Progress in IS Bernd W. Wirtz Digital Business Models Concepts, Models, and the Alphabet Case Study Progress in IS “PROGRESS in IS” encompasses the various areas of Information Systems in theory and practice, presenting cutting-edge advances in the field. It is aimed especially at researchers, doctoral students, and advanced practitioners. The series features both research monographs that make substantial contributions to our state of knowledge and handbooks and other edited volumes, in which a team of experts is organized by one or more leading authorities to write individual chapters on various aspects of the topic.
“PROGRESS in IS” is edited by a global team of leading IS experts. The editorial board expressly welcomes new members to this group. Individual volumes in this series are supported by a minimum of two members of the editorial board, and a code of conduct mandatory for all members of the board ensures the quality and cutting-edge nature of the titles published under this series. More information about this series at http://www.com/series/10440 Bernd W.
Wirtz Digital Business Models Concepts, Models, and the Alphabet Case Study 123 Bernd W. Wirtz Chair of Information and Communication Management German University of Administrative Sciences Speyer, Germany This book was prepared with great care. However, it may still include incorrect information. Therefore, the author does not assume any liability for errors and their associated consequences.
I am grateful for any related information. Please send your notes to ls-wirtz@uni-speyer.de ISSN 2196-8705 ISSN 2196-8713 (electronic) Progress in IS ISBN 978-3-030-13004-6 ISBN 978-3-030-13005-3 (eBook) https://doi.1007/978-3-030-13005-3 Library of Congress Control Number: 2019931979 © Springer Nature Switzerland AG 2019 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc.
in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland Preface The Internet economy is essentially characterized by its considerable dynamic and speed of change. The rapid digitalization of numerous areas of life has resulted in a shift towards today’s Information Society. Therefore, since the beginning of the twenty-first century, online businesses have profoundly and progressively gained an importance. Against this background, the growing intensity of competition and the shortening of innovation cycles management decisions have become ever more complex and difficult, especially for the area of business models.
In recent years, the business model concept has become a popular tool in business practice because it can help to successfully analyse and handle these complexities. Despite the great practical importance of business model management in the digital area, the conceptual basis in the literature is not very comprehensive. Thus, it seems necessary to develop a stronger conceptual foundation in order to deduce helpful insights and practical guidance for managers of digital businesses. The present book aims at filling this gap and to provide a detailed overview of the business model concept in the digital world.
In preparing this book, I received various kinds of support from the former and current employees and doctoral students of the Chair of Information and Communication Management at the German University of Administrative Science Speyer. I would like to particularly thank Mr. Daniel Schmitt (MPA) for their dedication to this project. The scientific development of a subject area thrives through the critical analysis and discussion of concepts and content.
Given this fact and the currently inchoate state of knowledge regarding digital business models, I am grateful for every comment or suggestion for improvement. Furthermore, lecturers who are interested in using graphics and lecture with materials from this book are welcome to contact the author. Speyer, Germany Bernd W. Wirtz March 2019 v Contents 1 Foundations of Digital Business Models .2 Development of the Business Model Concept .3 Analysis of Definitions .4 Importance of Business Model Management for Success.
14 2 The Business Model Concept .1 Research Streams of Business Models .2 Classification of Business Models .3 Integrated Business Models .4 Levels and Goals of Business Models .5 Business Models, Value Chain, Core Assets and Competencies .1 Development of Digital Business .2 Basics of Digital Business .3 Forces of Digital Development .4 Business Models in Digital Markets. 79 4 B2C Digital Business Models: Content .1 The Content Business Model .2 Content Business Model Types .3 Value Chain, Core Assets and Competencies .4 Case Study: Wikipedia. 97 5 B2C Digital Business Models: Commerce .1 The Commerce Business Model .2 Commerce Business Model Types .3 Value Chain, Core Assets and Competencies .4 Case Study: eBay. 116 vii viii Contents 6 B2C Digital Business Models: Context .1 The Context Business Model .2 Context Business Model Types .3 Value Chain, Core Assets and Competencies .4 Case Study: BING.
130 7 B2C Digital Business Models: Connection .1 The Connection Business Model .2 Connection Business Model Types .3 Value Chain, Core Assets and Competencies .4 Case Study: LinkedIn. 147 8 Hybrid Digital Business Models .1 Development of Hybrid Digital Business Models .2 Hybridization of Business Models: Google. 155 9 B2B Digital Business Models .1 The Sourcing Business Model .2 The Sales Business Model .3 The Supportive Collaboration Business Model .4 The Service Broker Business Model. 170 10 Digital Business Model Innovation .1 Introduction to Business Model Innovation .2 Demarcation of Business Model Innovation .3 Types and Processes of Business Model Innovation .4 Integrated Approach to Business Model Management.
201 11 Google/Alphabet Case Study .1 Google’s Organizational History and Development .2 Google’s Integrated Business Model .3 Google’s Market Environment .4 Case Analyses and Structure of Solutions .5 Google Case: Questions and Solutions. 237 About the Author Prof. Wirtz studied business adminis- tration in Cologne, London, and Dortmund, culminat- ing in a Master of Business Administration (MBA). He later served as Lecturer for media management at the University of Düsseldorf (Germany) and University of Zurich (Switzerland).
In 1994, he was awarded a doctorate in the field of new media and competition strategies (Doctorate in Business Administration). After finishing his studies, he worked as Consultant with Roland Berger and Partners as well as Andersen Consulting/Accenture (Manager in the field of new media/electronic commerce) and as Lecturer at the University of Zurich. From 1999 to 2004, he was Full Professor (Deutsche Bank Chair for Strategic Management) at the Witten/Herdecke University (Germany). Since 2004, he has been Full Professor (Chair for Information and Communication Manage- ment) at the German University of Administrative Sciences Speyer (Germany).
He is Editorial Board Member of the journal Long Range Planning, the Journal of Media Business Studies, the International Journal on Media Management, the International Journal of Business Environment, the International Journal of Public Administration, the International Review on Public and Nonprofit Marketing and the Public Organization Review. He has several years of experience in consulting on strategy projects for leading media and telecommunication enterprises and the European Commission. His publi- cations focus on media management, business model management, marketing, e-government and electronic ix x About the Author business (approximately 300 publications). In total, he has published 20 books (e.
tenth edition of Media and Internet Management in German, sixth edition of Electronic Business in German, fourth edition of Direct Marketing in German and fourth edition of Business Model Management in German). Chapter 1 Foundations of Digital Business Models 1.1 Introduction In recent years, the development and design of business models have received increased attention, especially in the economic literature and mainly related to the emergence of the Internet-based new economy (Wirtz 2000c; Chesbrough 2010). In this context, business models are often linked to competitive advantages. The success of corporate activities is largely attributed to the management of business models.
The increased importance of the business model approach is primarily due to the considerable changes in competitive environments during the last two dec- ades particularly in digital markets.1 Increasing globalization, deregulation of entire market sectors, faster innovation cycles, the digital transformation of business transactions and accelerating eco- nomic integration have made the markets more dynamic, more competitive, more digital and, above all, more complex. Companies striving to be global competitors have to adapt continuously to the changing market conditions. Strategies, organi- zations and products are subject to a growing pressure for change in order to be successful in this market environment. How do companies manage to navigate successfully this highly dynamic and complex competition? Business models are important for answering this question.
Business model management helps companies to develop new business ideas, examine existing business activities and modify their strategies and structures by simplifying the complexities and dynamics of the modern business environment. Thus, business models represent the essence of corporate activities. They support the management in systematically analyzing success factors and adapting their business activities. 1 See also for the following chapter Wirtz (2013a) and Wirtz (2018a).
© Springer Nature Switzerland AG 2019 1 B. Wirtz, Digital Business Models, Progress in IS, https://doi.1007/978-3-030-13005-3_1 2 1 Foundations of Digital Business Models The diffusion of the Internet into all areas of business activities has brought particular focus to business models. The all-embracing process of digitalization of business processes is the driver of changes in company strategies and management practices. Online markets have brought about a multitude of new business models that are the foundation of companies such as Amazon, Google, Facebook and eBay.
Today’s significant start-up and innovation rate resting upon new business models shows the relevance of the business model concept in the digital context. The information society, generally based on digital goods, represents a focal point for competitive strategies of modern businesses. Against this background, this textbook particularly addresses the digital orientation of the business model con- cept. More precisely, the book’s emphasis is on the description, illustration and analysis of digital business models.
The book intends to contribute to the topic of digital business models from the perspective of business administration and is therefore structured as follows. This chapter provides an overview of the business model concept in general by pre- senting the development of business models, the analysis of definitions of business models and the significance of the success of business model management. Chapter 2 gives insights into and explanations of the business model concept and provides the underlying approaches and ideas of business models. Building on these foundations, Chap.
3 outlines the fundamental aspects of the digital economy. Chapters 4–7 examine different core models in the B2C context. Those chapters follow the 4-C approach that divides the digital B2C businesses into models, focusing on content, commerce, context and connection. Each chapter describes one of the four different models and provide different respective business model types, the value chain, core assets and competencies as well as a case study.
Chapter 8 outlines a hybrid digital business model approach. Based on the example of Google, the section describes the hybridization or in other words the development of a hybrid digital business model. Chapter 9 examines the B2B digital business models. It shows how companies focus on the business solutions such as the online provision of sourcing, sales, supportive collaboration and broker services.