedness, and then by addressing issues around the other continua. For I2P firms, the changes needed are less transitional. Rather, they have to completely change their mental models and address the development needs on all continua simultaneously.     

Are pricing policies an impediment to the success of customer solutions?

In an era of declining pricing power and increased global competition, customized solutions appear to be an effective way to build competitive advantages without the debilitating effects of price competition. Solutions involve provision of an integrated combination of goods and services that are designed to meet a business customer's specific needs. Premium prices and higher margins can be extracted by solution providers, who now have considerable incentives to design and market innovative solutions for their customers. We examine the applicability of various pricing frameworks and pricing practices in the context of two industries — business process outsourcing and power generation equipments. Our interviews suggest that firms predominantly use traditional pricing strategies; new strategies for solution pricing are only emerging; and, successful firms are currently using hybrid pricing models. We find that the solutions that we observed among practitioners are not what theory would suggest as true solutions but what would be described by theory as bundled products. We also find that solutions are in the eye of the beholder, i.e., if customers can de-bundle offerings, they are not true solutions. We extend our findings to academic theory and to the practice of developing and pricing solutions.     

Information sharing and profit allotment based on supply chain cooperation

To maximize customer value created by a supply chain system as a whole, one of the key issues in supply chain management is how to have profit and benefit properly shared between partners in an effective manner of the supply chain integration. In this regard, information sharing between partners plays a rather important role in business process and management integration of the supply chain. The paper focuses on analyzing the value created from information sharing by decreasing inventory level and on investigating the collaborative mechanism of providing incentive to retailer by upstream partner via sharing profit gained information sharing in the context of three-echelon supply chain system. The issue of dealing with the interest conflict between the supply chain as a whole and individual partners is addressed based on information sharing analysis by means of cooperative game approach, a graphic model with three-dimensions is developed to depict the possible cooperative solutions of profit allotment between partners, and a problem solving method addressing how the profit allotment between partners can effectively motivate the partners to be cooperative with each other is presented as well.     

The sites and practices of business models

This paper examines the concept of business models. Drawing on the business model literature, we first identify technology, market offering and network architecture as the three core elements of business models. The theoretical routes of each element are then examined through the associated literatures: technology and innovation studies, industrial marketing, operations strategy, and evolutionary economics. Multiple dimensions of each element are identified and the resultant framework is used to explore developments within the recorded music market across three centuries.Through changes in the recorded music market since the 1870s, we explore how business models emerged, took on multiple sites and evolved through their practice over time. We look at how interlinking business models become spread out across the business network as different network actors play their part. The recorded music market generates important insights into how business models are created, developed and practiced. We suggest that firms, business networks and markets form embedded systems within which multiple overlapping business models can be considered as constituent parts. In this way, the business model is understood as having agency to shape action; but in turn actions (of others in the business network as well as within the firms themselves) also shape the business model.     

Individual customers' use and integration of resources: Empirical findings and organizational implications in the context of value co-creation

This article addresses the call for empirical work to contribute to the ongoing critique of service-dominant (S-D) logic, and for an assessment of its potential reach to practitioners. It examines the appropriateness of a model of the resource-based view of consumers in an organizational context — the British Library (BL) — and concludes that the model can be adapted to include individual customers with varying motivations (personal/business) for using the BL's services. A detailed analysis of individual customer's operant resources (enabled through access to 565 messages posted to a BL user support forum) provided a different lens through which the organization could consider strategies to support value co-creation. The outcomes, from a collaborative research process, with executives and senior managers of BL, suggest that a sub-division of customer operant resources into physical, cultural and social has empirical support and managerial relevance, and that a focus on individual customer resources can provide insights into how to manage co-creation of value.     

Benefits of using hybrid business models within a supply chain

Today's competition between supply chains (SC) requires optimized strategies in order to satisfy customers’ demands. The business models used by the SC members play a big role in this delivery of value to the customer. From here the notion that a mismatch between the intended market and the business model used to address it translates into a poor SC performance. As real-life business environments have become really complex, SC members have been forced to use hybrid business models (that is, the integration of features of two different business models). A review of the literature in the area of supply chain management shows that past research have not paid much attention to this issue. The objective of this paper is to quantitatively evaluate the influence these hybrid business models have on the SC performance. For this purpose, a system dynamics (SD) simulation model is developed and tested under different operational conditions, so conclusions can be derived regarding the benefits of the use of hybrid business models.     

Risk assessment and profit sharing in business networks

Nowadays network is the preferred governance form to conduct economic transactions. Network solution allows to reach flexibility maintaining cost and quality level. Since network concept refers to a great variety of organizational hybrids it is possible to choose the one that fits better market requirements. The new trends in inter-organization relationships push towards network solutions: companies are interested in relationships with partners and customers to overcome resource dependence, to enter too risky market or simply differentiate their business portfolio. The proposed research focuses on the network concept aiming at highlighting threats and opportunities to investigate the double nature of the risk concept. Network structures offer flexibility and higher profit as a consequence and business risk sharing opportunity.These two aspects (profit and risk) are strictly related and have to be considered together to depict a complete scenario; this implies that risk assessment and management in network environment cannot neglect profit sharing or, in other words, that profit sharing mechanisms should use risk as driver. In this context our research proposes a methodology to measure risk taking into account network peculiarities; risk estimation is a basic step to evaluate the opportunity cost of capital needed to compute the network Net Present Value (NPV) that is assumed as base in the profit sharing process. The profit sharing process has been tackled using the Shapley value approach that is inspired to the fairness principle while the opportunity cost of capital is assessed using the Capital Asset Pricing Model (CAPM).     

Mobile targeting in industrial marketing: Connecting with the right businesses

Although the existing literature has acknowledged the importance of mobile marketing, few scholars have examined the efficacy of mobile targeting. This paper contributes to the burgeoning literature on mobile targeting by investigating the effects of customer mobile habits and social capital on firm sales. Leveraging unique customer mobile browsing data from a major telecom service provider in China, we use a Bayesian SEM (structural equation modeling) approach to show that customer mobile habits and social capital exert significant influences on customers' purchase intentions. Specifically, customers who engage in more hedonic mobile behaviors, such as social networking, video browsing, and gaming are associated with a higher probability of purchasing, controlling for the usage of communications apps including messaging and emailing apps, and the usage of functional apps, such as maps, living services, and app market apps. Additionally, our research results reveal a significant positive effect of social capital on firms' sales performance. These findings offer important insights that are often missing from organizational targeting campaign designs in terms of targeting both the right customers and the right business alliance partners and enable a better understanding of managerial and decision-making implications in the context of the B2B market in general.     

Decision making for business model development: a process study of effectuation and causation in new technology-based ventures

This study investigates the decision-making logics used by new ventures to develop their business models. In particular, they focussed on the logics of effectuation and causation and how their dynamics shape the development of business models over time. They found that the effectual decision-making logic was used dominantly to generate a viable value proposition for a specific customer segment. Causal logic is then used dominantly to define the other business model components in relation to the value proposition and customer segment. When a shortage of resources emerges, causal logic is replaced by an increase in effectual decision-making again. They concluded that before investing significant resources in a business model it was crucial for firms to reduce, as far as possible, technological and market uncertainty through effectual strategies to avoid high re-configuration costs later.     

Network effects and preference heterogeneity in the case of mobile telecommunications markets

This paper demonstrates how revealed- and stated-preference analyses can be used for modeling network effects in the field of mobile telecommunications. The aim of this study was to verify if network effects may still play a role in the Polish mobile telecommunications market, measure their strength, identify their sources and variability across consumers by accounting for consumers' observable and unobservable preference heterogeneity, evaluate their monetary value to consumers, and finally, to verify if the marginal utility associated with network effects is constant. The analysis of consumers' revealed choices (currently used mobile telephone operator) allowed the identification of major differences between customer bases of incumbent and new entrant operators, and insight into the business strategies adopted in the presence of asymmetric regulation of mobile termination rates. The second part of the study—the analysis of the consumers' stated choices (made in carefully prepared and designed hypothetical choice situations, known as the choice experiments) made it possible to directly model consumers' utility functions and, in this way, investigate the nature of network effects in mobile telecommunications markets. From the results, the presence of strong network effects, which are related to the ratio of consumers' social network group using the same operator, and to the magnitude of on-net price discounts, is confirmed. These network effects can be disaggregated to pecuniary and non-pecuniary effects. Through the utilization of the random parameters multinomial logit model, consumers' observable and unobservable preference heterogeneity can be accounted for, which proved a scientifically revealing and potentially policy-relevant approach. The results might be of a particular interest to other researchers aiming at modeling consumers' preferences as well as to mobile telephone operators and regulatory authorities—it is shown that capacity for vigorous price competition between mobile operators is limited by non-price factors, which affect subscriber's choices, especially in the presence of asymmetric mobile termination rates.     

Leveraging stakeholder networks with outside-in marketing

The theory of Outside-in marketing (OIM) emphasizes the importance of internal and external partners of a firm to drive strategies for value creation. OIM is based on four key tenets: market sensing and responses, segmentation and targeting, innovation, and employee's learning effort. With this commentary, we apply the theory of OIM to network analysis. By doing so, we identify key stakeholder networks as part of a firm's business ecosystem and discuss the value that can be extracted from different stakeholder networks. Most prior network research in marketing has mainly used customer or employee network data while neglecting other important stakeholder groups. We provide information about how network analysis of stakeholder data can fill gaps in the marketing literature and provide firms with essential knowledge, economic value, and influence over external partners, and improve the value generation process. We first describe each tenet and give examples of stakeholder networks that can be investigated within the realm of the tenet definitions. We then discuss different challenges that social network research can pose, and end with future research questions that can be explored for empirical research studies.     

A dynamics-based approach to solutions typology: A case from the aerospace industry

The process of servitization for manufacturing firms has been studied to help improve understanding as to how manufacturing firms can combine products and services in order to provide business solutions for their customers. Several proposals as to a typology for business solutions have been made. Typologies proposed are static in nature rather than dynamic. The aim of this paper is to propose a typology of the dynamic solution process, taking the aerospace industry as an appropriate context of analysis. A qualitative and exploratory research is adopted, using a case study approach. A triadic approach is applied in the selection of cases in order to capture the multi-actor base element of the network and solution dynamics. The data reveals four different time-based categories of business solution: 1) solutions before manufacturing; 2) solutions for manufacturing; 3) solutions for product performance and 4) solutions for innovation. This paper has theoretical and managerial contributions by presenting a typology for business solutions as a variable combination of products, services and developments over time.