Business Model Innovation In Two-sided
Markets: How Do Drivers Determine Its
Execution And Strategic Choices?
Name Student: T.R. van den Berg Student number: S2404591
Master: MSc BA Strategic Innovation Management 1th supervisor: dr. T.L.J. Broekhuizen
2nd supervisor: dr. K.J. McCarthy
Date: January 2016
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Abstract
With high speed internet available everywhere, two-sided business models have become increasingly important in our global economy. Corporate ventures but especially independent entrepreneurs have created successful businesses in two-sided markets. Little research has been done so far on how these type of business models emerge. This study investigates the literature on how two-sided business models emerge, and how the internal or external drivers determine its execution and strategic choices. A qualitative case study research has been conducted. Three businesses which have created new business models in a two-sided market have been selected: Achmea Health, Hotels.nl, and BimBimBikes. An important finding is that two-sided markets are characterized by a high degree of market uncertainty and therefore entrepreneurs should learn quickly by trial-and-error. Corporate ventures in particular have trouble doing this, due to their preference for planning, control and risk management in order to prevent reputational damage and failure. Another finding is that creators of these new business models in two-sided markets prioritize the growth of the platform by first growing the supply-side and later focus on the demand side. The insights from this research provide fruitful opportunities for future research.
Keywords: Two-sided market, multi-sided markets, business model innovation, execution,
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Table of content
1. Introduction ... 4
2. Literature review ... 6
2.1. Business Model... 6
2.1.1. Types of business models ... 6
2.2. Business model innovation ... 8
2.3. Drivers and stages of new business model development ... 8
2.4. Trade-offs during execution ... 10
2.4.1. Trade-off 1: Organizational Independence versus Dependence ... 10
2.4.2. Trade-off 2: Discovery versus Planned Execution ... 11
2.4.3. Trade-off 3: Simple, Rigorous Rules versus Mixed Forms ... 11
2.5. Two-sided markets ... 11
2.5.1. Pricing strategy ... 13
2.5.2. Winner-take-all competition ... 14
2.5.3. Threat of envelopment ... 15
2.6. Conclusion of literature review ... 15
3. Methodology ... 16
3.1. Data sources ... 16
3.2. Data analysis ... 19
3.2.1. Research instrument ... 20
4. Findings ... 21
4.1. Drivers for new business model and hurdles in its execution ... 21
4.2. Trade-offs and structural properties ... 23
4.2.1. Achmea Health ... 23
4.2.2. Hotels.nl... 24
4.2.3. BimBimBikes ... 26
4.3. Case comparison ... 28
4.4. Key findings ... 32
5. Conclusion and Discussion ... 33
5.1. Conclusion ... 33
5.2. Discussion ... 34
5.3. Managerial implications ... 36
5.4. Research limitations and further research ... 36
References ... 38
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1. Introduction
“Business model innovation is vitally Important, but in practice very difficult to achieve, as the barriers to changing the business model are substantial, and require organizational processes to change and these are not covered by those [business model] tools (Chesbrough, 2010).”
The concept of business models (defined in chapter 2) became prevalent in the mid-1990s, and has received an increasing amount of attention among both academic literature as well as business practitioners (Zott, Amit, & Massa, 2011). Existing literature on business models have distinguished types of models and it is likely that these types of business models emerge differently (Chesbrough & Rosenbloom, 2002).
Despite increasing attention paid to business models, we still know relatively little about how initiating variables (i.e. drivers) influence how new business models emerge and its further
execution. It is of great importance for managers to know how different type of business models emerge so they can act properly, predict possible obstacles, and facilitate the implementation of their new business model. Both external and internal drivers can affect the configuration and the evolution of the business model. Anecdotal evidence suggest that business model ideas driven by mostly external pressures such as competitive forces, market trends, and social environment would require a different development approach than business models subjected to mostly internal pressures such as the passion of the entrepreneur, or dissatisfaction with firm’s size, or governance structure (Casprini, Pucci, & Zanni, 2014; Broekhuizen, Bakker, & Postma, 2015). For instance, a driver like a change in government regulation may result in a different evolution process of business models as compared to manager’s discontent of current market structure or existing products. However, more research on this subject is needed for a particular type of business models, namely new business models in two-sided markets.
5 business models, to grow quickly, and sustain in the market. An increasing number of firms in the Fortune 500, operate as a platform and use a two-sided business model. This business model type is even more dominant in the MillwardBrown Brandztm top 100 most valuable brands.
Key to the success of two-sided markets is the existence of network effects. Both parties are affected by the number of users on the other side of the platform. The platform’s value for one group depends substantially on the number of users on the platform’s other group, which causes reinforcing effects, but at the same time have chilling effects on growth due to the “wait-and-see” position adopted by consumers who derive little utility from an innovation that has few other adopters when the platform is just launched (Goldenberg, Libai, & Muller, 2010). Neither consumers nor merchants will be interested in VISA if the other party is not. Hence, two-sided markets often face a “chicken and egg” dilemma in its infant phases, which is interesting to research.
Once platforms have established large installed bases and have become market leaders in two-sided markets, they are hard to outcompete. It becomes difficult for new entrants to change the rules of the game and persuade parties to switch to a new platform. Two-sided markets are often dominated by a limited number of firms, which makes it interesting to research the preceding steps towards new business models in two-sided markets. In sum, the structural properties of two-sided markets like network effects, chilling effects, and limited competition influence the effectiveness of strategies (Eisenmann, Parker, & Van Alstyne, 2006), and in particular on the development of business models (Osterwalder & Pigneur, 2010). This study brings together the impact of the drivers of business model innovation on its execution in a specific and highly important business field: two-sided markets.
This study focuses on the emergence of two-sided markets, and tries to answer questions such as: How do firms get motivated to start new business models of two-sided markets? Which strategic choices should be made in the development of a new two-sided business model? How do external and internal drivers influence the further execution of the business model? This leads to the following leading research question:
“How do two-sided business models emerge, and how do the internal or external drivers determine its execution and strategic choices?”
6 the motivation of creators which introduce new business models in two-sided markets, and how they gear their firm towards successful development.
2. Literature review
2.1. Business Model
A firm’s purpose, in essence, is to make money. In order to do so a firm needs to create value for its customers, and then convert payments to profit (Teece, 2010). The business model
phenomenon is used to understand how firms deliver and capture this value. Osterwalder and Pigneur (2010, p. 14) define a business model as “the rationale of how an organization creates, delivers and captures value”. Business models differ from strategy in that strategy involves the creation of a competitive advantage, and focuses clearly on the competitors (Magretta, 2002). The business model provides an account of how the firm earns its money and focuses on the value creation for the customer. In assessing a strategic position, a firm would relate the intended strategic positioning and the nature of the competitive advantage to the performance of the firm (McGee, Thomas, & Wilson, 2010). Thus, firms are very unlikely to have the same strategy whereas it is less unlikely that multiple firms have the same business model.
According to Osterwalder (2004), an organization’s business model can be described on a pre-structured canvas with nine basic building blocks: The customers segments, the value
proposition for each segment, the channels to reach customers, customer relationships to establish, the revenue streams to generate, the key resources and key activities one requires to create value, the key partners, and the cost structure of the business model. This tool helps to map, discuss, design and invent business models.
2.1.1. Types of business models
Typology Type of market
Main competitive element
Primary risk Simple rules that mitigates risk
Profit origin Typical example 1. Efficiency-based Non- network-based
Price. Utilizing, fixed capital and labor resources
Only one can be the cheapest
Shift demand in time and place
Scale economics makes the marginal profit margin worthwhile
Manufacturing firms that do not differentiate their products, but focus on low-cost production (e.g. in China) for the mass market. Unlock capacity 2. Perceived value-based Non- network-based Uniqueness of perceived value; creates a "want" or "pull" by understanding value drivers Competition fulfilling the same needs in a better way Consider desired outcomes and not needs
Able to charge price premium where margins are relatively large
Pharmaceutical firms put a lot of effort in R&D and differentiate themselves through their innovativeness. Focus on visible outputs 3. Network value-based Network-based
When critical mass is established, customers act as ambassadors of the offering, do not switch easily due to customer lock-in, and make repeated purchases The costs of attracting the critical mass of the customers in the first place Co-opt customers, rivals and stakeholders
Combination of perceived value-based with a critical mass of loyal customers that will lead to repeated
purchases
Kickstarter crowdfunding; promotes entrepreneurial projects where backers can support projects.
Get big slowly – stay under the radar
4. Network efficiency-based Network-based
platform that extends the efficiency across the value chain; facilitator of other parties doing business together; a central place for suppliers to deliver based on a predictable model of demand from buyers
Execution (considering the large number of failures and the few successes)
Engage customers Virtuous cycle by attracting more
suppliers and customers to a common hub
Netflix; offers a standard product to a large group of customers from a large group of content creators
Unlock ecosystem capacity
This paper assumes that different business models emerge differently, and that it provides additional insights by analyzing the variety that may exist within network-based, two-sided business models. It focuses on the two network-based business models of Chatterjee that represents two types of two-sided business models: one that focuses on perceived value, and one that focuses on efficiency (see Table 2.1).
2.2. Business model innovation
Business model innovation (BMI) involves a multidimensional and orchestrated set of activities, that focuses on a new way of earning money within an industry (Chesbrough, 2010). Business model innovation is vitally important, but in practice very difficult to achieve, as the barriers to changing the business model are substantial, and require organizational processes to change (Chesbrough, 2010). However, due to this challenging execution, it could deliver superior returns because it is hard to imitate by competitors. In times of fierce competition and economic downturn, BMI can provide a way to stand out of the crowd. An analysis of The Boston Consulting Group (BCG, 2009) shows that business model innovators earned an average premium that was more than four times greater than enjoyed by product or process innovators, and these innovations were also more sustainable over time.
Innovation in a business model goes beyond single-function strategies, such as enhancing the sales model (BCG, 2009). Introducing a product, service, or a technological innovation to the market does not automatically represent a business model innovation, even not when they are considered to be radical. This paper refers to a business model innovation when it alters the way of how an organization creates, delivers and captures value in an industry (Broekhuizen, Bakker, & Postma, 2015). This paper follows previous studies and considers it a business model innovation when two or more elements of the business model canvas’ building blocks are reinvented to deliver value in a new way (BCG, 2009; Osterwalder & Pigneur, 2010).
2.3. Drivers and stages of new business model development
9 McGrath (2010) displays the importance of experimentation during the development of new business models. New business models often enter the market with all resources allocated to the one specific business model innovation. High costs and risks are involved with this type of
introduction of new business models with the promise of high returns. This promise is rarely fulfilled, leaving the focal firm with great losses. This approach is described by McGrath as the ‘black hole’ strategy. In contrast, to avoid great losses in the introduction of a business model innovation, one can experiment in different stages of the development. This would lead to smaller investments which can still result to significant positive returns over time. McGrath (2010) describes this as ‘little hockey sticks’ which are real option in which small investments are made with the understanding that the company is earning its way into a new and promising area. This is referred to as feedback loops in figure 2.1.
Internal drivers
Passion of entrepreneur
Dissatisfacction with financial retruns or organizational structure or culture
Development of existing technologies or capabilities (path dependence)
External drivers
Macro-level developments
Value web developments (consumers, suppliers, competitors,
complementors, etc.)
Opportunity recognition
Initial idea for new business model (discovery)
Business model creation
Transformation of idea into workable format (formation) Organziational transformation Managerial actions to promote transformation Organizational form Resource gathering
Managing forces that both promote and oppose change
Launch Feedback loops
Execution Stages
10 execution of further development in subsequent development stages (Broekhuizen, Bakker, & Postma, 2015; Casprini, Pucci, & Zanni, 2014).
New business models can emerge from within when the motivation is driven by an
entrepreneur with passion to introduce better products or services disconnected from existing ones, or from dissatisfaction with current financial returns, culture, or organizational structure. Internally driven business models are supplemented by own resources and capabilities, and evolves along relevant selectors and gatekeepers into a business model. Business models that are based on internal drivers, generally face high market risk is difficult to estimate because market is yet to be convinced. The focus is on learning quickly from trial-and-error and selecting the right target customers
(Casprini, Pucci, & Zanni, 2014).
Developments in the general environment outside the firm can create opportunities. Managers would pick up these signals and turn them into business ideas for itself. The market risk with external drivers is relatively low when compared to internal drivers because it is consumer and market developments that indicate the market need. The creators of such externally driven business models can develop roadmaps and use market research to reduce market risk (Broekhuizen, Bakker, & Postma, 2015). Though, the chance that the firm cannot implement the new business model viably is still a considerable risk (Casprini, Pucci, & Zanni, 2014).
2.4. Trade-offs during execution
Literature has identified three trade-offs in one-sided business models that may also apply for two-sided business models. When creators develop their new one-sided business model, they often face three common strategic trade-offs regarding the organizational form, roadmap approach (explorative or exploitative), and value proposition (rigorous, simple rules versus mixed forms) (Broekhuizen, Bakker, & Postma, 2015). These strategic trade-offs influence the execution of new business models in general. Thus, strategic decisions made by the creator of a new business model are likely to influence the execution of the business model. However, operating in a two-sided market could involve different, or additional strategic trade-offs.
2.4.1. Trade-off 1: Organizational Independence versus Dependence
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2.4.2. Trade-off 2: Discovery versus Planned Execution
The second trade of deals with the degree to which the execution of a new business model can be planned. McGrath (2010) argues that the execution of new business models generally occurs in highly uncertain, complex and fast-moving environments, and that firms should care about insight, rapid experimentation and evolutionary learning as much as the traditional skills of planning and rock-ribbed execution. In this case business models are driven more by ex post trial and error rather than by ex ante foresight. However, in business models that are externally developed, the market risk (the chance that the market is not ready for it) is lower, and some planning is possible, as shown by the ING Direct case in the paper of Broekhuizen et al. (2015). In such more stable or predictable environments, successful development and acceptance of business models can be enhanced by incorporating and adjusting to ex ante assumptions about internal and market reactions.
Thus, although new business model development is uncertain and requires experiential learning, through incorporating market reactions and fine-tuning business models, firms can benefit from an ex ante preparedness when the markets demonstrate certain stability and predictability. Creators should consider the degree to which market reactions can be predicted to balance the degree of discovery against planned execution.
2.4.3. Trade-off 3: Simple, Rigorous Rules versus Mixed Forms
The last trade-off deals with the rigor applied in following the initial value proposition. When companies develop new business models, they can rigorously follow the ‘simple rules’ associated with their chosen pure form (primary logic) but simultaneously they can make adjustments
(secondary rules), as indicated by Chatterjee (2013). Creators of perceived value-based models may at a certain moment, when markets demand it (e.g., price competition becomes more intense), shift to mixed forms in which the quality gets somewhat sacrificed in order to maintain the business model. Business model innovations do not necessarily take off or remain in a pure form in terms of Chatterjee’s (2013) theoretically derived classification and primary logic, but may reach such a pure form in later phases or else, or they might start in a pure form but then make adjustments and end in a mixed price-perceived value form. Business model innovation with high degree of disruptiveness are likely to have lower degree of stability and predictability and therefore should remain flexible in their value proposition in order to be able to make adjustments. Creators should therefore balance the degree to which they follow rigorous rules versus mixed forms, when they develop their value proposition to focus on price or perceived value.
2.5. Two-sided markets
12 money, firms become platforms in which the transaction between two parties is regulated. The rise of such business models in two-sided markets in the past three decades is impressive. Although these market forms have existed before the emergence of the Internet, two-sided markets have become more prevalent since its advent (Rysman, 2009).
In traditional one-sided markets, value flows from supplier to customers and cost flow contrary. In two-sided markets, costs and revenues flow from and towards both suppliers and customers (Eisenmann, Parker, & Van Alstyne, 2006). Such platforms create value as intermediaries by connecting these groups. Two-sided (or more generally: multi-sided) markets are defined as markets in which one or several platforms enable interactions between end-users, and try to get the two (or multiple) sides “on board” by appropriately charging each side (Rochet & Tirole, 2004). That is, platforms court each side while attempting to make, or at least not lose, money overall. The platforms’ fine design of the structure of variable and fixed charges is relevant only if the two sides do not negotiate away the corresponding usage and membership externalities (Rochet & Tirole, 2006). In other words, the end-user does not internalize the welfare impact of platform use on other end-users. Hence, the platform has some sort of control. If the users could internalize the welfare impact, then a one-sided market would emerge.
Two-sided markets have certain structural properties that make them different from one-sided markets, and which should be considered when analyzing the execution of new business models. In creating strategies for two-sided markets, creators often rely on assumptions and
paradigms based on one-sided markets. As a result, they could make decisions inappropriate for the economics of two-sided markets (Eisenmann, Parker, & Van Alstyne, 2006). New platforms provide infrastructure and rules to facilitate interaction between the two distinct groups of users. The development and growth of such platforms is often very quick, which is due to the strong network effects apparent in the adoption of the platform. In two-sided markets two types of network effects exist that influence the adoption and success of two-sided business models: Cross-side and same-side network effects.
Cross-side network effects exist when a greater number of adopters in one side is beneficial
to the other side of the platform. This phenomenon exists because the two sides are interdependent on each other. The effect is typically positive (game developers prefer more gamers), but it can be negative (TV users prefer fewer ads, but advertisers are attracted by larger TV audiences) (Cennamo & Santaló, 2015; Eisenmann, Parker, & Van Alstyne, 2006). In a two-sided market, at least one side of the platform should experience positive same-side network effects.
Same-side network effects exist when an increasing number of users on one side of the
13 on one side compete with each other for users on the other side of the network. The effect is
positive when drawing users on one side helps attract even more users to that side (e.g., increased number of online players make it easier to find companions and more fun to play online games). Positive same-side network effects increase value when more users of the same-side use the
platform (Eisenhardt & Graebner, 2007). However, contrary to cross-side network effects, same-side network effects can be absent on both sides of the platform. Consumers may not value a specific credit card more or less when more consumers use it. Similarly, the value of credit cards acceptance for a merchant may not be affected by the use of other merchants. Figure 2.2 visualizes the network effects involved in two-sided markets.
Supplier
Platform
Customer
Same-side network effect Same-side network effect Cross-side network effectsCross-side network effects
Figure 2.1: two-sided markets based on Eisenmann et al. (2006)
The structural properties of two-sided business models necessitate the creators to think about three important strategic decision in the development of their business model (Eisenmann, Parker, & Van Alstyne, 2006).
2.5.1. Pricing strategy
Although the presence of cross-side network effects have positive reinforcing effects for platform growth when a critical mass of consumers has been reached, they also give rise a
phenomenon that is referred to as a “chicken-and-egg” dilemma (Bakos & Katsamakas, 2008; Cailaud & Jullien, 2003; Eisenmann, Parker, & Van Alstyne, 2006; Hagiu, 2006) or “chilling effects”
14 Revenues for the platform come from the non-subsidized user group of the platform. Gaming platforms such as, for example, PlayStation, attract limited revenue streams from consumers who pay for the console by offering it to a price minimum and charge per-unit royalties on games and fixed fees for development kits from the game developers which pay for their appearance on the platform. Netflix on the other hand, charges the consumer side of the platform with a subscription for a monthly paid fee. Content developers for Netflix are paid by views accordingly.
In order to get the pricing right, Eisenmann et al. (2006) suggests to subsidize quality- and price-sensitive users. Quality demanding users should be subsidized in order to achieve a large customer base so that it is appealing for quality suppliers to contribute. Video game developers for instance, incur enormous fixed costs to develop games. These developers need to be assured that the quality demanding side (gamers) is large enough to get return on their investments. The price sensitive user should be subsidized because a large group of these users make it more likely that the other side of the platform is willing to pay to reach this large group of users. TeamViewer for
example, is free for non-commercial users. Any household can download the software for free but commercial users such as IT-helpdesks need to subscribe and pay a monthly fee to use the software. When TeamViewer would charge its non-commercial users, the number of users would by far be not as large as it is today (Eisenmann, Parker, & Van Alstyne, 2006).
It may be important to get specific users on board to attract more users on the other side of the platform. A platform provider can accelerate its growth if it can secure the exclusive participation of ‘marque users’ in the form of a commitment from them not to join rival platforms. Marquee users can be exceptionally big or influential buyers, like governments or celebrities, or they can be high profile suppliers, like anchor stores in malls (Eisenmann, Parker, & Van Alstyne, 2006).
2.5.2. Winner-take-all competition
When a platform owner manages to get its pricing strategy on both sides of the market right, the firm is in a strong position to grow fast, and enjoy ‘tipping’ effects where users increasingly choose a particular platform over available alternatives in the market (Rochet & Tirole, 2003; 2006). This would imply that being first mover, or at least fast follower in two-sided markets is more beneficial than in one-sided markets. Because of network effects, successful platforms enjoy increasing returns to scale. Users will pay more for access to a bigger network, such that margins increases as user bases grow.
15 platforms will survive. Users are unlikely to have multiple similar looking ‘home’ platforms when cost and efforts of introduction are high. This effect is strengthened when cross-side and same-side network effects are positive and strong for the side of the platform with high multi-homing costs. Strong, positive network effects will increase the attractiveness of one platform with the largest user base. The odds of a single platform prevailing also increase when the needs of the users are not very differentiated. If one platform can fulfill the needs of all customer needs, competition can hardly differentiate itself (Eisenmann, Parker, & Van Alstyne, 2006).
However, even when market characteristics point at proprietary control of one single
platform is likely, the platform can still decide to share the platform. Sharing has certain benefits. The total market size increases and the rivalry lessens. Radio stations jointly adopted Frequency
Modulation (FM) as their frequency to broadcast. When a platform wants to fight for proprietary control, it needs deep pockets, a reputation for past prowess, and preexisting relationships with prospective users.
2.5.3. Threat of envelopment
Platforms frequently have overlapping user bases. Leveraging these shared relationships can make it easy and attractive for one platform provider to ‘swallow’ the network of another. A stand-alone platform facing envelopment often has little choice but to sell out to the attacker or exit the field because multiplatform bundles have greater functionality for users or lower price for users. Mobile phones for instance, currently incorporate music and video players, PCs, and credit cards. In order to overcome envelopment, the single-standing platform is not completely without options. Platform can change the business model and so, differentiate themselves from competition or engage in anti-trust law suits.
2.6. Conclusion of literature review
Creators of new business models in general face strategic trade-offs in organizational form (dependency vs. independency), roadmap approach (discovery vs. planned route), and value
proposition (rigorous form vs mixed forms). The strategic decisions that creators make in developing the business model influence further execution. These trade-offs are developed over business models in general. However, operating in a two-sided market could involve different, or additional strategic trade-offs. Creators of new business models in two-sided markets sometimes rely on assumptions and paradigms that have been developed on one-sided markets, and therefore
16 overlapping user bases, two-sided markets often face a threat of envelopment. This study will relate the general strategic trade-offs with the structural properties of two-sided markets in order to identify appropriate strategies for successful execution in two-sided markets.
3. Methodology
Given the limited understanding of the execution of new business models in two-sided markets, this study conducts an inductive case study. Inductive studies are especially useful for the search for pattern from observation and the development of explanation since there is limited theory at the beginning point of the research and theories evolve as a result of the research (Geurts,
Broekhuizen, & Dolfsma, 2015; Lodico, Spaulding, & Voegtle, 2010, p. 10). Exploratory research is necessary to build theory and gain insight on the emergence of business model innovation in two-sided markets and how internal and external drivers determine its execution.
Theory-building typically combine multiple data collection methods such as archives, interviews, questionnaires, and observations. This approach allows for the triangulation of data and makes it possible to provide stronger substantiation of constructs (Eisenhardt, 1989). Conflicts in evidence can be reconciled through deeper probing of the meaning of the differences (Eisenhardt, 1989). Qualitative data are useful for understanding the rationale or theory underlying relationships revealed in the quantitative data (Jick, 1979).
Central to building theory from case studies is its replication logic. That is, each case serves as a distinct experiment that stands on its own as an analytic unit (Eisenhardt & Graebner, 2007). Based on perceived patterns, this study develops a process model as a conclusion of this explorative study.
This study is based on three case studies. Two cases operate in the network value-based business model, and one operates in the network efficiency-based business model according to the typology of Chatterjee (2013). The use of multiple case studies can richly describe the existence of the phenomenon (Eisenhardt & Graebner, 2007), and find rationales for differences between cases. The setting is on firms that have created new two-sided business models in their industry. This study involves business model innovation cases from both a corporate venture as well as starting
entrepreneurs. This helps to generalize conclusions over different starting positions of new business models in two-sided markets.
3.1. Data sources
17 evolved over time. The founders are able to identify the changes, can clarify the strategic choices made, and represent excellent key informants that have sufficient knowledge. The qualitative data are linked to existent theories to grasp a better understanding of how these two-sided models emerge and how the drivers impact the execution.
Qualitative data have been retrieved from semi-structured, face-to-face and retrospective interviews that use an interview guideline. This guideline has been built on existing literature (Broekhuizen, Bakker, & Postma, 2015; Geurts, Broekhuizen, & Dolfsma, 2015) and covers necessary areas in order to build theory. Sample criteria and selection of new business models
Three business models were selected in three industries: the hotel industry, the bike industry, and the health care industry. Table 3.1 provides an overview and brief description of the cases which have been selected for this study. Table 3.2 provides an overview of interviewees and their (former) positions. The interviewees where narrowly involved in the development of the business model and are knowledgeable about strategic decision which makes them key respondents. Two selection criteria are formulated to select the appropriate business cases. They are described in more detail below.
Table 3.1: Case descriptions
Innovativeness relates to the criterion that the business model has to be innovative to the
industry. As discussed in Chapter 2, a business model is considered innovative when two or more elements of the business model canvas’ building blocks are reinvented to deliver value in a way that is new to the industry (BCG, 2009; Osterwalder & Pigneur, Musiness Model Generation, 2010). All three cases satisfy these criteria. Table 3.1 shows which elements of the business models considered are different from existing business models.
Firm Market
Platform side one
Platform side
two Business model innovation Hotels.nl Platform that
facilitates
transactions between hotels and
consumers
Hotels Consumers that want a hotel room
Hotels get reservations through the platform
Users rate the hotels and give independent feedback BimBimBikes Platform that
facilitates transaction between bike rentals and consumers
Bike rental Consumers that want to rent a bike
Bike rentals get reservations through the platform
Users rate the rental firms and give independent feedback Achmea.com Platform that
facilitates
transactions between health suppliers and health insured people Health service providers (fitness, dieticians, etc.) Consumers that want to live healthier
A platform where consumers inform themselves and create a 'pull' on information
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Two-sided markets refer to the criterion that the business models need to involve at least
two sides. As discussed in Chapter 2, the selected business model innovator should perform as a platform that adds value for two or more interdependent groups, and the platform should set the price and arrange communication between the two segments. This study selects only business models that introduce a two-sided business model. In order to identify differences between the type founders, both corporate ventures and independent entrepreneurs are incorporated. The following cases have been selected (for selection criteria see table 3.1):
Firm Interviewee Interview method Types of partners interviewed Achmea Health
(corporate venture)
Jeroen Kemperman
Focal, on location Works since 1998 at Achmea and is currently Senior Manager Strategy, Programs, Investments and lectures at Zilveren Kruis
Tom Buijtendorp E-mail Former part of management team Achmea Health Hotels.nl
(independent entrepreneur)
Henk Gorter Focal, on location Former director
Kees Eldering Focal, on location Founder, current director BimBimBikes
(independent entrepreneur)
Michel Willems Focal, on location Founder, current director
Table 3.2: Interviewees
Achmea Health: when founded, the board of the holding company [Achmea] developed an
idea to deliver value as a health care insurance company to people who are not ill, but pay for health insurance. This board developed a division called ‘Achmea Health’ in 2001 which focusses on
proactive measures for a healthier life. The concept retrieved several revenue streams. The web shop sold products and health centers (fitness centers) provided a discount for subscribers but due to low marketing costs they still made profit. A health check was financed by external parties like family doctors and the Health magazine was running on advertisement, governmental subsidies and money from the health insurance. On the money sides of the concept are the supplying health providers like dieticians and fitness centers. Consumers, on the subsidized side, could utilize these kind of products or services at a discount. Achmea Health has quit their operation in 2014 due to increasing losses and now returns less prominently under the umbrella of Zilveren Kruis (part of Achmea). This follow-up concept is internally called ‘Vitality program’ but does not get a brand name like Achmea Health was.
Hotels.nl: based on an online guide with information about almost every hotel, the founder
created a platform were hotel rooms can be booked in 2001. While physically located in Groningen, the platform focused on hotels in Amsterdam for especially British travelers and expanded
19 commission rate per booking. This is the money side of Hotels.nl. On the demand side there are consumers which are interested in a hotel room. This side is subsidized, meaning that Hotels.nl do not retrieve revenue streams from this side of the platform. In 2006 Henk Gorter joined the team of Hotels.nl. He has been the founder of hotelsinamsterdam.nl.
BimBimBikes: founded in May 2015, this startup is a youngster among the cases. A key
advantage on this is that important developments in business model execution has happened recently and thus, are more likely to be remembered correct. This limits a potential bias on
retrospective interviewing. This platform is a website where anybody can rent a bike at a bike rental store. It is currently operating in 39 counties and this number is still growing. Michel Willems, the founder of BimBimBikes, likes to compare its platform to what booking.com is for the hotel industry. On the supply side, there are bike rentals. These parties pay a commission rate of fifteen percent per transaction and are the money side of the platform. On the demand side, there are traveling
consumers who like to rent a bike, and want to have it settled before they arrive on destination. The demand side is subsidized by the platform since they do not have to pay to utilize it.
3.2. Data analysis
Information on the building blocks and drivers of business models is also derived from secondary data sources. Secondary data sources include annual reports, firm’s website, and online brochures. Next to this, other researchers or journalists have performed a research at the company, which may provide valuable information. So, also newspapers, business journals and third party websites are scanned for information about the specific cases.
20 Theoretical variable Indicator(s) Answering system
General business description
History, mission, strategy
Open Business model innovation BM Canvas Building
blocks
open Drivers of innovation Internal/external
factors
open/closed
Growth phase Planned/emerged open
Merging of two sides Subsidizing, friction with incumbent firms
open Table 3.3: From theory to indicators
To analyze the data, first the theoretical variables as indicated in table 3.3 are formulated, that summarize the core information of the research. Second, several ‘indicators’ are constructed that represent the theoretical variable in practice. And lastly, the indicator variables influence the answering options in the interview (e.g. closed/open questions).The question are mostly open to avoid confusion of definitions, which happens often with a concept like the business model (see appendix A). Clarification questions are asked, while maintaining freedom in the answer format. After conducting the several data collection methods described in the former section, the data is analyzed. Table 3.4 explicates for which purpose the data sources are used. Through this, the analysis is performed in a more structured way.
Data collection method Type of data Stage in business model development
Secondary data Annual reports, brochures, company website
Business model innovation/ growth phase
Articles, meeting notes, memo's, blogs, websites
Drivers of innovation
Primary data (interviews with creators of new business models, see appendix A)
Question 1, 2, 3 General business description
Question 4, 5 Business model innovation
Question 6, 7, 8 Drivers of innovation Question 9, 10 Growth phase
Question 11, 12, 13 Merging of two sides
Question 14 Thread of envelopment Table 3.4: from data to theory
3.2.1. Research instrument
Semi-structured interviews are conducted as the research is exploratory in nature (Saunders et al., 2000). The interview guide consists of three sections. First, questions concerning the
21 existing competencies and capabilities of the respondent and introduce the business model. Second, an extensive description of the drivers and further developments stages of the new business model was asked in order to find coherent results on which hurdles they have encountered, how trade-offs where present in their market, and how structural properties of two-sided markets influenced the execution. Respondents were prompted with follow-up questions like “how did you do that?”, “how did you deal with that?”, and “why did you do that?” This provided more insight in the consequences of decisions made in the initial development phases of new business models. Third, the respondents were asked to evaluate their strategic decision and updated their decision making and responses.
To stimulate elaboration of experience and behavior of the interviewer, this study uses courtroom questioning. This procedure mitigates potential bias of interviewer effects on retrospective narration about choice and performance (Miles & Huberman, 1994).
4. Findings
4.1. Drivers for new business model and hurdles in its execution
Achmea Health started as a part of a large corporation: Achmea. The primary reason for
Achmea to develop Achmea Health was to offer value to the people with preventive health care. Buijtendorp: “reimbursement of expense claims only involved the people who were ill. Customers who
were not sick just paid without getting anything in return. The board observed that people where irritated by this. Achmea Health provided value for this group of people”. A secondary driver for
launching Achmea Health was the rising cost of health care. “The aging population of the Dutch
society and increase in chronical disorders observed by the board are inherent with rising health cost”
according to Kemperman. Preventive health care could help in reducing future expenditures on health care because fewer people would become ill. Both the primary and the secondary driver can be considered as external drivers. The division of Achmea Health was developed rather
independently from Achmea, the parent company. Achmea Health had a separated office and management team in Amstelveen. “We thought that a cautious insurance company like Achmea
could not develop such a disruptive business model because it was so different from its core business”
Buijtendorp explains. This allows for experimentation but has led to internal hurdles. The perceived distance between Achmea Health and Achmea (and its affiliated brands like Zilveren Kruis, Groene Land en PWZ) was too large which has led to a phenomenon that Buijtendorp describes as a ‘not-invented-here’ syndrome. He continues “The parent firm and its affiliated brands had to pay to keep
the business up and running, while the prevention effect was difficult to measure”. The external
22
about a capacity problem since they could not handle all the applications for health checks, but the main hurdles in the development of the business model were internal”.
Hotels.nl started as a new firm developed by founder Kees Eldering. Eldering started with an
online guide with information about almost every hotel in the Netherlands (about 3000 hotels) in 1999. Because only few hotels had their own website at the time and most of them did not have the resources and capabilities to build one, hotels were willing to pay for the appearance on Eldering’s website. Eldering started the new business model because he was unsatisfied with existent offering which is an internal driver. Eldering: “Existing platforms for online hotel reservations could be largely
improved and earlier collaboration with other firms did not lead to satisfying result”. Due to high
demand from Hotels to get their information online, Kees thought about a booking platform and captured the domain name Hotels.nl. In 2002 Hotels.nl was fully operating. Because Hotels.nl was independent it did not have to justify any decisions to corporate management the internal hurdles were not present. Gorter: “We have experimented with everything that God has forbidden.
Sometimes with success, and sometimes with less success”. Gorter continues: “Due to the immaturity of the industry, there were no rules about how to play the game yet”. Nonetheless, this immaturity
and disruptiveness on market structure did presented external hurdles. Hotel platforms shook up the market of traditional travel agencies. Gorter: “These travel agencies where unsatisfied with the
advent of hotel platforms but could not do anything about it. We provided much more flexibility for hotels”. This flexibility came at a price for hotels. Hotels were complaining about the high
commission rate which they had to pay, but would join the platform eventually when other hotels did.
BimBimBikes is founded by an independent entrepreneur, Michel Willems. As he was
traveling in San Francisco for leisure in 2013, he wanted to rent a bike online, but was not able to do so. The dissatisfaction of the nonexistence of a platform alike, was the internal driver that pushed Willems. Willems: “When I came home I started to analyze the opportunities and did some online
research and conclude that there was no platform alike”. It took until May of 2015 and then the
platform was launched. Michel has always looked for a scalable project as an online platform. There were multiple examples of online platforms in different industries. According to Michel, these online platforms have certain similarities (figure 4.1) “Platforms have added value when the market is
23 Figure 4.1: Likelihood of a two-sided market to emerge (input from Michel Willems, BimBimBikes)
His research led to two final product groups in which he saw potential: ski rental and bike rental. “It appeared that there were already two ski rental platforms while none existed in bike rental.
This has led to the decision to start a platform in bike rental” Michel said. Due to its independency,
BimBimBikes did not have considerable internal hurdles on the way to market launch or thereafter. External hurdles where present to a limited extend said Michel. “Bike rentals were afraid to lose
control over their reservations since the business model is rather disruptive for them. As more parties join, this fear is declining”.
4.2. Trade-offs and structural properties
4.2.1. Achmea Health
Criteria Analysis Trade-off 1:
Organizational Form
Achmea Health was implemented top down as an idea of the board. As an
incumbent firm it dealt with internal struggles like moral support during the startup phase. Because Achmea Health was a division of a large corporation, a separate and independent business unit was created. Due to this independent form, a not-invented-here syndrome prevailed at the parent firm. This resulted in a lack of support for Achmea Health at the parent firm. In later stages, the business unit became more integrated with the parent firm which has led to more support from corporate.
Trade-off 2:
Roadmap Approach
24 Trade-off 3: Value
Propositions
The value proposition of the core business of Achmea is value added and not so much on large scale preventive health care services at lowest cost. The value proposition of the Achmea Health division has always been aligned with this. Achmea Health used simple, rigorous rules in the establishment of the new business model.
Merging of two sides
Demand-side (D): Due to the large customer base in the related product [health insurance], the demand side was clearly identifiable and within range to approach. Supply-side (S): The supply side was attracted by the large group of potential customers on the demand side.
Adaptations to the business model due to growing fast
It was difficult for Achmea Health to assess the return on investment because the prevention health care has long term effects that are difficult to measure. Due to internal hurdles described above, the health care division of the parental firm and affiliates did not support the business model of Achmea Health. Their costs grew simultaneously when Achmea Health was scaling up. Since 'charity is not scalable' the model had to change and the projects should now be self-sufficient.
Same-side network effect
D: Positive same-side network effects are present on the long run when health care premiums decline.
S: Regional competition caused negative same-side network effects at suppliers offering the same product or service in the same region.
Cross-side network effects
D: A larger number of suppliers strengthen the platform’s cause.
S: A larger demand side is more appealing for the supply side in order to enlarge potential market.
Multi-homing costs D: it was not compulsory to have a health insurance at Achmea or its affiliates when joining the platform. Hence, multi-homing costs for the demand side are considered low.
S: No exclusivity of partners is demanded but contractual agreements involve effort for the supply side to join the platform. Hence, multi-homing costs for the supply side are considered moderate.
Pricing strategy D: Get a discount at the products or services sold through the platform and is thus partly subsidized in this business model.
S: The health care providers take account for the discount advantages and are therefore considered as the money side.
Winner-takes-it-all Because of low multi-homing costs and because Achmea Health is a complementary element to the core business [health insurance], this two-sided market is not likely to create a winner-takes-it-all principle. Achmea Health is not the primary reason for consumers to switch health care insurance provider.
Threat of envelopment
As part of a large corporation with the objective to support the core business, it is unlikely that Achmea Health would be sold to a different party. Also, not many health platforms exist.
Adaptations to the business model over time
In the beginning Achmea Health branded their health prevention under their own name (i.e. Achmea Health Centers), but it has changed its branding, towards collaboration with established brands (i.e. fresh, local food delivery ‘Willem en Drees’).
4.2.2. Hotels.nl
25 Trade-off 1:
Organizational Form
The independent form of the start-up gave the opportunity to experiment extensively with new ideas like price setting strategies, and informal contracting and adapt quickly due to its flexibility. The business unit was run in an informal way which resulted in fast and efficient 'on the spot' decision making.
Trade-off 2:
Roadmap Approach
Decisions were based on trial-and-error rather than a planned route set up in advance. Market research was occasionally performed, for instance in collaboration with external parties (i.e. WUA). The managing style and evaluation moments were informal. Decisions were made quickly and ad-hoc based on common sense. Trade-off 3: Value
Propositions
Whereas the core business essentially remained the same, the way of doing so has changed significantly over time. In the beginning Hotels.nl was more focused on efficiency and a large supply side (network efficiency-based). After domination of a competitive firm on price, Hotels.nl shifted its value proposition towards network value-based in order to differentiate from competition.
Merging of two sides
D: The supply side was established only after the demand side was attracted. Since the website was easy to be found in search results, the demand side would be attracted without much effort. In a later stage, when competition became fiercer, Hotels.nl started utilizing marketing efforts to promote the platform among the demand side.
S: Hotels.nl started by deploying a functional website optimized to be easily found and ranked highly by search engines. This availability has helped them to convince the supply side to participate with the platform (individual hotel websites would rank lower).
Adaptations to the business model due to growing fast
Due to the fast-growing customer bases on both sides, Hotels.nl was able to leverage their bargaining position on the supply side. Hotels were allowed to determine their commission rate themselves (with a minimum of 7%) in a transparent manner to be ranked more highly on the platform’s site. This peer pressure among suppliers pushed the margins of Hotels.nl. This also helped the credibility/honesty of the platform since all hotels were treated equally. Same-side network
effect
D: Hotels.nl did not introduce a competing mechanism to increase competition among visitors that may cause negative same-side network effects in contrast to competition (i.e. booking.com).
S: Competition causes negative same-side network effects. However, these
negative same-side network effects helped the platform to increase its profitability. The supply side was able to determine its own commission rate. The highest
commission rate would be on the top of the search page increasing the likelihood of a booking. Because competition in Amsterdam was so fierce, Hotels.nl decided to stop the application for new hotels in order to protect incumbent partners. Cross-side network
effects
D: A larger group on the supply side is more appealing for the demand side. However, since the shift toward a network-value-based business model, the demand side does not demand scale. It is more about added value and high quality in exchange for reasonable pricing.
26 Multi-homing costs D: There are very limited efforts in registration and can be considered low.
S: Hotels need to keep their information updated and have certain maintenance costs (e.g. training personnel to use the system). Hotels are unlikely to join a large number of platforms, but multi-homing costs are not high enough to enforce a monopoly position. Hotels are likely to be present at a small number of platforms. Pricing strategy D: does not have to pay to use the platform and are slightly subsidized.
S: Hotels determine their own price on the platform and are asked (not forced) by Hotels.nl to offer their rooms at the same price or lower as they would without the platform.
Winner-takes-it-all Since the hotel business is a global business, and Hotels.nl does not offer hotels globally, it is somewhat unlikely that Hotels.nl would become the winner-who-takes-all, in its operating region. Brand awareness and moderate multi-homing costs has caused that this industry has a market leader [booking.com]. However, there are sufficient niches to differentiate (i.e. value added, hotel auctions) Threat of
envelopment
There have been conversations about Hotels.nl being acquired. However, these parties were too dominant. This has led to rejection.
Adaptations at the business model over time
Hotels preferred some personal contact, while Hotels.nl was only acquiring hotels at a distance (i.e. by phone). Hotels.nl introduced account managers later on for more personal contact in relationship management. This was necessary in order to make agreements on packages which they would offer.
4.2.3. BimBimBikes
Criteria Analysis Trade-off 1:
Organizational Form
The independent organizational form resulted in flexibility of the start-up and led to the opportunity to experiment extensively. For example, with their web interface they have experimented on different booking processes. The flexible organizational form and informal evaluation moments gives BimBimBikes the ability to make decisions quickly.
Trade-off 2:
Roadmap Approach
After multiple brainstorm sessions before market launch there was a well prepared business plan with sufficient opportunities. Although the platform was introduced with a planned route, there have been some changes in reaction on developments in the market. BimBimBikes applied a trial-and-error approach in order to keep the costs low.
Trade-off 3: Value Propositions
BimBimBikes focuses more on the value-added perspective rather than lowest cost bike rental. Bicycle sharing platforms encounter the efficiency value proposition while we offer more variety and personal contact. The demand side of BimBimBikes has a wide variety of bikes to choose from (from simple city bikes to high
performance racing bikes) and high service at the rental firm. However, efficiency and low costs are important features as well. The platform did not change its value proposition over time. Hence, BimBimBikes rigidly execute a mixed value
27 Merging of two
sides
D: After a group of suppliers were established, BimBimBikes enlarged its customer base on the demand side. It tries to do so by forming alliances with prominent partners in the traveling business (i.e. KLM adding bike rental options to their reservation process of airline tickets).
S: First a group on the supply side was incorporated in the platform. It had done this in first instance by personally visiting bike rentals and later by acquiring them by phone. Each region is incorporated in the in the platform on a modular basis and when acquired, fused into the platform. Once incorporated, it takes limited effort for BimBimBikes to maintain the relationship. This modular implementation per country gives BimBimBikes the ability to deploy interns in order to keep costs low. Adaptions on the
business model due to growing fast
Following from its growing number of customers on the supply side of the platform, BimBimBikes has more availability. Where the demand side used to book the destination first and then looked for a bike rental in that area, they now get inspiration for a destination from the platform.
Same-side network effect
D: There are little to none same-side network effects present on the demand side of the platform.
S: At the supply side there is regional competition which causes negative same-side network effects. However, this competition helps BimBimBikes to attract more partners. When one partner joins the platform, multiple partners in that same region will follow. When suppliers choose not to participate on the platform, they are likely to lose sales to regional competition. In addition to these negative same-side network effects, BimBimBikes tries to create positive same-same-side network effects as well. Bike rentals can collectively purchase new bicycles at lower price. Contrary to for instance hotel platforms, there are not as many bike rentals so it is not necessary to set a maximum on partners.
Cross-side network effects
D: A larger group on the supply side is more appealing for the demand side since this increase the possibility of a nearby bike rental. In addition, an increase in number of suppliers will enlarge the competition which will drive the price down for the demand side.
S: A larger group on the demand side of the platform is likely to increase the attractiveness of the platform for suppliers because of an increased market potential for the supply-side.
Multi-homing costs D: Creating an account which can be considered as low multi-homing costs.
S: Keep information on inventory and price updated. This is considered as moderate multi-homing costs.
Pricing strategy D: does not have to pay to use the platform and are slightly subsidized.
S: Pays fifteen percent commission rate while the rental price for the demand side does not increase. Hence, the margins on a transaction through the platform will be lower than a direct transaction. This side provides for the revenues of BimBimBikes and is the money-side of the platform.
Winner-takes-it-all Bicycles are a homogenous product where one platform can fulfill more or less all needs of the demand side in the network value-based value proposition. The mainstream of bike rentals is likely to run through one main channel.
Threat of envelopment
28 Adaptions on the
business model over time
Because the supply is growing, and demand differentiates, BimBimBikes is improving its interface and thus its service. In order to enlarge the supply side of the platform BimBimBikes tries to create benefits for the supply (i.e. collective bicycle purchasing, inventory management system).
4.3. Case comparison
The trade-offs proposed by Broekhuizen et al. (2015) for one-sided business models, also play an important role during the execution phases in business model development for two-sided business models. When comparing this trade-offs to the cases in this study, the following results can be found.
Regarding Trade-off 1 (dependency vs independency) the results indicate that the strong demand for experimentation and quick adjustments let firms to choose an organizational form that is independent and does not intervene with current businesses. The freedom given to the business unit that operates separately and independently does cause that in the case of corporate venture. That internal resistance may not be taken away. When the success of the business model depends on the parent firm (e.g. inflow of customers to platform) then they should consider placing the platform partly under the disposal of the parent firm to create dependencies and overcome not-invented-here problems. Buijtendorp (Achmea Health): “the concept was loosely coupled from the insurance
company, including its own management team and a physical separated office.” The effect was a lack
of commitment from insurance brands of Achmea (i.e. Zilveren Kruis, Groene Land, PWZ) where spillover effects were required. A not-invented-here syndrome arose at the insurance brands. To increase the likelihood for success, the prevention program is now more integrated with the insurance brands of the parent firm. Dependency was created by involving the insurance brands in the development of Achmea Health which led to the not-invented-here syndrome being resolved and employees of the parent firm more willing and prepared to make it a success. The independent form was also applied on the two other cases where independent entrepreneurs developed the business model. Gorter (Hotels.nl): “Due to the disruptiveness [of the concept], there were no rules in the
playing field. Everything was possible, which made it extremely fun to be part of the team… We were able to experiment freely and try everything that god has forbidden.” Broekhuizen et al. (2015) argue
29 entrepreneurs often automatically choose for an independent organizational form because they do not have a parent firm to be dependent on. Hence, they do not encounter this ‘burden of
dependency’.
Regarding trade-off 2 (discovery vs. planned execution) the results of this study indicate that market uncertainty is an important element that determines the extent to which planned execution can be applied in the creation a new business models in two-sided markets. Especially two-sided markets tend to change fast since its reliance on technological developments (i.e. internet) and exponential growth. Therefore, perfect foresight in a two-sided market is less likely to occur than in one sided markets. However, like Broekhuizen et al. (2015) suggest in their study, ex ante
preparedness is useful when the markets demonstrate certain stability and predictability. The external drivers of the development of Achmea’s corporate managers have led to the introduction of Achmea Health. Since the new business model was related to the parent firm Achmea, a threat of reputational damage was present. Achmea Health was launched with a high degree of ex ante preparation and applied planned execution for their two-sided business model. Kemperman:
“Corporate ventures have the disadvantage that it takes relatively much time to get from plan to action due to reputational reasons of the parent firm. There was no room for erroneous market launch since it could hurt the reputation of the Achmea brand as a whole. This made the launch rather bombastic and large.” Achmea Health was not cost effective due to its bombastic
introduction. “We have now learned that new concepts should be introduced with a pilot and
improved by trial-and-error.” Hotels.nl did not plan the execution of the new business model in a
structural way. Eldering: “using common sense has led to structural profit since day one. The
disruptive nature of the innovation and the uncertainty about the technology [internet] makes it important to remain flexible as a new business model to react and adapt quickly when circumstances demands to.” While BimBimBikes was a business model innovation in its industry, it had multiple
examples on internet platforms in other industries (i.e. booking.com, Uber, Airbnb). Platforms like these have started since the advent of the internet around the year 2000, while BimBimBikes was launched in 2015. This lowered the uncertainty of the technology and gave the ability to the creators of the platform to perform ex ante preparation. Willems: “We are a platform for bike rental industry
like booking.com is for the hotel industry. Although, I am well aware that the urgency to book a hotel in advance is much higher than booking a bicycle and therefore we will never be as large as
booking.com. We can learn from platform like these, but it is not copy paste.” BimBimBikes had
30 Regarding trade-off 3 (simple, rigorous rules vs. mixed forms) results indicate that market uncertainty is the leading driver for not applying simple, rigorous rules in the establishment of value proposition. When market uncertainty is high, new business models are more likely to adopt mixed forms, which enables them to switch value proposition when market characteristics demands it. Achmea Health had a strategic focus on value, imposed by corporate management. It had to
correspond with the parent firm. Because the insurance brands of Achmea were taking a value added perspective in their value proposition, Achmea Health was imposed to align with this. Kemperman:
“Achmea is not a health insurance aiming for lowest price. This logically also counted for Achmea Health. The demand side in this platform is not focused on the lowest price either. We provide top quality, obviously for the best possible price.” For Achmea Health, it was certain that their strategic
focus would be on network-value-based. Hence, market uncertainty about the value proposition was low and Achmea Health stuck to the same value proposition during its existence. The flexibility enabled Hotels.nl to switch in value proposition. Initially, Hotels.nl focused on incorporating all hotels within the Netherlands and competed with other hotel platforms to compete on lowest price, but it has lost the battle in this segment [network efficiency]. Increased competition and successful focus on price by competition, forced Hotels.nl to switch value proposition towards a network value-based business model. The platform managed to perform this switch in value proposition in time while many large travel agencies perished. Eldering: “in 2004 I got the conjecture that the marked would be
dominated by a few large players. We would not be among these large players since we don’t have global coverage [only the Netherlands and Belgium]. Therefore we differentiated from these large players by aiming on the experience of the customers.” This change in value proposition has evolved
slowly since 2004 and has not ended yet. Nevertheless, price remains an important feature for the platform due to the transparent nature of the internet. The value proposition thus shifted more towards the network value-based business model but did not become an ultimate form. At the start of the concept, Hotels.nl started in the beginning of the internet era in combination with a
competitive market, they had to deal with much market uncertainty. Its strategic focus shifted along the way. BimBimBikes has aimed at the value-added perspective, because competition already provides efficiency with bike sharing platforms. However, BimBimBikes does not operate in a pure form. “We have a wide variety of customers. Some just want to rent the cheapest bike as possible,
and some have high standards and prefer many options on specs. We also have a wide variety of suppliers. Some just rent city bikes, but some rent racing bikes, mountain bikes and e-bikes with multiple options.” This would imply that BimBimBikes cannot easily be placed on an ultimate side of
