THE PROCESS OF BUSINESS MODEL DESIGN IN A DYNAMIC

CONTEXT

The Case of Mobile Middleware Technology Providers

Antonio Ghezzi and Filippo Renga

Department of Management, Economics and Industrial Engineering, Politecnico di Milano

Piazza Leonardo da Vinci 32, 20133 Milan, Italy

Keywords: Mobile Content, Mobile Middleware Technology Provider, Business Model, Strategy definition, Multiple

Case Studies.

Abstract: The purpose of the paper is to explore the evolution of a company’s business model, analyzing how external

changes due to the market turbulence can determine the reshaping of the previously adopted model.

Considering the case of a Mobile Middleware Technology Provider (MMTP), the study assesses how the

market fluidity impacts on a firm’s approach towards business modeling, by comparing the business model

designed right before the company’s market entry, to the one present after two years of activity within the

industry. Employing the longitudinal single case study methodology, the research identifies which are the

most critical choices to be made at a business modeling level for a MMTP, and shows how these parameters

can be combined to constitute a thorough configuration; afterwards, a comparison is carried out between the

initial and the current business models adopted, so to identify any change in the parameters prioritization

and in the approach towards business modeling as a whole. The research findings allow to provide a

business model parameters reference model for MMTPs. Moreover, the longitudinal comparison makes

evident that not only the market’s characteristics, but also the initial strategic approach towards the new

business, strongly affect the firm’s business model definition process.

1 INTRODUCTION

The Mobile Content market, i.e. the market for

mobile digital content and services, has in the last

years been characterized by high levels of

dynamicity and uncertainty.

The Mobile Network Operators’ (MNO) refocus

on digital content – so to cope with the levelling off

of voice revenues and to the subsequent decrease of

Average Revenue per User (Muller-Veerse, 1999;

Arthur D. Little, 2001; Kuo, You, 2006) –, together

with the process of value system reconfiguration the

Mobile Industry as a whole was going through

(Wirtz, 2001; Li, Whalley, 2002; Fjeldstad et al.,

2004; Peppard, Rylander, 2006), contributed in

shaping a complex context where each market

segment experienced significantly different

performances (Bertelé et. all, 2008), and is

populated by a fast growing range of actors whose

activities covered and position within the value

network are not so clearly defined.

Among them, a relatively new actor typology is

currently taking on a significant role in the

competitive ecosystem: the market’s

technology

enabler,

from now on referred to as “Mobile

Middleware Technology Provider” (MMTP).

Such players are converging in the Mobile

Content market from several neighboring business

areas, and their moves can strongly influence the

market’s development, potentially determining

unexpected competitive attritions between these new

players and incumbents.

These competitive dynamics deserve attention

from both researchers and practitioners. Specifically,

questions arise concerning the strategies MMTPs

will elaborate to compete in the fast-changing and

fragmented Mobile Content market, and the business

models they will hence design and adopt.

Analyzing the noteworthy case of MMTPs, the

purpose of the paper is to explore the evolution of a

company’s business model, assessing how external

changes due to the market turbulence and

dynamicity can determine the reshaping of the

Ghezzi A. and Renga F. (2009).

THE PROCESS OF BUSINESS MODEL DESIGN IN A DYNAMIC CONTEXT - The Case of Mobile Middleware Technology Providers.

In Proceedings of the International Conference on e-Business, pages 57-68

DOI: 10.5220/0002223700570068

 SciTePress

previously adopted model. Moreover, the relation

between business model design and the underlying

strategy approach a firms adopts will be

investigated.

The research focuses on an Italy-based Mobile

Middleware Technology Provider, new entrant in the

Mobile Content market, finding itself in the

condition of developing a business model for the

new business area it is going to compete in.

Employing the longitudinal single case study

methodology – based on 15 semi-structured

interviews carried out in two distinct periods of time,

2006 and 2008 –, the research is articulated into two

main steps. At a first stage, it attempts to identify

which are the most critical choices to be made at a

business modeling level for a MMTP, and to

understand how these parameters are interrelated

and can be combined to give rise to a thorough

business models. At a second stage, a comparison is

carried out between the initial and the current

business models adopted by the company, in order to

identify any change in the parameters prioritization

and in the approach towards business modeling as a

whole. As a conclusions, inferences will be made

concerning the existing relation between business

model design and the overall strategy definition

process.

2 AN OVERVIEW ON BUSINESS

MODELING LITERATURE

The concept of business model generally refers to

the “architecture of a business” or the way firms

structure their activities in order to create and

capture value (Timmers, 1998; Rappa, 2000; Weil,

Vitale, 2001). As a literature stream, business

modeling has evolved from a piecemeal approach

that looked for the single identification of typologies

or taxonomies of models, to one searching for the

development of a clear and unambiguous ontology –

that is, the definition of the basic concepts of a

theory – (Osterwalder, 2004), that could be

employed as a generalizable tool for supporting

strategy analysis on firms. In parallel, business

model has become an extensive and dynamic

concept, as its focus has shifted from the single firm

to the network of firms, and from the sole firm’s

positioning within the network to the its entire

interrelations and hierarchies (Ballon, 2007).

What is widely accepted by the literature is

that a business model shall be analyzed through a

multi-category approach, as a combination of

multiple design dimension, elements or building

blocks. However, the proposed dimensions are quite

diverse, and the existing body of knowledge shows a

lack of homogeneity.

Noteworthy attempts of providing a unified

and consistent framework can be found in Rappa

(2001), Weil and Vitale (2001), Osterwalder (2004),

and Ballon (2007) – this last study asserting a

specific focus on Mobile Telecommunication

Industry –. The recurrent parameters of their models

can be brought back to the general concepts of Value

– e.g. value proposition and financial configuration –

, and Control – e.g. inter-firm or value network

relationships –.

The literature review on business modeling

allowed to individuate a further literature gap: as the

Mobile Content segment is a relatively young

market, and as the “advent” of MMTPs within such

market’s boundaries is an extremely recent

phenomenon, only few consolidated theory on

strategy creation and business modeling in such

market context and with reference to the specific

player typology under consideration is present.

Therefore, starting from the existing literature

on business modeling, and taking into account the

building blocks so far pinned down, this research

attempts to identify the key business model

parameters for MMTPs, and to describe the

“parameters mix” actually employed by one player

operating in the Mobile Content market. Moreover,

through a comparative analysis of the business

model solutions adopted in different moments in

time by the same company, the study will shed light

on the impact of a fast changing environment on the

business modeling process, also assessing the

implications of the strategic approach underlying the

business model design choices.

3 RESEARCH METHODOLOGY

The present research is based on case studies,

defined by Yin (2003) as “empirical inquiries that

investigates a contemporary phenomenon within its

real-life context, especially when the boundaries

between phenomenon and context are not clearly

evident; and in which multiple sources of evidence

are used”.

Qualitative research methodology was chosen as

particularly suitable for reaching the research

objectives, which aim at understanding the complex

phenomenon of business modeling development

within a given industry – i.e. Mobile Content –

characterized by a high level of dynamicity and

ICE-B 2009 - International Conference on E-business

competitive turbulence, and with reference to a

specific typology of players – MMTPs –, and at thus

building new theory – or extending existing theories

– on it (McCutcheon, Meredith, 1993; Eisenhardt,

Graebner, 2007).

To accomplish the previously identified research

propositions, a single in-depth longitudinal

exploratory case study on an Italy-based Mobile

Middleware Technology Providers was performed.

(The company name will not be disclosed

throughout the paper. All proper names of

informants have not been mentioned as well, to

preserve their anonymity). This company could be

defined a “MMTP” as it presented both a well-

defined line of business dedicated to the

commercialization of Content and Service Delivery

Platforms or CSDP modules, and an offer directed to

the Mobile Telecommunications market.

Coherently to the research methodology

employed (Pettigrew, 1988), the firms belonging to

the theoretical sample were selected as they

conformed to the main requirement of the study,

where the process of interest was “transparently

observable”. Specifically, at the time the first set of

interviews were collected, this company was an

early entrant on the Mobile Content market, and was

going through the process of designing a suitable

business model.

A single case study methodology allows to

provide a thorough, extensive qualitative description

and analysis of the business model definition process

with the needed depth and insight, hardly replicable

when considering a wider theoretical sample.

Furthermore, the longitudinal approach enables the

establishment of a comparison between the

company’s conditions in different moments of its

history, thus obtaining a valuable “ongoing view” on

how it developed with reference to the specific

variables under scrutiny.

From May to June, 2006, 10 face-to-face semi-

structured interviews were held with 4 persons

identified as key participants in the firms’ strategy

definition and business modeling processes at

different levels. The population of informants

included the following top and middle managers:

Chief Executive Officer (CEO); Chief Information

Officer (CIO); Marketing & Sales Manager (MSM);

Product Managers (PM).

The semi-structured nature of the interviews

made possible to start from some key issues

identified through the literature – e.g. the business

model parameters highlighted by the existing body

of knowledge –, but also to let any innovative issue

emerge from the open discussion.

The identification of core business model

parameters also leveraged on procedures borrowed

from “Grounded Theory” methodology (Glaser,

Strauss, 1967), which helps developing new theory

or a fresh insight into old theory: after identifying

the research “core category, the related “conceptual

categories” were then isolated and described by

means of applying the “open coding” technique to

the interviews transcriptions.

In order to assess the impacts of the fast-

changing environment on both the business model

initially adopted by the company and, potentially, on

the overall strategy employed, more than two years

after the first contacts with the firm – from June to

July, 2008 –, a second wave of 5 further interviews

were held with 3 key informants – this time, the

Chief Executive Officer, the Chief Information

Officer and the Marketing and Sales Manager were

involved –. By maintaining the same research

structure in terms of scheme of analysis and

questions, the comparability of 2007 and 2008

results was assured. The only addition to the original

scheme of analysis was related to questions

concerning the business model variation in time. In

2008, the informants were asked to identify any

perceived difference between the initial and the

current business configuration.

This further set of interviews provided the study

with the requested longitude, thus supporting a

within-case analysis of changes in the firm’s

strategic dynamics and business architecture with

reference to the temporal dimension.

The need of assessing the whole business

modeling decision making process, paying attention

to different subunits within the companies, led to the

adoption of an “embedded” case study, with

multiple units of analysis, related to the set of

“decisions” to be made at a business modeling level.

As the validity and reliability of case studies rest

heavily on the correctness of the information

provided by the interviewees and can be assured by

using multiple sources or “looking at data in

multiple ways” (Eisenhardt, 1989; Yin, 2003),

multiple sources of evidences or research methods

were employed: interviews – to be considered the

primary data source –, analysis of internal

documents – both official and informal –, study of

secondary sources on the firm – research reports,

websites, newsletters, white papers, databases,

international conferences proceedings –. This

combination of sources allowed to obtain “data

triangulation” or “perceptual triangulation”, essential

for assuring rigorous results in qualitative research

(Bonoma, 1985).

THE PROCESS OF BUSINESS MODEL DESIGN IN A DYNAMIC CONTEXT - The Case of Mobile Middleware

Technology Providers

Though the study was localized on a single and

unique firm, thus lacking the generalizability of

results granted by multiple cases (Meredith, 1998), it

can be claimed that its findings will be to some

extent generalizable, not only to the player typology

under scrutiny, but also to every kind of firm going

through a process of business model design within

complex environments.

4 THE INITIAL BUSINESS

MODEL CONFIGURATION

The research took into consideration an Italian

Technology Provider, just entering the new business

area of Mobile Content.

Founded in the early ’90 to operate as a software

house for telecommunications systems, in 2006 the

company’s core business lied on the design and

provision of customer care multichannel platforms

(e.g. call centers, Interactive Voice Response etc.).

At this time, the company had matured advanced

skills in content management and channels

integration. Moreover, in 2006 the Management

Buy-Out process started two years before was

completed, making the company totally independent

from the group it previously belonged to. For the top

management, it was time to look for a business

expansion, in order to create the conditions for

higher growth and revenues. As the CEO stated:

“Now the company structure is linear, and we

find ourselves in an ideal situation for making

strong strategic choices”.

Thanks to the past cooperation with actors

belonging to the Mobile Industry, the company had

the chance to come into contact with the Mobile

Content segment, in which it perceived an high level

of attractivity and potential profitability, especially

in the niche of video services. The main reasons for

the subsequent choice of penetrating the Mobile

Content market were disclosed by the initial

declarations of the CEO:

“We consider the business area as particularly

attractive, because of its vicinity to our core, and of

the prediction that incumbent players are about to

invest heavily on infrastructure platforms to enable

their value added services offer. The market is going

to grow dramatically in the short term: and we want

to be there when that happens”.

This point was later confirmed by the Marketing

& Sales Manager:

“Our solution portfolio could be easily enlarged

to embrace innovative mobile video solutions both

Mobile Network Operators and Mobile Content &

Service Providers are going to need to deliver their

rich media services”.

The development of the new platform

represented an addition of functionalities to the

existing solution, and did not represent a major

technological issue for the company’s software

engineers. According to the CIO:

“After having developed the platform for fixed

and IP network, for us, the step of integrating the

mobile channel was a piece of cake. We had the

technology, we had the know how: it was just about

applying it all to a new market”.

The idea of positioning the offer on the video

segment held some criticalities, that were quickly

overcome thanks to the experience matured in

similar project. This clearly emerged from the words

of the Product Manager:

“Making the platform capable of real-time

assembly and delivery of video content was quite

messy and made us sweat; but nothing we couldn’t

handle after all. We had done that before”.

The market value drivers the company wanted to

leverage on appeared clear and recognizable to the

management: video services and real-time content

creation and adaptation were key to success.

Therefore, the MMTP was positioning itself to

deliver innovative, high quality solutions, looking

for product leadership in the promising video

services niche.

Concerning the role the company desired to play

within the Mobile Content Value Network, a clear

statement by the CEO synthesized it:

“We are essentially a technology provider, and

we want to maintain our traditional focus”.

The Marketing & Sales Manager further

explained this topic, presenting the motivations for

such choice:

“We want our scope to remain strictly

technological. This is for three main reasons: first,

we don’t want to move too much from our core

business; second, we don’t want to be forced to

internally develop the infrastructure and know how

necessary for creating and commercializing digital

content; and third, we definitely want to maintain a

clear separation between our business and our

customers’. This last one is a key point. The idea

that we may represent a threat to their business,

because of the overlapping of one or more activities,

mustn’t even cross our customers’ mind

”.

The previous argument allows to infer that in the

initial configuration, the firm intended to cover the

Platform Layer activities of the Value Network,

without any interference with the Content & Service

ICE-B 2009 - International Conference on E-business

Layer. The “pure technology provider” positioning

was reinforced by further decisions concerning

platform provisioning and complementary services:

in-house installation of the Content & Service

Delivery Platform within Mobile Network

Operators’ (MNOs) and Mobile Content & Service

Providers’ (MCSPs) infrastructure was the only

option made available; customers could also rely on

the MMTP for the delivery of technical services

related to the platform’s operation management –

e.g. maintenance, upgrading, etc. –.

With reference to the revenue model adopted,

the company opted for a rigid platform selling to the

customer, characterized by fixed revenues for the

MMTP. The possibility of establishing a “revenue

sharing” model, where revenues coming from the

selling of content and services published on the

platform are shared between the MMTP and its

customer, was strongly criticized by the Marketing

& Sales Manager:

“We absolutely don’t want to set up a dirty

model where our revenues and our customers’

revenues are somehow not clearly distinguished.

Revenue sharing is not just a way too risky option

for a technology provider: it’s simply wrong. Our

positioning must be fully transparent to our

customers”.

5 THE CURRENT BUSINESS

MODEL CONFIGURATION

When the firm was contacted again in 2008, the

situation looked radically different than two years

before. The company’s future within the market was

far from looking bright.

Falling short of managers expectations, the

market had failed to keep its promises of high

growth and consistent revenues. Instead, it had

revealed its true nature: a context characterized by

high levels of complexity, dynamicity and scarce

predictability of future trends.

According to the CEO, the current situation the

company was going through was discouraging:

“We predicted the market, especially the video

segment, would grow dramatically. And when I say

dramatically, I don’t mean a 15%-20% growth per

year: we expected a 50% growth rate. Well, till now,

this just didn’t happen. This is an area we’ve been

heavily investing on for three years […], and what

we found out now is that, objectively, the results we

obtained are so poor they wouldn’t justify to hold

the current position”.

Moreover, the international reach of the

company allowed to verify that the criticalities were

not depending on some specific condition proper of

the Italian context, but could be considered a

generalized characteristic of the global market.

The market complexity and dynamicity are well

depicted by the words spoken by the Marketing &

Sales Manager, who spontaneously admitted the

incapacity of predicting the Mobile Content’s future

scenarios – the manager even got to ask the

researcher for some “hints” to support an

interpretation of the competitive environment, thus

reinforcing the idea of absence of a clear direction –:

“My idea of the current market trends is at the

moment so confused that, personally, I don’t deny

that giving the company a clear indication of where

to invest, on which segments, on which kind of

services, is really a tough call”.

The causes for such change are brought back to

the scarce commitment of MNOs, to the absence of

a real “killer application” for video services and to

the uncertainty caused by the unclear norms

regulating mobile premium services

commercialization. As the Marketing & Sales

Manager and the CEO pointed out:

“The MNOs themselves don’t seem committed,

they don’t want to bet on innovative video services.

And, even worse, when we sit around a table to

discuss about any possible cooperation, they ask us

what kind of services to develop to attract their own

customer base. That’s something they should know!

This is not a good sign”.

Being the Operators the “network focal”, – i.e.

the central firm within the network, expected to

drive the whole market’s development –, the

absence of strategic initiative on their part

determines a strong sense of disorientation, making

the identification of the market’s true value driver

extremely complex.

In order to cope with this unexpected situation,

the company reacted trying to reposition itself: in

doing so, it departed from the initial configuration,

and appeared to be adopting an approach based on a

higher openness and third parties involvement. The

management started looking outside the company’s

boundaries, searching for greater dialogue and

interaction with other actors in the Value Network.

The CEO stated that:

“At the moment, we are constantly talking to

every actor in the market”.

The Marketing & Sales Manager reinforced this

message, though clarifying that even this new open

approach had not given much results yet:

THE PROCESS OF BUSINESS MODEL DESIGN IN A DYNAMIC CONTEXT - The Case of Mobile Middleware

Technology Providers

“We are looking at what’s going on in the

market, to get some hint that can help us reposition

our offer. However, the external situation looks

really confusing: all the players in the chain seem to

be taking different directions”.

As a whole, all the informants perceived the

urgent need of reshaping the business configuration

under banner of flexibility, at all levels: from the

value proposition to the activities covered, to the

financial configuration adopted. Talking about the

reorientation of the solution portfolio, the CIO

commented:

“We are going through a process of

repositioning our platforms on more generalist

content and services. We are also trying to figure

out whether our video solutions may be reapplied to

different contexts, like the Web”.

The shift from a rigid vision of the products was

also testified by the new tendency of establishing

joint projects with several different market players,

so to test, by “trial and error”, the commercial

feasibility of the initiatives, without concentrating

investments and the related risks.

Consistent changes also affected the revenue

model. Quoting the Marketing & Sales Manager:

“Our level of flexibility is getting higher and

higher as time goes by, and we are willing to set up

a wider range of revenue models, if it can win us

customers. We are even evaluating revenue sharing

models, even if, I have to admit, I don’t like them

that much”.

The need of sustaining the business made the

company even depart from its initial negative stance

towards revenue sharing, regarded as dangerous for

its competitive implications: as will be discussed

later, such radical change can be interpreted as a

symptom of the lack of a clear strategy driving the

firm’s choices.

Concerning the role the company wished to play

within the value market, the environmental

complexity led the management to strive for a more

active positioning, potentially extending the original

coverage of activities towards the downstream chain.

As the Marketing & Sales Manager stated:

“By taking part to the call for tenders for the

outsourcing of an MNO’s Mobile Portal, we

understood that many operators are looking for an

editorial partner, not only for a technological one.

This gave us a useful indication for orienting our

future positioning”.

The company was in desperate need of

customers, and was ready to exploit every chance

the environment was going to offer; even if this

meant to abandon the “pure” technology provider

role.

As a conclusion, the top managers declared their

will of remaining and keep investing on the Mobile

Content market: nevertheless, they somehow

admitted Mobile Content was never the strategic

focus for the company. Taking from the words of the

CEO:

“We moved in the Mobile Content market as a

diversification maneuver of our past offer. Thanks

God, our main business unit is still focused on a

different, consolidated market, creating 90% of our

revenues. This allows us to treat the Mobile Content

business area as start-up market, following the

logics of resources allocation proper of businesses

portfolio management”.

The business was and remained a “question

mark”, and the company was trying to face

turbulence and change though a profound

reassessment of the initial configuration it shaped. In

fact, this reassessment not only encompassed the

business model adopted; it also dealt with the

underlying strategic approach which guided the

design of such model in 2006.

6 A COMPARISON BETWEEN

THE TWO CONFIGURATIONS

6.1 The Emerging Core Business

Model Parameters

Throughout the first wave of interviews with

different managers, the emerging main theme or

recurring issue was the search for the most suitable

business architecture for competing in the newly

entered market. Therefore, business modeling was

found to be the “core category” (Glaser, Strauss,

1967) of the research.

Through applying the “open coding” method

proposed by Grounded Theory approach, the main

“conceptual categories” related to the core category

were labeled and identified. Such categories

corresponded to the core business model parameters

or building blocks for the Mobile Middleware

Technology Provider under study.

The findings are synthesized in the “MMTP

Business Model Parameter Reference Framework”

below provided, which identifies three macro-

dimensions, in turn divided into nine parameters.

1. Value Proposition parameters. Platform

characteristics; Offer positioning; Platform

ICE-B 2009 - International Conference on E-business

provisioning; Additional services;

Resources & competencies.

2. Value Network parameters. Vertical

integration; Customer ownership.

3. Financial Configuration parameters.

Revenue model; Cost model.

As it will become clear by analyzing the

framework, some building blocks were present in

previous models – in particular, Ballon (2007) –,

while others – as not present in the existing

literature, or not made explicit – were modified or

originally created to better express some aspects

strictly linked to MMTPs.

For each parameter, a definition will be

provided, and the specific “parameters values”, i.e.

the company’s choices concerning the initial

business model configuration, will be described and

discussed.

MMTP

Business

Model

Business

Modeling

Parameters

Platform

characteristics

Offer

positioning

Platform

provisioning

Additional

services

Resources

Competencies

Vertical

integration

Customer

ownership

Revenue

model

Cost

model

Value

Proposition

Financial

Configuration

Value

Network

Figure 1: MMTP Business Model Parameters Reference

Framework.

Platform characteristics: as the CSDP is the core

element of MMTPs’ value proposition, its

characteristics are a key parameter to be modeled, as

they strongly affect the firm positioning. In the

initial business model configuration, the firm opted

for developing an end-to-end solution, only open to

some degree of modularity. This choice was driven

by the habits matured within the firm’s traditional

business – customer care platforms –, where the firm

was used to develop vertical solutions for its

customers.

Offer positioning: offer positioning is related to

the choice of developing a CSDP devoted to the

management & delivery of “mature” content – Sms,

Mms, logos, wallpapers, ringtones and so on

(Bertelè et al., 2008) –, or meant to deal with more

innovative and cutting edge services – like video

services or Mobile Tv –. As mentioned earlier, the

company’s management decided to focus on the

video services niche, believed to be particularly

attractive.

Platform provisioning: the CSDP provision

modality is an emergent parameter – not present in

the existing literature –, particularly interesting in

the case of MMTPs, as it influences the kind of

relation the technology supplier creates with its

business customers. In the initial configuration, the

company only considered the installation of the

platform in the customers’ “house”, maintaining a

clear separation between customer and supplier

infrastructures. Again, this situation was something

the company was accustomed to, and derived from

the approach followed in the traditional business.

Additional services: another original parameter

for MMTP business modeling, additional services

refers to the complementary offer accompanying the

CSDP selling, which can range from a simple

technological management of the platform’s

operation – e.g. maintenance, upgrading etc. – to, in

some rare case, a commercial management of the

content and services published on the platform itself.

Coherently to the CEO declaration, in the initial

business configuration the company remained

strictly focused on a technology dimension.

Resources & Competencies: as the “research

based view” and the “dynamic capabilities

approach” state, a firm’s collection of path-

dependent core resources and competencies (R&C),

strongly influence its ways of seeking competitive

advantage (Hamel, Prahalad, 1990; Barney, 1991;

Teece et al., 1997). In 2006, the company showed a

clear prevalence of technology-oriented R&C,

making it better disposed towards a simple

technological partnership with its potential

customers.

Vertical integration: the level of vertical

integration refers to the MMTP coverage of

activities in the Mobile Content Value Network. The

clear initial positioning on the Platform Layer

activities denotes a firm choice of self-relegation to

the technology enabler role, staying out of the

downstream chain that allows direct contact with the

end user, and clearly separating the MMTP business

from the ones of its customers.

Customer ownership: strongly related to the

choices concerning vertical integration, customer

ownership deals with the nature of relationship

established between the MMTP and the end

customer. In the first configuration, an intermediated

customer ownership on the Technology Provider’s

part, implying a higher reliance on MNOs and

MCSPs, was selected; the CSDP vendor was going

THE PROCESS OF BUSINESS MODEL DESIGN IN A DYNAMIC CONTEXT - The Case of Mobile Middleware

Technology Providers

to receive only indirect revenues streams from its

business counterparts.

Revenue model: the revenue model parameter

refers to the kind of revenue streams flowing from

the MNO/MCSP to the MTTP, that can vary from

mere selling of the platform, to a full revenue

sharing agreement on the content/services delivered

through the CSDP. The choices at this level are

strictly related to the platform provisioning

parameter, and shall be considered extremely

critical, because of their many implications on the

firm’s overall positioning and strategy. In the first

business model, the company adopts a rigid “system

selling” solution, granting a spot, fixed and

“assured” revenue for the MMTP, and presupposing

a clear distinction between its business and the ones

of its customers. As stated before, the revenue

sharing model is labeled as “way too risky” and

“unfeasible”.

Cost model: the cost model refers to the nature

and sharing of investments undergone for CSDP

development. In 2006, the company decided to rely

heavily on internal resources, concentrating the

investment within its perimeter. This way, a

“product approach” was taken, that is, the MMTP

delivers to the market a given product, with scarce

or no cooperation of other players in financing the

development process: the risks associated to

development are not shared, but the player can

benefit from a greater strategic independence after

the solution is created.

The combination of the above described

parameters gave rise to the business model the

MMTP adopted in 2006, right after its entry in the

Mobile Content market. In the next paragraph, the

business model currently employed by the firm will

be described and analyzed, and a comparison

between the two will be carried out, so to underline

any changes, and attempt to interpret their causes.

6.2 The Shift of Business Model

Parameters Value

As emerged from the second wave of interviews, in

2008 the business model design decisions taken two

years before were put under discussion, and to a

great extent reconsidered. Analyzing the interviews

and other sources of evidence collected, it can be

argued that, as a whole, the “MMTP business model

parameters reference framework”, built on the basis

of the 2006 company conditions, is still valid.

However, a significant change in many parameters

values was observed.

Platform characteristics: the initial business

model’s choice of developing vertical platforms,

scarcely modular and interoperable, proved itself

strategically wrong for the new entrant, as it

contributed at slowing down the market penetration

process. As Blind (2005) points out, modularity and

interoperability with existing systems allow quicker

consolidation within the market, and the pursuit of

these characteristics is particularly advisable for new

entrants. After recognizing its mistake, following a

“trial and error” approach, the top management

introduced a higher level of modularity and

interoperability in the products offered, so to induce

their diffusion.

Offer positioning: in 2006, the company selected

to focus on the video service business sub-area: this

could lead to the exploitation of consistent revenues

associated to the attractive segment – higher than the

average revenues characterizing the market –;

nevertheless, it could make the company face higher

risks related to the hardly predictable process of

uptake of forefront services. As the informants

declared, from 2006 to 2008 the MMTP actually

experienced high uncertainty in demand, mainly due

to the low commitment showed by MNOs

concerning innovative services. Therefore, the

management decided to keep focusing on video

services, but to make the platforms more flexible

and multi-purpose, capable of managing and

delivering also “generalist” content and services: the

aim was to exploit any possible opportunity that

could arise.

Platform provisioning: the first two years of

experience within the Mobile Content market taught

the new MMTP an important lesson concerning the

platform provisioning modality: many customers

were not interested in installing the platform in-

house, as they were reluctant to cope with the related

technological complexity; they’d rather seek for a

remote access to CSDP’s functionalities, delivered

in application service provisioning (ASP). As a

result, the “software as a service” approach was

introduced among the range of opportunities: this

can allow the technology provider to keep a greater

presidium on the platform, and to exploit both scale

and scope economies on the platform provisioning

infrastructure.

Additional services: concerning the offer of

services bundled to the CSDP provisioning, the

current business model sees the beginning of a

gradual departure from platform management

services, towards the evaluation of the content

marketing & sales option. Should the company go

all the way with such choice, it could give rise to the

ICE-B 2009 - International Conference on E-business

insurgence of a value network “structural

equivalence” (Gulati et al., 2000) between MCSPs

and MMTPs, thus determining competitive attrition

among the two player typologies.

Resources & Competencies: as the initial

configuration was characterized by a clear unbalance

towards technology-oriented R&C, the current

business model denotes an effort to fill the gap,

developing content-oriented resources &

competencies. This is meant to enable the firm to

leverage on a set of newly created assets to propose

itself not only as a technology supplier, but even as

an “editorial partner” – that is, a player capable of

executing the activities of content creation,

management and market making – to MNOs.

Vertical integration: In 2008, the top

management does not appear so convinced about

conserving the rigid technology provider role

initially selected. As emerges from both the CEO’s

and the Marketing & Sales Manager’s interviews,

some moves are being made towards the extension

of activities covered to embrace the Content &

Service Layer, as this positioning puts the MMTP in

a more central role in the system, closer to the

“network focal” – the MNO – and to the primary

source of revenues – the end customer – (Gulati et

al., 2000; Peppard, Rylander, 2006). Of course, such

strategic choice implies a more direct competition

with MCSPs.

Customer ownership: the shift towards a more

central position in the Value Network characterizing

the current business model manifests itself even

through the search for a more direct relationship

with the end customer. As the Marketing & Sales

Manager asserted, the company is strongly

evaluating the possibility of setting up agreements

and solutions for managing the end user with few or

no intervention from other actors. This repositioning

can cause competitive attritions with MCSPs

Revenue model: strictly related to the

consideration made at the platform provisioning

level, the MMTP learnt that many customers were

not willing to sustain high investment – which

turned into fixed costs – for acquiring the platform;

they’d rather pay a annual/monthly fee, or a

“consumption fee” for the platform usage. This leads

to the decision of adopting more flexible revenue

models, which could respond to a more variegated

range of customer needs. Moreover, as the company

struggles to create a solid customer base and

generate incomes, almost out of the blue the

vituperated “revenue sharing” agreement – resting

on a division of potential revenues coming from

content/service selling to end customer – becomes a

feasible option. This solution is strongly affected by

the uptake and the consequent success of the service

provided by MNOs and MCSPs; therefore, the

MMTP revenues are spread on the whole service

lifecycle, and are subject to a higher variance,

because the technology provider is sharing not only

opportunities, but also risks related to the service

commercialization, finding itself in a “business

sharing” condition. Though now considered feasible,

the solution is not yet implemented, as no potential

partner has proposed this kind of agreement.

Quoting the Marketing & Sales Manager:

“We are ready for revenue sharing. At the

moment, we have none of these agreements ongoing.

But, I repeat, not for our own will…” .

Cost model: forced to face the market

complexity and turbulence, the company gradually

reconsidered its initial choice of concentrating

investments, and sought to share spending – and

risks – associated to solutions development among

different business partners. This new direction is

confirmed by the repeated reference to the “project”

concept – contrasting with the “product approach”

previously adopted – made by both the CEO, the

CIO and the Marketing & Sales Manager. In the

case of joint investment between the MMTP and the

MNO/MCSP, the risks related to the project are

spread on several actors; still, the MMTP enjoys less

freedom , as its choices will have to be aligned with

the strategic priorities of its partners.

As will emerge from the analysis carried out in

the next paragraph, the origins of such changes

cannot be brought back only to exogenous factors –

i.e. the market complexity and dynamicity –, but

also to endogenous ones, mainly related to the

underlying strategic approach that drove the initial

business model design process.

7 DISCUSSION

The longitudinal study on the business model

adopted by the company from 2006 to 2008 showed

significant changes in terms of values assumed by

the core parameters identified. Form a superficial

analysis, one could infer the reasons of such

differentials are to be brought back exclusively to

exogenous factors, i.e. the complexity, dynamicity

and hard predictability of the Mobile Content

market. Unexpectedly finding itself at the mercy of

turbulent competition and uncertainty, one could

conclude that the relatively inexperienced new

entrant tried to shift from a rigid to a flexible

business model, declining such choice at all levels.

Instead, the profound reassessment of the initial

THE PROCESS OF BUSINESS MODEL DESIGN IN A DYNAMIC CONTEXT - The Case of Mobile Middleware

Technology Providers

business model configuration was only the tip of the

iceberg: in fact, the company was undergoing a

deeper redefinition and rebalancing of the

underlying strategy that drove the first business

model design; a strategy that proved itself deficient

in the first two years of activity.

As can be inferred by deeply analyzing the

interviews and the additional sources available, in

2006, after the Management Buy-Out, the company

found itself in the condition of looking for new

revenues to sustain its growth. Almost accidentally

getting in contact with players belonging to the

Mobile Industry – these firms needing an adaptation

of the traditional IVR platform for new purposes,

different than the ones institutionally established –,

the company sought to take advantage of a

contingent opportunity, and started collecting

information on the Mobile Content market. On the

basis of such information and data – which, from an

ex post analysis, can be labeled as fragmentary and

incomplete –, lacking the necessary insight, a sloppy

external strategic analysis was performed, which

made the top management conclude the market was

attractive and extremely profitable. A deeper

external analysis would have allowed to identify the

market peculiarities, as well as the threats resident in

the video segment, and develop a business strategy

accordingly.

A much deeper focus was put on carrying out an

internal strategic analysis, aiming at identifying how

the company could be adapted to fit the new

business: the result was that, since the products

could be easily adjusted to respond the apparent

Mobile players needs, the top management was

confident that the company could rapidly take the

role of MMTP, substantially replicating the model

adopted in the traditional business.

Following the corporate strategy input, the

management chose to “rush in” the neighboring

business area where it could pursue correlated

diversification. However, an insufficient effort was

put in the development of a dedicated strategy at a

business level, which lacked an adequate external

analysis, and suffered from an unbalance on internal

analysis. The CEO final statement concerning the

relevance of the traditional business in comparison

to the start up market almost appears to be an

admission that Mobile Content was never a strategic

priority for the company.

The “lame strategy” resulting from this excessive

“inward focus” taken by the management was not

suitable for driving the competition in the newly

entered market. It also made difficult to identify the

right business model, which represents an

concretization of the overall strategy. In terms of

value proposition, the company was essentially

bringing to a new market the slightly modified

version of its traditional products portfolio, thus

showing to follow a “technology-driven” approach

implying the search for an application for a

technology already available, not the answer to real

customers needs – which, in the initial strategy

development process, were never actually assessed.

In the first two years of activity in the Mobile

Content market (2006-2008), the top management

gradually became aware of its mistakes made in the

strategy definition process, which resulted in a

wrong approach towards business modeling, with

reference to the choices in the parameters design.

The negative impact of the adoption of a rigid

business model on the company’s performances

were also amplified by exogenous factors like

market dynamicity and turbulence.

In order to get back on track, the management

then looked for a repositioning of its offer, which

ineluctably had to pass through the reshaping of the

initial business model, and the further rebalancing of

its underlying business strategy.

In such strive for rebalancing the strategy and

reshaping the business model straightaway while

continuing to operate within the market, the search

of constant dialogue and interaction with other firms

in the value network become a key element.

Through this new “outward focus”, the management

tried to compensate the initial lack of insight on the

market context by collecting information on the

competitive environment by means of establishing a

wide set of inter-firm relationships, thus maturing a

“learning by doing” experience. In addition to this,

the open and collaborative approach helped the

company to diminish the impact of external

uncertainty, by sharing opportunities and risks with

new partners.

As the company is now changing direction, it

will need to find the right alignment between

business models parameters through a “two footed

strategy” balancing both the inward and the outward

focus. Of course, the rebalancing process will not be

completed straightforwardly. In the short run, such

reorientation could also lead to choices which appear

strategically incoherent, like the sudden reversal of

the original stance concerning revenue sharing

models.

ICE-B 2009 - International Conference on E-business

Business

Modeling

Process

Strategy

definition

External

Strategic

Analysis

Internal

Strategic

Analysis

INITIAL CONFIGURATION (2006)

Business

Modeling

Process

Strategy

definition

External

Strategic

Analysis

Internal

Strategic

Analysis

CURRENT CONFIGURATION (2008)

“

Lame

Strategy

”

Inward

focus

Weak

tie

bounding

strategy

creation

and business

modeling

“

Two

footed

Strategy

”

Outward

focus

for

alignment

between

strategy

creation

and business

modeling

Figure 2: The initial and current approaches compared.

In figure 2, a comparison between the

consecutive approaches towards strategy definition

and business modeling is portrayed. The initial

configuration sees the development of a “lame

strategy”, resting only on internal strategic analysis,

and a weak link between strategy creation an

business model definition. On the contrary, the

current configuration is characterized by a stronger

tie bounding the “two footed strategy” – i.e. a

strategy founded on both external and internal

analysis – and the business model, and the strive to

find the right alignment between internal and

external focus.

What emerges from the longitudinal case study

is that, especially when facing convulse changes and

uncertainty, the correct balance between external

and internal strategic analysis, between the “inward

focus” and the “outward focus”, is essential for

developing an adequate business model. Had the

company developed a well-balanced strategy before

entering the new market, the impact of the fast-

changing environment on the initial business model

would have been less dramatic, and would have not

determined such radical changes in the parameters

values.

8 CONCLUSIONS

The research allowed to identify the core business

modeling parameters for Mobile Middleware

Technology Providers; moreover, it shed light on the

relationship existing between business modeling and

strategy definition.

Concerning the first research objective, the

findings show that some key business model

parameters identified by the existing literature can

be applied to MMTPs’ business modeling activity,

while others were missing or not made explicit.

With reference to the influence of the context

dynamicity and turbulence on business modeling,

the research demonstrates that what really matter in

determining a change in the business model adopted

are not only the exogenous factors – e.g. dynamicity,

high competitive pressure, uncertainty etc. –, but

also endogenous elements, like the nature and

quality of the strategy definition process, the

alignment between external and internal strategic

analysis, and the ties bounding strategy to business

modeling.

Business modeling is intimately related to

strategy, as the latter determines the former’s

adequacy and performances. While a “lame

strategy” where external and internal analysis are not

correctly balanced leads to the development of an

unstable business model, potentially more

influenced by external dynamics, a strategy well

grounded on both an inward and an outward focus

represents a solid foundation for the business

architecture, making it less vulnerable to uncertainty

and change.

The paper’s value for researchers can be brought

back to its contribution to Value Network, Business

Modeling and Strategy definition theories. Existing

literature on Value Network – with specific

reference to the Mobile Content Network – was

extended, through the provisioning of a unified

definition for the player typology under scrutiny and

its role in terms of activities covered; in addition to

this, the intrinsic value of establishing and

maintaining a wide set of inter-firm relationships to

obtain a more central role in the network was

evidences. Business modeling literature was applied

to the study of a new player typology, and original

design parameters have emerged. Moreover, the

relation between strategy creation and business

modeling was made explicit, through the in-depth

analysis of how choices made at a strategy definition

level affect the business modeling process. The

essentiality of achieving the right balance between

external and internal strategic analysis, expressed by

the “inward look” and the “outward look” concepts,

was also confirmed.

The value for practitioners lies in the creation

and provisioning of a “reference model” capable of

supporting the decision making process of business

modeling for a MMTP, as it presents strong ties

between business model parameters and their

strategic implications. The business model

parameters presented in the reference framework are

confirmed even after the change in the strategic

approach: what varies is the values such parameters

assume, as a consequence of a new strategic

THE PROCESS OF BUSINESS MODEL DESIGN IN A DYNAMIC CONTEXT - The Case of Mobile Middleware

Technology Providers

orientation of the management – passing from the

“inward focus” to the “outward focus” –. Moreover,

the study provides a “noteworthy case” of how the

interpretation of corporate strategy’s priorities can

influence business strategy definition, and, in turn,

business model design.

The research represent a significant step towards

the development of business modeling theory, with

reference to MMTPs. Future works will need to

confirm the generalizability of results, applying the

reference framework to a wider sample of players,

and to evaluate the impact of strategy definition on

business model design in different contexts.

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