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This paper aims to explore how mature firms in the media industry adapt their business models when faced with disruptive external change. This is particularly challenging as it often involves questioning and renewing the mental models that have guided the management of the firm in earlier successful times. A case study approach was chosen to explore the adaptation process with a high level of richness. As focal market we have chosen the Danish newspaper market since this gives us the opportunity to observe in detail two media groups, which control 50% of the national newspaper market. By working with archival data and interviews with key employees we succeed in tracing key developments between 2000 and 2011. Our findings show that mature firms use conscious strategic planning with regards to the value creation elements of the business model, but experimentation and random managerial responses for changing value proposition and value delivery elements. Overall, our empirical investigation leads us to propose guidelines on how to promote business model innovation.
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Business Model Innovation: the Role of
Experimentation
René Rohrbeck, Franziska Günzel, Anastasia Uliyanova
Aarhus University, Business and Social Sciences, Department of Business Administration and Center for Digital
Urban Living, Fuglesangs Allé 4, 8210 Aarhus V, Denmark; rrohr@asb.dk, frang@asb.dk, anau@asb.dk
This paper aims to explore how mature firms in the media industry adapt their business models
when faced with disruptive external change. This is particularly challenging as it often involves
questioning and renewing the mental models that have guided the management of the firm in
earlier successful times. A case study approach was chosen to explore the adaptation process with
a high level of richness. As focal market we have chosen the Danish newspaper market since this
gives us the opportunity to observe in detail two media groups, which control 50% of the national
newspaper market.
By working with archival data and interviews with key employees we succeed in tracing key
developments between 2000 and 2011. Our findings show that mature firms use conscious
strategic planning with regards to the value creation elements of the business model, but
experimentation and random managerial responses for changing value proposition and value
delivery elements. Overall, our empirical investigation leads us to propose guidelines on how to
promote business model innovation.
Introduction
Major changes in a mature industry can offer the
opportunity to create breakthrough innovations and build
a strong competitive advantage or have life-threatening
impact (Christensen, 1997; Stubbart & Knight, 2006).
This holds especially true for the media industry
nowadays. Media companies are under pressure to
challenge their existing business models in response to
(1) increasing importance of the Internet as a content
delivery channel, (2) entry of new competitors, (3)
emergence of new digital reading devices, (4) an overall
decrease of advertising expenditure during the financial
downturn, and (5) changes in media consumptions of
younger generations (Doctor, 2010; Grueskin et al., 2011;
VDI/VDE-IT, 2011). Current research proposes that
responding with an innovative business model can allow
mature firms to attain a competitive advantage (Storbacka
& Nenonen, 2011; Thompson & MacMillan, 2010; Yunus
et al., 2010) but the process of business model innovation
remains under-investigated.
In this paper we aim therefore to explore how mature
firms innovate their business models when faced with
(disruptive) external change. We build on longitudinal
data, which covers a time frame of 10 years. To further
specify our research question we reviewed the literature
on industrial change (macro perspective), strategic change
(micro perspective), and business model innovation
(activity and practice perspective).
Literature review
Industrial change
Technological discontinuities have been identified as
major triggers of change in fast-evolving industries
(Anand et al., 2010; Benner, 2010; Taylor & Helfat,
2009), and their effects have been well documented by
such industry life cycle theorists as Klepper (1997) and
Utterback and Abernathy (1975). Synthesizing
contributions from technology management literature,
Business Model Innovation: the Role of Experimentation
Rohrbeck, R., Günzel, F. and A. Uliyanova
R&D Management Conference 2012; Grenoble, France.
pg.11
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evolutionary economics and organization ecology,
Agarwal and Tripsas (2008) distinguish three stages of
evolution emergence/growth, shake out and maturity.
The mature industry stage is characterized by
competition between incumbents, low firm entry and exit
rates, and incremental innovations (Feldman, 2000). The
advent of technological discontinuities like the
introduction of the Internet at the mature industry stage
may either speed up the transition from maturity towards
decline, or it may fuel a new and reinvigorating cycle,
taking the industry back to an emergent stage (Afuah &
Utterback, 1997; Agarwal & Tripsas, 2008; Phaal et al.,
2011).
At such times, when new entrants are trying to create
dominate nascent markets (Santos & Eisenhardt, 2009)
incumbents must avoid resource and routine rigidities
(Gilbert, 2005). Both incumbents and new entrants will
be attempting to identify correctly the industry’s most
strategically valuable competencies (Gambardella &
McGahan, 2010) as well as the value propositions which
will serve customers best (Agarwal & Bayus, 2002), and
then change their business model accordingly.
Strategic change
Firms struggle to perceive the change in their
environment, because they lack the appropriate sensors
(Winter, 2003). In addition, as Gavetti and Rivkin (2007)
noted, bounded rationality might prevent top management
to identify the need to adapt its business model.
Such inertia can also sometimes be promoted
deliberately by members of the top management team
(Schwarz, 2012) and grounded in middle-management’s
unwillingness to compromise the status quo for an
uncertain future state (Lucas & Goh, 2009). Also Tellis
reports that incumbents can be expected to lack vision
and willingness to cannibalize assets to serve the new
emerging market (Tellis, 2006).
Miles et al. (1978) have theorized that successful
organizational adaptation needs to overcome three
problems: (1) the entrepreneurial problem of creating a
new business on the basis of a new insight into, for
example, the changed environment, (2) the engineering
problem of operationalization of the new business along
the business model elements, and (3) the administration
problem of designing management systems and routines
that ensure continuous value creation and value capture.
To induce discontinuous change Huy and Mintzberg
(2003) expect dramatic change, driven by top
management to be necessary. Only top management has
the vantage point and leverage to drive a re-configuration
of the resource base that plays an important role in
surviving external change (Danneels, 2011). In addition,
it can be expected that also the capabilities need to be
renewed (Subramanian et al., 2011) and indeed we expect
that often many (if not all) elements of a business model
have to be overhauled to adapt and thus survive external
change.
Business model innovation
Business model innovation is a type of organizational
innovation in which firms identify and adopt novel
opportunity portfolios (Teece, 2010). Despite, or perhaps
due to the breadth of the literature on the business model,
definitions of the construct have not yet converged to
consistent use (Zott et al. 2011). Recent studies reframe
business models as design of organizational structures
(Baden-Fuller & Morgan, 2010). Managers change
structures to initiate innovation (Hall & Saias, 1980) and
address novel opportunities (Gulati & Puranman, 2009).
However, due to management’s limited scope of control
and access to resources it can be expected that there is a
complex relationship between pro-active and re-active
patterns of encouraging in business model innovation.
A common perception of business model innovation is
associated with experimenting. Magretta (2002) for
example points to the need for hypotheses, tests and
revisions. Chesbrough (2010) argues that companies must
experiment with their business models, knowing that
some will fail; yet, even failure will provide learning
opportunities that can be applied in the future. But
besides these rather general suggestions there is little, if
any, specific guidance regarding how and when to adapt
to technological discontinuities.
Hypotheses
Through the literature analysis we have established that
industrial change creates the opportunity and the need for
incumbent firms to respond through a combination of (1)
entrepreneurial thrust, (2) careful re-configuration of its
business model and (3) administrative skills.
Overall, we expect the business model to be a suitable
level of abstraction to observe such strategic change on
the firm level. With regard to the literature we
hypothesize that business model change can occur
through:
H1: conscious strategic planning and decision-making
(planning paradigm)
H2: conscious experimentation (serendipity paradigm)
H3: random managerial responses (evolutionist
paradigm).
Methodology
Research design
To test our hypotheses we need longitudinal data from an
industry, which is and has undergone industrial change.
The media industry and especially the newspaper
market is in that respect very suitable as it has been
affected by multiple disruptive changes and is still in the
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process of adaptation.
To explore the adaptation process with a high level of
richness case studies are a particularly suitable research
method (Eisenhardt & Graebner, 2007; Yin, 2011). As
focal market we have chosen the Danish newspaper
market since this gives us the opportunity to observe in
detail two groups, which control 50% of the national
newspaper market (80% of the nationally distributed
newspapers) (The Nordic Media Market Report, 2009).
Sampling
The two media groups Berlingske Media and
JP/Politikens Hus have the additional advantage to be
organized and managed differently (see table 1), which
adds variance to our sample and creates the opportunity to
gain additional insights in how organizational structure
might affect the ability to adapt.
Criteria
Berlingske
JP / Politikens Hus
Turnover (2010)
403,3 million
437,2 million
Employees (2011)
2.850
2.405
First newspaper
1749
1883
Legal form
Subsidiary of Mecom Group Plc (British
media company)
Owned by Jyllands-Posten Holding A/S (50%)
and A/S Politiken Holding (50%)
Organization
Highly centralized with shared newsrooms for
online and offline news production,
centralized management, marketing and sales
responsibilities and an IT system that
facilitates news sharing across all newspapers.
Decentralized and subdivided with regard to
three titles of national coverage
(Morgenavisen Jyllands-Posten, Politiken and
Ekstra Bladet) and into two news desks
covering separately online/mobile and print.
Positioning
Modern, dynamic and agile
Quality and creativity
Newspaper portfolio
2 national daily newspapers
1 national free-sheet
1 weekly national business magazine
7 local daily newspapers
47 local weekly newspapers
1 partly-owned regional newspaper
3 national daily newspapers
55 free local newspapers in Denmark and
42 titles in southern Sweden
24,5% ownership of MetroXpress
Danmark A/S, the publisher of 2 free daily
newspapersMetroXpress and 24timer
Online portfolio
38 websites
39 local websites
9 mobile sites
11 online TV channels
1 national radio station
3 local radio stations
29 websites
42 local websites
8 mobile sites
4 online TV channels
1 national radio station
4 local radio stations
Other businesses
Scanpix: the biggest photo agency in
Denmark
SP3: an advertising agency
Infomedia: Danish provider of media
search, monitoring and analysis (50%
ownership)
Book publisher
Provider: Article database, media
monitoring and media analysis services
Politikens Plus: self-branded online and
offline shop (started in 1978)
Table 1: Characteristics of the two media groups present in our sample
Data sources
The newspaper industry lives up to their profession by
publishing not only news about others but also reporting
constantly and consistently about their own actions, views
and progression making a wide range of relevant material
available. To observe and validate the industry and
business model change form different angles we
employed multiple data sources:
Interviews: In total we collected 12 interviews with
top management of the two media groups, including
the two CEOs, editors-in-chief, and business
development directors. The interviews were semi-
structured, digitally recorded and transcribed.
Presentation: To capture the debate in the industry we
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visited leading conferences and captured the talks by
media industry executives. The presentations were
recorded and presentation slides were collected. In
total 14 hours and 22 presentation files entered our
analysis.
Annual reports: For the years 2003 to 2011, we have
collected annual reports of Berlingske Media,
MECOM, JP/Politikens Hus as well as their Danish
newspaper titles.
Industry newsletter: To further trace the industry
evolution and the debate among industry practitioners
we collected all newsletters from the Danish
Newspaper Association for the years 2000-2011, in
total 409 documents.
This data allowed us to triangulate our observation of the
adaptation process from the perspective of (1) the
management (through interviews and presentations), (2)
the investors (annual reports), and (3) industry
practitioners and general public (industry newsletters).
Data filtering and interpretation
The fully transcribed interviews, newsletters, audio
recordings and presentations relevant for the study, were
exported to nVivo9 software and subsequently
deductively and inductively coded and analysed.
The coding started with data reduction, which
produced a data output broadly representing the findings
related to the business models and industry change. We
then made a list of provisional codes corresponding to the
main building blocks of a business model (Osterwalder &
Pigneur 2010). Afterwards, we looked inductively for
changes related to the different parts of the media houses’
business models. Further, codes were introduced
inductively to represent specific industry changes, such as
“free newspaper”, “outsourcing”,iPad”.
In the end, we were looking at the relationships
between different parts of the business model before and
after changes in the industry as well as the chosen
approach by the management to encounter those industry
turbulences.
Validation of findings
Before the analysis, all transcripts were sent back to and
confirmed by the interviewees. After the analysis, all
findings were discussed within the interdisciplinary
research group under the auspices of the project Digital
Urban Living consisting of communication, design and
innovation management experts.
Results
The Danish newspaper market since 2000
Overall, the Danish newspaper industry experienced
declining revenues over the last decade that resulted from
plummeting subscription rates and newsstand sales. The
total circulation of newspapers declined from 1,6 million
in 2000 to 1,1 million in 2010 (Jauert, 2012). This equals
an estimated annual revenue of the Danish newspaper
market of approximately 526,3 million, of which about
197,4 million are state subsidies for the distribution
(Jauert, 2012).
The Danish newspaper market did react later then
other markets to the technology trends (The Nordic
Media Market Report, 2009). Therefore, the industry
evolution was analysed for the years 2003 until 2011
(figure 1).
1
st
phase (2003 – 2005)
This phase is primarily characterized by consolidation
and venture capital trends in the media market.
Particularly, the media houses publishing Denmark’s two
national papers, Jyllands-Posten and Politiken, merge and
create a corporation the size of Berlingske Media. In
April, 2003, Metropol Online A/S, the Joint Publisher
Company A/S jointly owned by Jyllands-Posten Holding
A/S and A/S Politiken Holding as well as TV2/Danmark
(national TV-channel) have decided to establish the
jointly owned Zonerne A/S. Zonerne A/S provides
Internet-based classified advertising and advertising
services for advertisers of cars, real estate and travel.
Thus, one of the strongest revenue-streams, classified
advertising, has gone online.
In 2002, Berlingske reached an agreement with
Politikens Hus to establish a joint printing house
Trykkompagniet A/S. Also, they have jointly established
distribution companies A/S Bladkompagniet and Dansk
Avis Omdeling in cooperation with a local media house.
In 2002, InfoMedia Huset A/S, Denmark’s leading player
in media intelligence, was the result of the merger
between Berlingske and JP/Politikens Hus.
Another trend consisted in developing special formats
adjusted to specific information needs of the target
customer group instead of clinging to the omnibus used
for so many years. This led to the emergence of niche
content offerings, such as the free newspaper Urban
publishing a special supplement about films three times
during the fall of 2003 (circulation approx. 350.000).
2
nd
phase (2006 – 2008)
The second phase is marked by a rapid development of
the free newspaper market and high exit rates as the
competition grew intensively.
The introduction of the new household distributed free
daily Nyhedsavisen shook up the market: the Danish
largest media houses launched each their own free daily,
Dato and 24timer in the fall of 2006. Now, there were
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both traffic newspapers and household newspapers, and
the competition grew strong. In the fall of 2006, the
situation was referred to as the “Newspaper War” having
ten free sheet titles circulating. Generally, free sheets
grew popular with readers, but not with the media houses
since they proved costly and unprofitable. Thus, a couple
of years later, titles fused or changed hands, the editorial
staff or management opted in melting with that of other
papers in the same group or publishing in lower
periodicity while even others eventually closed down
Overall, five free sheet titles remained with a market
share of above 50%.
With revenues from newspaper sales already declining,
the media groups focused on revenues from classifieds
and other advertisement revenues especially automobile,
jobs and real estate. Here, they were faced with increasing
competition from international groups and had to join
forces with companies that were already active in the
online market. Majority of the respondents from the two
media groups agree on Google and Facebook being “the
worst competitors”. They are seen as powerful rivals
“stealing” the traditional media customers’ time and
advertising revenues. As the result of this changed
competitive landscape, JP/Politiken Hus and Berlingske
Media initiated a number of shared digital projects, such
as the Internet portal and market place BilZonen.dk,
where JP/Politikens Hus has a 32% and Berlingske Media
a 34% stake and where second-hand vehicles are traded.
3
rd
phase (2009 – 2011)
In the summer of 2007, Apple’s iPhone was released but
it was not until 2009 and 2010 that the main national
newspapers in the Danish media market launched their
first iPhone-applications. The Berlingske Group was the
first to launch an iPhone-application in November 2009
which was the first in a series of applications for iPhone
and iPod Touch. As an introduction offer, this application
was free of charge until 15 February 2010. In responds
JP/Politikens Hus’ national dailies, Jyllands-Posten,
Politiken and Ekstra Bladet all launched their first
iPhone-applications in October 2010.
In 2010, Apple launched with the iPad a device that
introduced to the mass audience the idea of reading
content online to the mass audience. In October 2010,
Berlingske was the first to launch an app for an iPad,
which was a business news app, ahead of the launch of
the device itself in the Danish market. The week after the
launch, the app was downloaded 3.600 times. The
application updates with all the daily business news from
the Berlingske website and offers a preview of the next
day's headlines each night. A free trial period is offered to
new users, after which Berlingske charges 3 a month.
Figure 1: Evolution of the newspaper industry, environmental change and managerial responses
Chronology of the business model change
In general, both media houses showed a great degree of
openness towards technological and social innovations
like the World Wide Web, Web 2.0 and various mobile
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platforms. Jyllands-Posten was one of the first Danish
newspapers to launch an online edition www.jp.dk in
early 1996. The Berlingske concern and the other titles
from JP/Politiken Hus followed the trend and began
publishing online editions in 1998. From an overall
perspective, both media houses reacted quite similar to
the industry changes with regard to their business model
(for an overall overview, see figures 2 and 3). In the
following, we will report on the most important common
changes and the ones that distinguish both companies.
Business model changes at Berlingske
Within the value creation business model elements, one
of the most important changes for Berlingske was the
reassessment of qualifications of in-house personnel. One
of the examples is a growing need for journalists with
digital skills.
“We have hired four employees with specific digital
skills, because our existing organization could not
perform the tasks themselves. People tried it but
they did not have the right skills it was about
everything from blogging live to embedding, using
Google maps in articles and web TV clips and
mixing dissemination forms easily online. And for
this matter, we have specifically searched for
employees who already have the skills."
Respondent from Berlingske (our translation)
Additionally, in the process of being taken over by British
Mecom Group Plc., the key positions were newly staffed
with field experts who had experience with new media.
Another important change within value creation
elements was the establishment of a number of novel
partnerships a process both companies went through.
One such partnership is the advertising agreement
between JP/Politikens Hus and eBay. Another example is
Berlingske Media’s development of mobile solutions with
a Ukrainian IT-firm. According to one of the
representatives from this media group, there is a fairly
strong development in this field with collaborative
constellations increasingly reflecting two directions: “the
digital development and a high degree of
internationalization”. Additionally, printing and
distribution were outsourced to a high degree.
Berlingske is in search for their value proposition.
While in the “old days”, they could solely rely on their
ability to be a unique news channel and, thus, a unique
place to connect advertisers, marketers and readers, this is
questioned today. Therefore, Berlingske heavily relies on
their position of being a “credibility channel” as our
following interviewee puts it:
“Well, we should be this credibility channel which
verifies things. So, people will always search for
channels where they can get the truth, and it may
well be that there is a blogger who is super good and
has the right contacts in the government or where
the hell they now have them and it will, maybe, be
one of them, people go to when it comes to just that
area, which that person focuses on. But here, it is
clearly easier to be a media firm or a media which
has some tools to get things verified with.”
Respondent from Berlingske (our translation)
The interviewee elaborates a bit further depicting another
new role the role of being an entertainer.
So it is much verification, but, well, we have a
huge role in entertaining, informing and
collecting.”
Respondent from Berlingske (our translation)
With regard to value capture, Berlingske is experimenting
counciously with the channels which it can use to attract
readers successfully, e.g. through their various websites
which are experiencing increasing monthly visitor
numbers making them being among the top 10 Danish
websites. The media house has recognised the influence
of other digital media channels on the distribution of their
content and on redirecting readers to newspaper websites.
A number of examples are worth mentioning. In 2010,
Berlingske launched GoNews, a news channel on the
Microsoft owned by MSN.com. This move allowed the
newspaper to deliver content to 1.3 million Danish users
of MSN.com.
In July 2011, newspapers Morgenavisen Jyllands-
Posten and Berlingske joined forces with Denmark’s
largest cable TV provider, TDC, to deliver news on TV.
This joint initiative enables 120,000 cable subscribers to
read newspaper sites jp.dk and b.dk on their television
sets. TDC calls these news services TV apps and
considers it a modern version of Teletext with news,
weather, music etc. The service is easily accessed with
the remote control via applications at the bottom of the
TV screen and is available for TDC Internet TV
subscribers.
In 2010, Berlingske started also publishing the most
suitable articles from berlingske.dk on Berlingske’s
Facebook page. Designated community managers keep an
eye on the debate and initiatives in progress, responding
to the users’ questions. This channel as well as Twitter
encourages experimentation:
“Social media ... Yes, we are trying so ... we have
not found the model which can make sense for us,
but we are there, and we have a reasonable number
of friends. We have 800-something, and I am in
contact with many experts in social media, who say
that we ought to have 10 times as many. But we are
there and we have occasionally used it editorially.
And it's actually Twitter we have used in regard to
some trials we have followed, where we have
updated, and it has been a great challenge, but it has
been a success editorially, and those hardcore users,
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which we have, have also thought that it was really
good.”
Respondent from Berlingske (our translation)
The respondent then adds that:
“But there are then also just some fights about rights
and business models and customer contact and all
those things. As long as Facebook believes that they
own the copyright to everything which is uploaded
there, so it's difficult to produce journalism. As long
as there still appears on page 13 in their conditions
that they have the right to sell to the third part, so it's
hard to upload journalism.
Another way to fight decreasing revenues is to generate
new sources of revenue, like e-commerce which became
increasingly important, allowing the newspapers to
capitalize on their brands, reputation and huge Internet
traffic to their online sites. Berlingske also operates a
number of e-commerce websites with special offerings,
which have mostly no connections to the newspaper’s
core business activities, for example, sweetdeal.dk which
was launched in 2010 and is a Groupon copy.
We have sweet deals and everything else which is
non- traditional revenue, you can say - we also have
commercial sale, everything from firewood to travel.
So, the more we can earn there to fund our core
business and journalism and content, the better. And
if we can couple it together, it is even better. So
there are lots of different ways to get revenues in.”
Respondent from Berlingske (our translation)
Overall, Berlingske generated in 2011 a digital revenue of
26.7 mio., of which 17 mio. are attributed to
advertisement (37% increase). Sweetdeal.dk generated an
income of approximately 87 mio.
Figure 2: Business model change at Berlingske
Business model change at JP/ Politiken Hus
From the value creation point of view, JP/Politiken Hus
mainly focused on two aspects: 1) creating a flexible
organization and 2) building up a strong brand that can
permeate all channels. In general, interviewees were quite
overwhelmed by the recent changes in the industry and
articulated it in the following way:
“We dare not even to guess! We would rather have
an organization that is ready to change quickly than
we now sit and guess how our business model
would look like in 10 years!”
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Respondent from JP/Politiken Hus (our translation)
Creating a flexible organization that is able to react to
further changes in the media industry was especially
emphasized in times of the newspaper war and realized
through the means of saving costs. Politiken put up the
goal to save three percent of their costs in 2009
especially through reducing expenses for staff. Also more
recently, in the Jyllands-Posten newspaper editorial team,
some changes are taking place, in relation to a cost-saving
round of 3.3 million per year resulting in the lay off of
12 journalists. In this more recent process additionally all
major newspapers of JP/Politiken Hus closed down
important sections and editorial supplements.
Being a media house with three different and
independent national newspapers, JP/Politiken Hus
focused on maintaining and building their strong brands,
recognising the fact that in the current market conditions,
any medium is secondary to the brand.
”We will live for our brand. We want to be a media
house with a common denominator that is our
brand. And that's what we are doing at full speed. I
mean, with both going on the radio and online, and
in so many different niches which we are working
with, right. Here, we are, in fact, going in the
direction that we say, our asset is our brand, and it is
a hat covering all of the activities here".
Respondent from JP/Politiken Hus (our translation)
Within the value proposition besides strong brand
awareness, a theme that gets more important is not only to
be credible in informing (see Berlingske) but also to be
credible in choosing the most important news news
customization. This is still in an early development stage
but the awareness that this could be a tool to differentiate
from competitors is arising.
It is quite clear that there is a major challenge in
becoming sharper in our offer. […] Let’s say, you
can buy a package. I could well imagine that you did
at a newsstand; you could say that there were the
main products, but then there would also be a lot of
sub-products. Where you could say, well, you could,
for example, say that you had international news,
and you had business news from three different
newspapers. You had sports news, so if you were
now very interested in sports, then you could
actually combine those three things and say, well, I
would like to buy those ones together. And then pay
maybe 1,50 a day to get the best international
news from the Danish newspapers. But it's a
difficult balance, because I think well, if there is
anything that really has value for us, it's our brand.
So the moment you begin to atomize your content,
so you also risk at undermining your brand, so it's a
very, very fragile balance here.”
Respondent from Jyllands-Posten (our translation)
This quote displays very illustratively how JP/Politiken
Hus’ own brand awareness holds them back to create new
value propositions and, thus, to serve potential new
customer groups.
With regard to value capture, JP/Politiken Hus has
chosen not to experiment as much with channels but
instead with revenue streams. Willingness to pay was not
easy to evaluate and experiments with payment systems
started, e.g.:
“But what we can do, it is that we can make smaller
trials with payment -which to make our iPhone app
that we've made - and this is our attempt to find out
what the users are willing to pay for. And we've
launched it with a monthly payment of 1,60 to test
the willingness to pay among our users. And it is a
small trial, but it is a very good indicator of how
loyal customers interested in the Politiken-brand
relate to having to give money away for it once a
month.
Respondent from Politiken (our translation)
Additionally, as the first in Denmark, in 2004, Politiken
launched the e-commerce site plus.politiken.dk where it
offers specially selected goods and services, such as
travelling, entertainment services and even clothing,
wine, watches etc. This shop actually started in 1978
“offline” in the streets of Copenhagen. Until recently this
shop was just an add-on but through a very consistent
market approach it is now bringing growing revenues
(3% of the total revenue of the media house) leading to
the opening of a second “offline” shop in Copenhagen.
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Figure 3: Business model change at JP/Politiken Hus
Conclusion
Business model innovation in mature firms
This work has been based on the hypothesis that business
model change can occur through 1) conscious strategic
planning and decision-making (planning paradigm), 2)
conscious experimentation (serendipity paradigm) and 3)
random managerial responses (evolutionist paradigm).
Our analysis has shown that all three responses are
present but with respect to different parts of the business
model. Both firms show a high level of conscious
strategic planning with regard to value creation and cost
elements but a high of random managerial responses that
are guided by shared dominant mental models with
respect to their value proposition and value capture
elements. Only little intention experimentation takes
place within the arena of creating new revenue streams.
Overall, we find evidence for the evolutionist claim that
firms in situations of disruption find it difficult to adapt
through planned and conscious means with regards to the
market but we can not affirm this with regards to the
inwards directed business model elements. No excluding
paradigms when it comes to the business model
Recommendations for business model research
In the course of our study, some new questions have
emerged. Media owners have been strongly encouraged
to develop consumer-centric strategies and to keep
innovating to identify advantageous opportunities for
accommodating consumers’ and advertisers’ interests
(McPhillips and Merlo, 2008). This includes the ways in
which firms interact with suppliers as well as customers
(Brynjolfsson and Hitt, 2000). Therefore, as long
suggested by Chyi and Sylvie (2000), longer range
studies of strategic behaviour by online newspapers are
needed if we aim at getting an accurate sense of the
predominant business models of the future.
Business model change is studied more in-depth in the
field of entrepreneurship nowadays (Günzel and Wilker,
2012). But business model change in mature industries is
hardly recognized nor systematically studied yet. Studies
should analyse various levels studying the
organizational and business model changes as well as
10
alterations in the business network. The linkages between
those three levels will be worthwhile investigating since it
will give managers insights in how to practically translate
business model changes into the internal and external
sphere of their business. In addition to that, the role of
business model experimentation is worthwhile studying.
Business model experimentation may be the key for
success to allow mature companies to open up slowly and
transform purposefully to an entire new business model.
Parameters for evaluating individual or bundles of
experiments and their impacts on the organization,
however, are still missing.
Acknowledgements
This research has been funded by the Danish Council for
Strategic Research, 09-063245, (Digital Urban Living)
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