Business Model Innovation in a Multi-Country Setting: Why and How Do Firms Adapt or Replicate?

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Business Model Innovation in a Multi-Country Setting: Why

and How Do Firms Adapt or Replicate?

Name student: M. Odijk

Student number: S2006987

Master Program: MSc BA Strategic Innovation Management

Supervisor: dr. T.L.J. Broekhuizen

Co-assessor: dr. I. Estrada Vaquero

Word count (appendices excluded): 14.232

Word count (appendices included): 16.267

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Abstract

The purpose of this study is to investigate how and why organizations with an innovative business model replicate or adapt locally when entering a new host country. Extant literature assumes two basic principles for replication and local adaptation; replication results in cost efficiencies, whilst local adaptation allows a firm to overcome problems with its core in a new host country. Focused around five Dutch start-ups in different industries, this study finds four alternative motives to replicate: (1) it allows them to offer a consistent image/identity so they can leverage brand equity, (2) it allows them to scale the business model, (3) following a discovery approach, the founders have blind faith in the model, and (4) for platform-based business models, this study finds that they utilize its suppliers to make the local adaptations, so that they offer great local flexibility whilst still

replicating the model cross country. Adaptations are made to (1) overcome obvious product and financial incompatibilities and (2) additions to the core to provide a “local flavour”. Additionally, this study finds that firms make adaptations in the peripheral and/or non-visible elements of the

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1. Introduction

Over the past two decades, Business Models (BM) and Business Model Innovation (BMI) have proven their relevance to the business literature (Zott, Amit, & Massa, 2011). When discussing innovative firms, product- and process innovations are typically emphasized. However, a successful BMI earns an average premium which is up to four times higher compared to product or process innovations, according to the Boston Consultancy Group (Lindgardt, Reeves, Stalk & Deimler, 2009). It is therefore not ungrounded that Massa & Teece (2013) describe BMI not only as a vehicle for innovation, but also as an innovation of itself.

Obviously, when significant profits can be made, barriers are to overcome that block the path to success; a competitive advantage is never easily attained or sustained. Current literature focuses on the obstacles firms might face internally when innovating their business models (e.g., changing routines or engaging in exploration activities) and how they can tackle these obstacles (Chesborough, 2010). Moreover, a more recent article of Christensen, Bartman & Van Bever (2016) addresses more elaborately how and why incumbent firms struggle implementing innovative business models.

Although BMI fosters great possibilities for competitive advantage, and going abroad allows an organization to reap the benefits of a BMI to an even greater extent. Therefore it appears to be relevant to research BMI in a multi-country setting. However, the current BMI literature does not address the challenges faced when going abroad; how and why firms should adapt or replicate an innovative business model is currently unaddressed in the extant literature.

Currently, not much is known in the BM or BMI literature about replication and adaptation when going abroad with a BMI. Moreover, Aspara, Hietanen & Tikkanen (2010) claim that the “extant research has paid little attention to a related, important aspect of strategy: the replication of

(new) business model(s) that a firm creates” (p.23). Therefore, this study builds upon insights from

strategic management literature, and in particular franchising literature, to provide initial insight to why and how firms replicate or adapt its BM when going abroad. As franchising deals with exporting (elements of) a business model that the industry is acquainted with to a new country, it can provide interesting insights. However, as franchising typically entails (parts of) the business models, which are not new to the industry, additional research for BMI specifically is necessary.

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the business concepts (hard vs soft franchising) and on business models that has been around for years; they are not innovative any more. This study takes a broader perspective, and considers the replication of BMs in their entirety, and not just certain aspects of it. After all, a successful BM consists of self-reinforcing building blocks; altering one aspect influences the BM as a whole. Therefore, considering the BM as a whole provides a more complete image.

Taken together, the extant literature addresses (1) the importance of BMI, (2) the increased internationalization of the business environment, (3) the difficulties of scaling up a BMI and (4) how and why (certain building blocks of) well-known BMs are replicated when going abroad. However, existing literature does not address the link between taking an innovative BM abroad and whether it should replicate the BMI or whether it should adapt to the host country, and what drives these decisions.

This study therefore aims to provide new insights to the existing literature, by explaining

how and why firms decide to replicate or adapt locally when exporting a Business Model Innovation.

In other words, it aims to shed light on the factors that determine the degree of replication or adaptation of a BMI in a new country. To answer this question, existing strategic management literature is analysed to determine which factors determine the degree of local adaptation or

replication of BMs that have been around for some time (i.e. non-innovative BMs). Consequently, an inductive, multiple-case study (Eisenhardt, 1989) was conducted in order to shed light on the factors in a BMI context. The results offer three new contributions to the literature. (1) This study builds upon extant replication literature that highlights scale advantages as the standard reason to

replicate, and local adaptation in order to cope with difference with local consumer needs. However, this study provides a more nuanced view on this and provides other drivers to either replicate or adapt locally. (2) It shows where the adaptations (core vs. peripheral/ visible vs. non-visible) in the BM are made, which offers a more specific overview compared to extant literature. Lastly, (3) it shows that the ease of replication is influenced by the type of BM; two-sided market platforms tend to be easier to replicate as local adaptations are already made by its suppliers.

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2. Theoretical Background & Model

2.1 Business Model & Business Model Innovation

2.1.1 Business Model

A business model explains the logic between the core activities of a company; how a firms link its value creation activities with its value capturing activities (Teece, 2010). Chatterjee (2013) describes a BM as “a configuration (activity systems) of what the business does (activities) and what it invests in (resources) based on the logic that drives the profits for a specific business” (p.97). In short, a BM is the logical story on how a firm operates.

BMs contain the same set of components, which is quite elaborately discussed in extant literature. Osterwalder and Pigneur (2010) developed a handbook for business model (innovation), and describe nine BM “building blocks” (BB). An overview of these BBs is included in table 1, Appendix A. This pre-structured canvas enables organizations to describe, discuss, (re)-design and (re)-invent BMs and BMIs. Although there are various other BM canvasses to illustrate BMs (e.g. Christensen et al, 2016; Lindgardt et al, 2009), Osterwalder & Pigneur’s (2010) is the most comprehensive and most commonly used (e.g. de Reuver, Bouwman & Haaker, 2013), and will therefore be used throughout this study.

Business model innovators typically alter the buildings blocks to their own discretion and mix components in order to develop new, innovative BMs. This allows BM innovators to come up with a novel BM that introduces a new way of making money that deviates from industry standards. In other words, a business model innovation introduces a new way of creating, delivering or capturing value in an existing industry (Broekhuizen, Bakker & Postma, 2016). Chesbrough (2010) describes BMI as finding new ways of being profitable within an existing industry or with an existing product. This study defines BMI as finding new ways of being profitable in an existing industry or with an existing product by altering multiple (i.e., at least two) building blocks of the Osterwalder and Pigneur’s (2010) canvas, that are new to the market and/or industry.

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2.1.2 Types of Business Models

Chatterjee (2013) identified four different BMs, which either focus on cost efficiencies or perceived value. (1) The efficiency-based BM focuses on offering the lowest price possible; they are price takers. The value capture logic lies in offering a lower price than its competitors by superior asset utilization. (2) The perceived value-based BM focusses on offering a “want” item in order to charge a price premium for its product; they take customer demands in consideration thoroughly. (3)

Network value-based BM builds upon the perceived value-based logic; it utilizes the network to deliver specific value to customers. (4) Network efficiency-based BM focus on offering a hub where suppliers and customers can meet and its core focus is to increase the number of these transactions in order to increase revenue. In short, firms can use four different types of “pure” business models, which either focus on perceived value or cost-efficiencies and can be platform-based or not.

2.2 Replication

The choice of replicating or adapting businesses models locally has been explicitly addressed in franchising research. Franchising can be described as a business format in which the franchisor provides the right to a franchisee to distribute standardized, branded and/or trademarked goods or services in geographically dispersed locations (e.g. Cox & Mason, n.d.; Gillis & Combs, 2009). Replication “entails the creation and operation of a large number of similar outlets that deliver a

product or perform a service” (Winter & Szulanski, 2001, p.730). Therefore, this study describes

franchising as delivering of value to a customer by offering the same products, services, processes and/or outlets in various geographically dispersed locations.

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instead of using the same cross-country). Thus, both strategies have significant benefits and should therefore be considered carefully.

Replication in the franchise literature focuses on taking a standardized product or service, and selling this product offering at a different location. Reasoning behind each strategy (replication vs. local adaptation) has been discussed extensively. There is some overlap with the purpose of this study; after all, McDonalds’ business model was once considered innovative business model which was seeking to expand to new host countries as well. However, franchising literature typically focuses around (elements of) business models that are not new to the industry/host country; if Burger King would expand to a new host country, it is very unlikely that the business model is new to the industry in that country. And although this is interesting from a franchising perspective, this is less relevant for this study.

The extant franchising replication literature is a useful start to help understand the “how” and “why” firms replicate, but it is not sufficient as it entails the exportation (of elements) of BMs that are not new to the industry. Moreover, changing one (or more) building blocks of the BM can influence the overall effectiveness of the BM. This is particularly relevant for BMIs as the BBs should reinforce each other; it is the strength of a BMI (Chatterjee, 2013). Altering one block can

(negatively) influence the overall effectiveness of the BM. To put in perspective, it would not make sense if Rolls Royce suddenly decided to use cheap, low-quality parts in order to attain cost

efficiencies or if Ryanair started providing free lobster on all of their flights. As a result, altering one BB can affect the overall performance of the BM, which increases the easiness of replication of the BMI; the business model innovator might not want to risk harming the BMI as a whole by making local adaptations.

Extant research on replication provides some useful insights, however there are quite some contradictions. On the one hand, it is stated that there is a systematic tendency for

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understand how and why business model innovators replicate or adapt their business models, the following section will discuss the drivers of replication as identified in other streams of research. They provide an initial start to explore the drivers in a BMI context.

2.3 Drivers of replication

2.3.1 Socio-economic factors

Replication literature often discusses the cultural distance between countries as influences of the degree to which replication can be applied. Basic cultural differences are the most evident factor for organizations to adapt locally (e.g. Buzzel, 1968; Hannon & Jaw, 1995; Jensen & Szulanski, 2004; Lemak & Arunthanes, 1997). Cultural diversity can result in an array of problems, including different media habits, product preferences, and tastes. High cultural diversity makes it more amenable that a company adapts locally, as the practices in the host country can be inherently different from the home country. Replication is less effective in these countries, and local adaptation is the solution to overcome these cultural differences (Falbe & Welsh, 1998; Kaufmann & Oroglu, 1999).

Especially peripheral elements can be easily locally adapted when cultural differences exist (Cox & Mason, n.d.; Kaufman & Oroglu, 1999). Using Hofstede’s Cultural Dimensions, which rank countries on six cultural dimensions, may help to determine the cultural differences between home (business model innovator) and host country (selected market abroad), and understand which strategy (replication vs. adaptation) is most appropriate.

Additionally, BM creators may also consider socio-demographic differences, as they can influence the need for replication or local adaptation (Winter et al., 2012). Demographic factors like age distribution, gender, education, income, distribution of singles/married couples, unemployment rate, occupation, and diversity of religions, birth- and death rate, size of families may all influence how well a certain BM operates. If the demographic differences in the host country are significantly different compared to the home country, the degree of local adaptation is likely to increase as well.

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2.3.2 Institutional factors

Idiosyncratic institutional environments require local adaptations. Differences in, for example, tax regulations, political structure and labour laws, strongly increase the need for local adaptation in order to overcome these differences. When the institutional distance between the host and home country is large, an organization will favour a high degree of local adaptation, so it can more appropriately deal with these differences (Jensen & Szulanski, 2004; Kostova & Roth, 2002; Kostova & Zaheer, 1999; Winter et al., 2012).

Moreover, Siegel and Larson (2009) describe a local adaptive strategy as a way to exploit differences in the firm’s benefit. By exploiting difference in, for example, labour laws, a firm can significantly benefit when a host country has less strict labour laws and is able to adapt accordingly.

In light of replication literature, high institutional distance therefore makes local adaptation more likely, because they can exploit local regulations and laws. Low institutional distance and/or local regulations/ laws favouring the firm favour replication. However, this might be different in a BMI perspective.

2.3.3 Organizational factors

When a BM has proven to be successful in the home country, replication is more likely; why would firms alter successful business models (Winter & Szulanski, 2001)? However, this focuses around the core of the organization’s BM. Adaptations to the peripheral elements of the BM allows a firm to adapt to local requirements. Moreover, it is obviously less appealing for an organization to enter a new host country with a less successful BM, making it less likely that unsuccessful BMs actually would go abroad. Therefore, a business model which has proven its success over the years, will increase the replication of the core components, but allows local adaptation of the peripheral elements.

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misperceive certain environmental and/or cultural differences, and wrongfully favour local

adaptation over replication (Winter et al., 2012). Firms owning a significant amount of local market knowledge (or firms thinking they possess this knowledge) also tend to prefer to adapt locally. Being present for longer periods of time in a host country therefore helps to develop this market

knowledge (Windsperger, 2004).

As discussed before, organizations focus on exploiting either efficiency-based or perceived value-based BMs (Chatterjee, 2013). Firms pursuing efficiency-based models may be more likely to standardize and replicate to attain costs advantages, while firms focusing on perceived value may tend to adapt locally to address the important customer demands closely (Winter & Szulanski, 2001; Kaufmann & Oroglu, 1999).

Additionally, the organization’s corporate governance is likely to affect to degree of adaptation or replication. How decision rights are transferred to the host country can greatly influence the degree of adaptation or replication when entering new markets with (parts of) a business concept. Highly centralized firms tend to apply the same business practices across the firm, without allowing for local adaptations. It is more likely that highly centralized firms pursue a

replication strategy. Contrary, decentralized firms allow for local decision making in each of the firm’s locations; an adaptive approach is therefore more likely.

Finally, firm age may affect the tendency to replicate via influencing the flexibility of a firm. As firms mature (or grow in size), decision making power often becomes centralized, which makes them more cumbersome leading to organizational inertia (Hannan & Freeman, 1984). Therefore, younger firms may be more prone to adapt locally, as the organizational culture allows them to do so. At the same time, more mature firms may have experienced that replication does not always work, and be sensitive to local differences.

2.3.4 Product factors

The nature of the product offering might affect the decision to replicate or adapt. A firm offering a service is more likely to adapt locally as a service has more direct contact with its customers

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2.3.5 Supply factors

A host country sometimes offers different/inferior supply option compared to the home country. These resources can simply be not present at all, or there can be a mismatch between supply chain system of the firm and what the host country offers. Both can affect the decision to replicate or adapt significantly; is a firm “forced” to fully develop a supply chain system it requires (and therefore replicates), or is it “forced” to work with a supply chain system that mismatches with the BM as there is simply not another viable option (and therefore locally adapts). Obviously, a firm can also voluntarily decide to either replicate or adapt as the choice might not be forced upon them (Cox & Mason, n.d.; Falbe & Welsh, 1998).

2.3.6 Overview drivers of replication

Overall, extant literature (1) discusses how (particular building blocks of) a non-innovative business model are affected in light of replication/adaptation decisions, (2) how host country factors can influence these decisions and (3) which organizational factors can have an influence. However, the literature focuses on franchises, and the BMI perspective has not been considered. While the literature accurately describes how firms replicate (parts of) non-innovative BMs, they might not be applicable for innovative business models.

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3. Methodology

This paper uses an inductive, multiple-case study to explore how and why firms replicate or adapt the BMI when going abroad . Case studies in general allow for rich descriptive contexts which are ideal for explorative studies such as this one. Multiple-case studies offer the additional benefits, compared to single-case studies, such as increased robustness (Remenyi & Williams, 1998),as there are more available data points across multiple industries, and facilitate strengthened pattern findings when relying on Yin’s (1984) replication logic (Eisenhardt, 1989). In short, this means that each case is analysed as a separate case before drawing any conclusions. Moreover, it allows for relevant insights between the studied cases and extant literature (Miles & Huberman, 1994). This allows exploration on the “how” and “why” firms replicate or adapt the BMI in an international context.

3.1 Data sources

This paper seeks to provide insights in factors influencing the degree of replication and/or adaptation when taking the BMI abroad. For this purpose, this study selected 5 cases of business model innovators that have introduced a BMI in another region or country. To explore a wide range of BM types, this study purposefully selected a diverse pool of case studies. By doing so, exploration and explanation of multiple practices and factors is possible.

This study collected primary and secondary data. Secondary data is obtained from the company’s website, existing case studies, brochures and existing interviews, and served to provide background information for the primary data. Although this does provide some insights in the company itself, it’s BM and, for example, its expansion activity, this information remains rather superficial. The secondary data also helped to triangulate the data and allowed for “courtroom” questioning, which will be elaborated upon later-on. Primary data was collected by interviewing relevant employees from companies with an innovative BM, with the aim to develop case studies to be used in the analysis of this study.

3.2 Case sample selection

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selected two companies that emphasized efficiency and three that emphasized perceived value in its BMI to explore the impact of different BM types. Additionally, the sample included platform-based BMs and BMs that did not utilize such a platform, allowing to shed insights of the effects of

platforms on replication/adaptation

Five organizations were selected in five different industries in order to create a case pool which is as diverse as possible. All companies have the Netherlands as home country. Table 2 provides a short overview of the selected case studies and how the BM is innovative.

Table 2: Overview interviewed companies

3.3 Data collection

Primary data was collected via five semi-structured interviews with a key informant from each respective company (see table 3). In order to obtain access to the relevant primary data, the Organization Industry

Active in how many countries?

Innovative how?

Ace & Tate (Designer) eyewear

4 By vertically integrating the value chain and the route-to-customer, Ace & Tate offers affordable designer eyewear through its online platform and several physical shops.

BimBimBikes Bike rental/ rental platform

68 Offering the world’s first platform for bike rental by connecting rental shops to potential customers. Customers can search, compare and book bikes; “the booking.com of bike rental”.

Blendle Journalism 3 Online platform where existing articles from typically printed newspapers and magazines can be read, on a pay-per-article basis.

citizenM Hospitality 4 citizenM redesigned the entire “hotel experience” by cutting out unnecessary elements, focusing on a different customer segment and offering smaller, well-designed modular rooms.

StuDocu Document sharing

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employees responsible for strategic decisions were targeted; the CEO and/or (co-)founder(s). They are involved with the strategic decisions of the company, have been involved from the very beginning till today with these decisions, and have access to all strategic relevant information (Broekhuizen et al., 2016). This group was targeted with the request to participate in an interview in order to develop case studies. Depending on the organization, they were willing to cooperate with an interview, or referred to another colleague who was in their perspective a more appropriate interviewee. Table 3 provides an overview of the interview participants, their respective position in the organization and some relevant details concerning the conducted interviews.

Organization Name interviewee Job description interviewee Duration interview Type of interview Location interview

Ace & Tate Koen Bremer Chief Operating Officer

50 minutes Face-to-face Headquarters Amsterdam BimBimBikes Michel

Willems

Co-founder 65 minutes Face-to-face Headquarters Rotterdam Blendle Sebastiaan Lemmens Head of business development

65 minutes Telephonic Not applicable

citizenM Michael Levie Co-founder 70 minutes Face-to-face citizenM location Schiphol StuDocu Jacques

Huppes

Co-founder 35 minutes Face-to-face Headquarters Amsterdam

Table 3: Overview interviewees and interview details

The conducted interviews were semi-structured and had a retrospective approach. An interview guideline (see appendix B) was developed. The interview guideline consisted of four main topics. First, questions were asked about the background of the interviewee and general information about the organization he represented, including discussion of how the organization’s BM is

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was asked to describe each of Osterwalder & Pigneur's (2010) BBs in the home country and in the host country. By doing so, the degree of replication and/or adaptation of each BB could be determined. Using the answers provided in topic two, topic three aims to determine how they reached the decision to replicate or adapt, was this decision voluntarily or was it “forced”, which factors were considered to be key factors, did they had to make sacrifices on other aspects (trade-offs), et cetera. Topic four discusses which alterations were made to the BMI through the years and the reasoning in doing so or not. Moreover, topic four aims to provide insights in if and why the interviewee would do things differently if he had to do it all over again. The interviews were recorded and analysed within 24 hours of their occurrence.

As this study relies on primary data obtained from informants, an informant bias can be of issue. Ozcan & Piscard (2009) discuss in their inductive, multiple-case study several interview

techniques, based on Huber (1985) and Huber & Power (1985), for mitigation of the informants bias, including: event tracking, courtroom questioning and non-directive questioning. These interview techniques were also applied for the collection of the primary data. Examples of the techniques are "event tracking", which places the interviewee back in time, and helps them to walk back to the present in order to produce a step-by-step chronology of events. This framework typically yield more accurate information as it helps the interviewee to determine which step was taken when and which strategic decision were taken and which trade-offs were made. "Courtroom questioning" allows double-checking of the interviewee’s answer by facts found elsewhere. For example, upon asking whether StuDocu faced frictions when expanding abroad, the interviewee answered with a simple “no”. However, an interview was found where the interviewee elaborately discussed problems with local universities in Belgium and that they even faced legal actions by those universities. Upon confrontation with this information, the interviewee elaborated that this was deliberately pulled out of context by StuDocu in order to get some media attention, which obviously worked quite well.

Additionally, vague and broad questions such as "Why was the BM replicated in the new country" were avoided. Instead, the emphasis was placed on specific questions, such as: "What was a decisive factor when altering this specific Building Block in the new host country". For

non-directive questioning, questions about specific factors were withheld in order to decrease the possibility of “preferred answering” or “socially desirable answering”.

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more sources of secondary data were used. For each company, existing interviews with other key employees (i.e. (co-) founders) were extensively analysed, with the exception of BimBimBikes as there is no other key employee. Moreover, available (news) articles from a variety of sources were used in the development of the cases to ensure the validity of the collected primary data. The collected secondary data was used in the triangulation of the primary data to ensure validity of the gathered data upon the development of the case studies. The following paragraphs will provide descriptions of the collected secondary data for each company.

Ace & Tate’s founder Mark de Lange was interviewed numerous times over the past few years, and were published either in written form (e.g. “Ace & Tate Launch New Creative Fund”, 2016; “Dit Is De Man Achter”, 2016; ”Mark de Lange”, 2015)” or as videos (Spaces, 2014).

Additionally, as Ace & Tate grew over the years, the company was covered in various (news) articles (e.g. “Amsterdams brillenmerk Ace & Tate” , 2015; “Deze slimme innovators”, 2013; “Is Dutch eyewear startup”, 2015). The interviews provided useful insights as they closely discussed the viewpoints of a different key employee (i.e. the founder), whilst the news articles provided some additional information and allowed double-checking of facts.

BimBimBikes’ founder Michel Willems has been interviewed several times since the founding of BimBimBikes in 2015. These are available in written form (e.g. “StartUs Presents: BimBimBikes, 2015), video (Fastmovingtargets, 2015) and an elaborate podcast (“How to quickly scale to 66 countries”, 2016). Additionally, several useful news articles have been published (e.g. “BimBimBikes gets €250k”, 2016; “BimBimBikes: je fiets staat”, 2016). Although the interviews were also conducted with Michel Willems, this is inevitable since there is no other key employee

responsible for the strategic decisions.

Blendle’s co-founder Alexander Klöpping is quite well-known in the Dutch media landscape, which results in a variety of useful interviews about the company Blendle (DLDconference, 2016; Tech.eu, 2015; Duitslandnieuws, 2015). Moreover, quite a variety of (international) newspapers have written about Blendle, which resulted in useful information (e.g. “Would you pay 25 cents”). Additionally, the company website provides useful insights and background information, such as its expansion activities and its unique selling points.

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2014) or published as video interviews (e.g. KBIRI, 2009; PSheartbeat, 2013). Additionally, the company website offers additional information and additional interviews with other employees. Lastly, an elaborate case study about citizenM’s innovative business model is available and was used for background information and triangulation of gathered data (Lillis, van der Hoven & Goffin, 2012).

StuDocu’s co-founder Marnix Broer appeared in an elaborate interview (Fast Moving Targets, 2016) where he elaborates thoroughly about StuDocu’s activities. Additionally, a recent capital injection by a private-equity fund has resulted in quite some media coverage concerning StuDocu, which are particularly useful in the double-checking of facts (e.g. “Amsterdam-based StuDocu raises”, 2015; “Notities in ruil voor”, 2016; “Startup StuDocu heft meer dan miljoen gebruikers”, 2016; “Dealmakers van de week”, 2015). Additionally, the company’s website, along with the website of studeersnel.nl (which is the Dutch name of StuDocu) provided useful information such as its expansion activities and the way the platform operates.

Taken together, the secondary data allows for the triangulation of the primary data, which enabled the development of case studies. As the secondary data focused on different key employees compared to the ones that were interviewed in order to obtain primary data, the possibility of a respondents bias is significantly lowered. Moreover, by using a variety of other secondary sources, the pool of data is as diverse as possible, significantly increasing the credibility of the data.

3.3 Description of cases

3.3.1 Ace & Tate: Efficiency-based model

Astonished by the high prices of designer eyewear, the start-up Ace & Tate looked for a way to offer affordable designer eyewear by vertically integrating the value chain: combining product design and retail. Ace & Tate designs its own eyewear, which are manufactured by a third-party and are sold exclusively through Ace & Tate’s own channels. Additionally, it wants to challenge the way glasses are perceived: it is a fashion item, not solely a medical necessity. Marketing campaigns are targeted at the young, artsy, urban inhabitants of each city it is active in, and create a “shockwave” that reaches a broader range of customers eventually; “everyone can be a customer of Ace & Tate”.

Upon its initial launch in Amsterdam in 2013, Ace & Tate’s products were exclusively

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stores in Germany, one in Belgium and one in Denmark; they have been actively entering new markets with its BMI. Early 2017 a shop will be opened in Sweden and the remainder of the first half of 2017 will be dedicated to conquering Scandinavia. Important to note is that Ace & Tate does not target countries as a whole, but focuses on cities specifically.

3.3.2 BimBimBikes: Efficiency-based network model

After finding out there is not a platform to rent a bike, as is the case with for example hotel rooms or flight tickets, co-founder Michel Willems decided to develop such a platform. As a separate entity of web shop developer OneStopWebshop, BimBimBikes can best be described as “the Booking.com of

bike rental”. It collects available offerings of professional bike rental shops worldwide, and allows

customers to, search, compare and book a bike through their website, taking a 15% fee of every booking made. After its initial launch in 2015 with six rental shops, the platform grew to over 1,400 bike rental shops in 68 countries as of late 2016. Its business model revolves around one future prospect; “rent a bike anywhere, anytime”.

Aside from offering the platform, they are co-operating with the bike rental shops to

increase the quality. Providing a free inventory system, BimBimBikes can more accurately predict the availability of the bikes and avoid disappointed customers. Although there are plans to offer more of these modules in the future for a fixed fee per month, the current focus is on expanding the

platform as fast as possible. The main reason is that it considers the partners as their biggest asset in growing the concept; “copying the idea is not that hard, but copying the network of partners is”.

3.3.3 Blendle: Perceived value-based network

Founded by two journalists, the start-up Blendle aims to “address the distribution gap in journalism”. As there was not one easy way to get access to specific journalistic articles, since one usually needed a subscription to a complete newspapers or magazines. Blendle addresses this gap by offering a pay-per-article model which allows its users to read (and pay) only for the articles they desire; “it can be

best described as the iTunes of journalism”.

Blendle offers a digital platform where nearly all articles of a single country can be read in a user-friendly online environment; “typically the online experience with newspapers or magazines is

particularly disappointing”. Therefore it aims to make this experience as smooth as possible by

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each country they are active. This allows them to select the best articles daily so “the users do not

have to go through all the available content themselves”.

Founded in 2014 in the Netherlands, Blendle expanded to Germany mid-2015. Getting many newspapers and magazines on board was the biggest obstacle, but Blendle succeeded in doing so. No other platform offers such a wide selection of articles. Early 2016 the move to the US was made, where they initially focused on the top 20 largest newspapers and magazines as there is simply too much content to offer it all. Blendle currently has over one million subscribers, of which 20% are paid users (i.e., these subscribers at least topped-up their account once).

3.3.4 citizenM: Value-based model

A group of four founders considered the hotel industry as being highly traditional with very little room for innovation and eager to maintain the status quo. Whilst it is common in other industries to re-design a business model from scratch in order to reconsider what the customer actually wants, this was something completely new to hotel industry. Focusing on the mid-market, they realized that the current product offering for this segment shows significantly outdated inventory, as emphasized by co-founder Michael Levie: “the average Holiday Inn or NH looks horrible, has long overdue

maintenance and there is absolutely no inspiration whatsoever”.

citizenM focuses on a niche of travellers; a frequent traveller in the mid-market, that simply wants clean sheets, a proper bed and a nice, relaxing atmosphere with some sense of style, but does not have the funds to spend hundreds of Euros per night. As a response to these needs, citizenM developed small, modular rooms (14.5m2) full of technology which are relatively cheap to

manufacture, but are well-designed as it has necessities in them; good bed, decent shower, free Wi-Fi and more. As the rooms are relatively small, a lot of attention is devoted to the public spaces; the so-called “living rooms” of the hotels. These are designed by its in-house team of architects and decorators, to enhance the hotel’s stylish and modern image in all of its locations. As a result, citizenM is able to offer a comfortable stay in modern, trendy hotels, at prime locations, and for a reasonable price.

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3.3.5 StuDocu: Perceived value-based network

Started as a student project in 2010 in the Netherlands, StuDocu is a platform which enables students to share notes, summaries and exams, and use tools to improve their study results. Users either pay a monthly fee of four Euros or “pay” by uploading content, which allows them to enter all content. Non-paying users do not have access to all content and generate no revenue for StuDocu.

The concept expanded initially to Australia and Spain. Currently, StuDocu is also active in Italy, Belgium, Canada, USA, Germany and the UK, although the latter four are non-substantial markets so far. StuDocu has over one million registered users, and the platform grows at an average rate of 10% a month. The aim is to expand as quickly as possible.

Although being the first with such a platform in the Netherlands, it had to stand out globally by offering several additional services as similar platforms existed abroad. Examples are the

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3.4 Data analysis

After conducting the interviews, the case studies were developed based on the primary and secondary data. Within 24 hours after conducting the interview, the recordings were analysed and developed into extensive summaries (recordings and summaries are available upon request). These were quickly scanned, and initial thoughts were noted. After careful re-listening of the recordings and re-reading of the summaries one-by-one, themes and concepts that became apparent were labelled. This could mean that certain subjects were mentioned numerous times during the interview, it was something particularly surprising, the interviewee stressed it was important etcetera. The aim of the coding was to conceptualize certain patterns. Consequently, the most important codes were combined, which allows the development of themes. Examples of found themes are “image-consistency” and “founder’s vision”.

Additionally, it was important to determine the degree of replication or local adaptation for each respective building block. Each building block was giving a certain score (- - for fully adapted, - for majority adapted, + majority replicated and + + for fully replicated) based to what extent a building blocks was replicated or adapted locally. To provide some examples; citizenM scored + + on their customer segment BB as they are pursuing an identical customer segment in each country, BimBimBikes was given a + score for its customer segments as they pursue two customer segments across all countries, but one additional customer segment in the Netherlands (the empty-nesters, which do not exist in other countries), Ace & Tate’s partnerships were given a – score as they develop new partnerships in each individual city they operate, but to some extent utilize

partnerships cross-country in the production of their eyewear, and lastly, Blendle’s key partnerships were given a - - score as they have to develop completely new partnerships in each country in order to make the platform work; existing partnerships are not used. These scores were used to calculated rough estimates of the overall replication activity of the firm. This is a summation of the given scores, with, for example, ++ being a +2, +/++ being +1.5 and - - being -2.

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4. Results

The following chapter describes the results of the five case studies. Table 4 on the following page provides a cross-case overview, which shows an overview of the firms’ respective type of business model, adaptations that were made with related “score”, firm age, and degree of scalability of the concept. Figure 2 (see Appendix A) shows a blank business model canvas, where the non-visible buildings blocks are marked as “the backstage” and the visible building blocks are marked as “front-of-the-stage”.

The first thing that became apparent was that adaptations are made mostly in the non-visible part of the business model canvas; “the backstage”. “The front-of-the-stage” was mostly replicated across countries, although there are some minor adaptations that were made. However, these adaptations were made solely in the peripheral of the model; adaptations to the core were non-existent; companies pointed out that they want to preserve who they are as a company. An overview of each company’s BM canvas with its relating adaptation/replication activity will be provided in the individual case findings later in this chapter.

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Element of analysis Ace & Tate BimBimBikes Blendle citizenM Studocu

Type of BM Efficiency-based Efficiency-based

network Perceived-value based network Perceived-value based Perceived-value based network

Adapta

tio

ns t

o Busi

ne

ss

Mo

del

Customer segment + + + + + + + + + Value proposition + + + + - + - Channels - / + + + + + + + + + Customer relationships + + + + + + + + + Revenue streams + + + + + + / ++ + + Key resources - / + + + - / + + + - / + Key activities - / + + + + + + + + + Key partnerships - - - - + - / + Cost structure + + + + + - / + + +

Overall replication (rough

estimate) Low (8) High (14) Low (8)

Moderate

(12.5) Moderate (11)

Scalability concept Medium Very high Low High High

Firm age in years 3.5 2 2.5 11 6

Fully adapted locally Majority adapted locally Majority replicated Fully replicated

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4.1 Case study findings

4.1.1 Ace & Tate

Key partnerships Key activities Value proposition Customer relationships Customer segments Key resources Channels

Cost structure Revenue streams

Fully locally adapted Majority locally adapted Majority replicated Fully replicated

Figure 3: Overview Business Model Canvas Ace & Tate with respective adaptations/replications

Ace & Tate’s main aim is to offer affordable, designer glasses. Glasses are a relatively simple product, highly suitable to sell the same collection in multiple countries. In Ace and Tate’s marketing, they focus on the customer segment that is “hip, young, artsy, urban people” in specific cities, and want to become part of that community. Their core message is that they are a trendy product, closely related to local, urban and artsy people. As a result, visible elements of the shops are altered to become part of that local community. Koen Bremer explains:

“Ace & Tate wants to be an insider in these local art communities. This group of people have a lot of followers,

so by targeting this group, a broad range of potential customers is reached; everyone can be a customer of Ace & Tate. Therefore we aim to become fully enveloped in this community; we ask local artist to make murals on

our facades, ask to help in organizing the opening party etc.”

As Ace and Tate aims at building a European-wide brand, the way the image is perceived in each city has to be the same; it has to match with the local, young, art community. However, as this community differs per city, local adaptation is a necessity in order to fit in with this community. These decisions are made by the headquarters in Amsterdam. Koen Bremer explains:

“The crowd that is typical for Berlin is not necessarily the same as in Hamburg. Although we always aim for the

same type of community, what this community is and how we can be a part of it, it can differ per city. The “right” location, the “right” employee and the “right” local artist for the new shop might differ quite a bit from

the previous city.”

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“Eventually, Ace & Tate is a scalable brand with the intention to go across Europe. Cost efficiencies are

important; we want to spread to costs of the headquarters over as many shops as possible, use expensive photo shoots across countries, etcetera. In order to achieve this, non-visible elements are replicated where

possible”

Driven by cost efficiencies, Ace & Tate aims to standardize non-visible elements where possible. Local adaptations in the visible elements are made to fit the company’s image across countries. This appears to be quite contradictory. However, as Ace & Tate’s image is that they fit within/are part of these local communities, local adaptations are an inevitability to sustain the image, making it a logical strategy to market its products.

4.1.2 BimBimBikes

Figure 4: Overview Business Model Canvas BimBimBikes with respective adaptations/replications

“It would surprise you how little we adapted”, as Michel Willems starts. BimBimBikes employs a near identical business model across the 68 countries they are active in; the only difference is the BB customer segments and partnerships. The international customer segment differs from the home market’s customer segment, Michel Willems explains:

“The Dutch empty nesters (typically 55+ years old, same wind jackets, ANWB members) have a very particular

hobby which cannot be found elsewhere; recreational cycling. This important customer segment in the Netherlands simply does not exist in the rest of the world.”

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Latin-America get an additional text message after a reservation was made because e-mail is less common in those countries.

Aside from partnerships with the bike rental shops, which are the most important ones, the other partnerships BimBimBikes are centralized and established in the Dutch market. This has two reasons; (1) it is simply easier to attain partnerships in the country you are located at and (2) people associate cycling with the “Dutch heritage”, which makes Dutch partners like KLM more prone to co-operate.

The remaining BBs are replicated in each country. Michel Willems emphasized that they are working on a scalable platform, making it more difficult to make alterations to each specific country. Michel Willems elaborates:

“Building a global brand takes time and money, and therefore we just accept that we might miss out on

something by not adapting locally; it also helps to build a strong brand. Besides, if local adaptation is required, this can be done by the bike rental shop itself; they already know which types of bikes are needed in specific

regions and have purchased them.”

This directly relates to the transaction model BimBimBikes utilizes; all the local adaptations that might be necessary are already done by the supply side of the model. Moreover, it offers great flexibility as the people making the local adaptations are actually the ones that are in direct contact with the customers, whilst still replicating the model as a whole on nearly all aspects.

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4.1.3 Blendle

Figure 5: Overview Business Model Canvas Blendle with respective adaptations/replications

Blendle’s value proposition is highly country-specific; selling a Dutch newspaper or magazine in the US would not make any sense due to the language and topic issues. Therefore, Blendle has to continuously look for the country-specific content when entering a new country; existing content can barely be used elsewhere and at a later point of time. Moreover, in order to overcome the chicken-and-egg problem, Blendle has to be able to offer content before customers subscribe. Although there are some possibilities for cross-country selling, e.g. Dutch readers might be

interested in reading the New York Times, although this number is relatively small and negligible. As a result, the value proposition, and the related key partnerships and key resources are altered. Revenue streams differ as the price paid per article is lower in the US, country-specific resources, such as editorial offices and contracts with publishers are required for each new country and new partnerships with publishers has to be developed in each host country; these are developed the same way in all countries, but are highly country-specific

The way Blendle is presented to its potential users is adapted locally. Although offering the same type of product, different elements were emphasized of the product. Where the focus in the Netherlands and Germany was on the online offering of all available articles, in the US it focused on offering the content without advertisement. Sebastiaan Lemmens explains:

“The US already offered most of the content online, even for free. Therefore, we had to alter the way Blendle

was marketed; instead of focusing on all content in an online environment, we focused on an ad-free experience in the USA; we offered exactly the same type of product, but emphasized a different aspect of

Blendle, as compared to local competing alternatives.”

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the relevant articles for that day by making use of its data-analytic capabilities and (2) a smooth online experience. Sebastiaan Lemmens:

“Although the content is of course very important, it is not the only important thing we offer. As our users are

used to a smooth, hassle-free online environment, our aim is to offer this. This is something which is uncommon in the current publishing business. Moreover, we help our users with the “discoverability” of articles; we send them a user-specific newsletter with all the relevant articles for that day; they do not have to go through the

huge offering of articles to find what they like.”

Other building blocks are replicated when possible. The customer segment is the same cross-country (young people, aged 20-40 years old), the channels customers are reached are the same (a daily, personalized newsletter) and the relationship with customers are all on an informal basis. Moreover, the platform itself, the software showing all the content, is replicated as it offers a smooth online experience, something their customers desire and Blendle considers a necessity. Sebastiaan Lemmens continues:

“Our subscribers are the same across countries since they are all raised using the internet and therefore

demand the same; a good, online product. Moreover, they like the way we communicate with them; in a young, modern way with a sense of humor. This is part of who we are as a company. The older generation of

customers sometimes complains about this, but we won’t change this.”

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4.1.4 citizenM

Figure 6: overview Business Model Canvas citizenM with respective adaptations/replications

citizenM focuses on the delivery of affordable overnight stays in luxurious environments around the globe for a particular customer segment: the frequent, mid-range traveller. Since this target group is rather homogeneous across countries (i.e., they are global travellers), the core of the company can, and is, strongly replicated around the globe to ensure the same experience. Michael Levie

elaborates:

“80% of our concept is our core [and standardized]; it is who we are. These are our modular rooms with

king-size beds, rain shower, a safe, the ambience and style in the hotels, the “living rooms” we offer and more. We will never make alterations in this; it’s who we are. The remaining 20% allows local additions; for instance, we constructed a rooftop bar in our hotel at Times Square, Chinese hotels will have a noodle bar as the Chinese are

prone to their noodles, we offer different kinds of breakfast in the French hotels (which typically have a higher rate of French guests compared to Dutch guests in the Dutch hotels) and other peripheral elements. But this is

just a sugar coating, it’s the fine-tuning of the dial.”

The local adaptations are not necessarily country-specific additions, but can also be strongly influenced by the location; a rooftop bar simply makes more sense at location with a spectacular view (e.g. Times Square) than at an airport. Michael stresses that they will always be open for new input and ideas, as long as it does not mismatch with their core. Although innovation is part of their DNA, as it was the initial idea to be innovative in the hotel industry, they strongly keep to their innovative core as it is.

“I don’t think we are that arrogant to state that we know what the customer wants and therefore will never

blindly enter a new market; that wouldn’t make sense. After all, the initial idea to start citizenM was because the traditional hotel chains were exactly doing that.”

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expectation results in a loss of clientele. Therefore, citizenM does not make alterations in their core, just in the peripheral elements. Michael Levie provides an example:

“The sleeping culture in Asia is different. Generally, people sleep in separate beds. We won’t adapt to this and

put separate beds instead of the king size beds we usually have? No! Our guests expect the king size beds, so we cannot, and will not change this, as it will change who we are.”

This global image-consistency does not solely affect the value proposition, but also other building blocks; customers only communicate with the hotel chain via electronic channels, the majority of key activities are centralized (and decided in the Netherlands) to ensure quality, key partners are used globally to provide the same experience, customer relationships are maintained using the same loyalty programs, e.g. arts program “collectionM” and the offering of meeting rooms to local businesses.

Although the additions made in the value proposition result in some minor alterations, these are not substantial, but may impact the cost structure and revenue streams. Michael Levie:

“We sell nights of sleep, that’s what we do. A rooftop bar at Times Square or the hotels in France (where it is

more prevailing to eat in restaurants compared to the Dutch culture) might result in slightly higher food & beverage revenues compared to the average, this will not be a substantial difference; always in a small range”

Michael Levie emphasizes that the global partnerships significantly help them to be consistent in their image. Partnerships with for example the initial architect and its furniture manufacturer Vitra significantly contribute to image consistency. He explains:

“The architect that initially worked with us is still with us today; it has become part of our DNA. We use the

same furniture manufacturer, Vitra, throughout all the hotels; it’s part of who we are. By leveraging these partnerships in across the countries we are active, we can deliver the same experience worldwide.”

In Asia local adaptations were more pressing and additional partners were needed. In order to understand the local investment culture, a local partner was required. For example, several financing multiple vary significantly from European standards (i.e. exit yields, which shows how long it takes before you earn back your investment), and a local partner was needed to make sense of this and “to bring a local bag of money” to invest in the new location.

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In order to cope with, for example, the higher lot costs, citizenM makes some minor alterations. To provide an example, the hotel located at Times Square is nineteen floors high, whilst its other locations are typically five to eight floors high.

citizenM is clearly focusing on replication when going abroad. Their main driver is focused on delivering the same value around the globe, with a deliberate replication strategy as result in order to stay close their core. As can be seen in figure 2, nearly all building blocks are kept the same; utilizing the same partnerships in order to deliver the same value proposition to the same customer segment.

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4.1.5 StuDocu

Figure 7: Overview Business Model Canvas StuDocu with respective adaptations/replications

The focus of the platform is placed on creating a scalable platform. Jacques Huppes elaborates:

“From the very beginning we wanted a scalable platform that would work anywhere. We have proven that our

platform is scalable as it is exactly the same anywhere. We purposefully did not make any alterations, even if we noticed that it caused problems.”

Currently, the value proposition differs slightly across countries. This is caused by the university-specific content. However, as the amount of content increases, and by the development of recombination capabilities of the content, subject-specific content is offered; instead of searching for specific courses, specific subjects can be offered. This allows StuDocu to more actively replicate its value proposition across countries. This allows replication to a greater extent as the content is not university-specific anymore and useful in all countries, with an increase in overall quality, enabled by up scaling of the model Jacques Huppes explains:

“Our business is not about margins, but it’s all about having the best content; our customers don’t care

whether they pay four Euros or eight Euros, they simply want the best. Our supply of content is so huge, that it would not make sense to offer an altered platform for each specific country; linking of databases allows us to

offer the best content.”

Although StuDocu is aware of customer segment differences between countries, they purposefully decide to not make these local adaptations. Although people might prefer it a certain way, e.g. Spanish students are more oriented towards the professor, rather than the course itself. Instead of altering the search criteria in this country, StuDocu decided to keep it the same. Altering would cost quite some money, changes the platform as it is and since students are become a “global student”, StuDocu probably would not reap many benefits from the alteration anyway.

“People might prefer it in a certain way in different countries, but in the end, they will deal with it and work

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StuDocu uses replication for three reasons; (1) it allows for the linking of existing content in order to offer fitting content to its users (scalability argument), (2) it keeps the platform manageable when being present in a variety of countries (otherwise would require a lot of work and

reprogramming) (high costs for adaptation argument) and (3) when it shows that the platform works in one country, they believe it proves that it works in other countries as well.

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5. Conclusion & Discussion

5.1 Conclusion

This research explores how and why firms replicate or locally adapt innovative business models when entering a new host country. Among the sample of researched cases, there seems to be a clear preference for a replication strategy. The reasons for doing so vary; (1) firms replicate as they aim to offer a consistent image/identity across the countries they operate in, (2) there is a necessity to scale up the model; replication helps them to do so more easily and successfully, (3) founders, hence the ones making replication/adaptation decisions, have a (blind) faith in the concept; making

adaptations would mean acceptance of weakness of the BMI, and (4) for two-sided platforms, adaptation is not a necessity as all relevant adaptations are made by its supply-side.

Although replication is favoured - most of the building blocks of the researched firms are replicated, at least to some extent - local adaptations are not a rarity. Local adaptations are made as (1) there are simply product and financial incompatibilities, and (2) additions, rather than

adaptations, are made to capture additional value as they can deliver a “local flavour”.

Additionally, this study explores how firms replicate or adapt an innovative business model across countries. To deliver a consistent experience across countries, firms focus on replicating the visible elements of the BMI as far as possible; the right-hand section of the business model canvas (“the front-of-the-stage”) is set out to be equal in each individual country. Adaptations in the left-hand section of the business model canvas (“the backstage”) are made to deliver the consistent front-of-the-stage experience for its customer. The same logic lies in the core vs. peripheral

elements of the BMI; replication in the core of the model sustains its identity cross-country; it is part of the DNA of the firm, and altering it would mean an inconsistent image/brand/experience across countries. Adaptations/additions in the peripheral elements of the model allow firms to offer a “local flavour”, which allows them to offer and capture additional value.

Moreover, this study provides insights in when decisions are made to increase/decrease the level of replication; (1) when there is financial downturn, firms reconsider their options, and (2) a firm develops replication capabilities over time; firm age appears to positively relate to an increased adaptation activity.

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a more nuanced view on this and provides other drivers to either replicate or adapt locally; image-consistency, necessity to scale the BM, founder’s vision and the additional benefits two-sided markets show. Moreover, It shows where the adaptations (core vs. peripheral/ visible vs. non-visible) in the BM are made, which offers a more specific overview compared to extant literature. Lastly, it shows that the ease of replication is influenced by the type of BM; two-sided market platforms tend to be easier to replicate as local adaptations are already made by its suppliers.

5.2 Discussion

5.2.1 Brand equity, identity & customer experience

The case study results hint that offering the same (brand) experience across countries strongly drives their replication activities. Firms that enter new international markets often pursue the same image cross-country, because it is part of their DNA. As (international) customers have certain

expectations, failure in fulfilling this expectation might result in a loss of clientele. Alterations in their unique selling points results in “losing who we are as a company”. As a result, generally firms are highly cautious in such branding alterations which are immediately visible for the customer. Making visible alterations means losing the image of the company. Examples of these visible elements are the living rooms for citizenM the shops of Ace & Tate and the platform interfaces of BimBimBikes, StuDocu and Blendle.

The logic to offer a consistent identity to meet customer expectations cross-country is also prominent in the marketing literature, particularly in the brand equity literature (Keller, 1993). Positive brand equity results in a more positive association to a specific marketing mix compared to a nameless (or fictitious) brand; therefore a price premium can be charged. Positive consumer-based brand equity can lead to enhanced revenue, lower costs and greater profits. Positive brand image and brand awareness increases the value of the brand equity. By offering a consistent identity these specific customer expectations can be met, and brand equity can be fully leveraged.

Building brand equity requires creating a familiar brand name and a positive brand image. Consistency of these dimensions, especially in different geographical location, should be carefully managed; otherwise the brand equity can lose its value and harm the company; a diluted brand image may harm the company in all locations

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in why the adaptations are not made in the core of the BM; as was pointed out in the result section, companies considered it to be great important to offer this core consistently in each country they operate in, as it is part of the brand image they want to offer to its customers. This also appears to be in line with the franchise literature discussed in section 2 of this study; the core elements should be replicated, while the peripheral components can be adapted locally to meet specific conditions (Aspara, Hietanen & Tikkanen, 2010; Cox & Mason, n.d.; Kaufmann & Oroglu, 1999; Winter & Szulanski 2001).

These adaptations appear to be more likely as the firms mature. The most mature firm in the sample, citizenM, states that the following: “We have a basket of tools from which we can pick

elements that we think fits the host country in the best way”. This indicates that firms develop

certain capabilities over the years which helps them to identify useful adaptations/additions in the peripheral elements, as was also emphasized by Winter & Szulanski (2001) and other scholars discussed in chapter two of this study. In short, mature firms have developed capabilities over the years which allows them to more successfully identify useful adaptations/additions to the peripheral of the BMI.

5.2.2 Type of business model

Interesting insights relate to the scalability of the business model. Three of the five investigated cases are active as two-sided platforms; BimBimBikes, StuDocu and Blendle offer a product from suppliers on their platform and sell them to their users, using the platform’s interface. The strength of such networks relies on the size and growth of the supply and demand segments. While

BimBimBikes and StuDocu focus on a replication strategy for growing their platforms, Blendle uses a local adaptation strategy. The easiness of replication lies in the strategy a firm can utilize to grow its platform and overcome the “chicken-and-egg” problem; it can subsidize a price- and quality sensitive group of users or by (2) securing “marquee” users on the platform (Eisenman, Parker and Van Alstyne, 2006).

Business Model Innovation in a Multi-Country Setting: Why and How Do Firms Adapt or Replicate?