Week Two – Business Models

This week we covered a formal description of business models, noting their specific components as defined by Michael Rappa. These components are:

  • Value proposition
  • Revenue model
  • Target customer
  • Distribution channels

We were then tasked to look at organisations with similar business models to Google, Amazon and Netflix. I selected Facebook, Fishpond, and Github.

Facebook

  • Value proposition – Connecting the world socially
  • Revenue model – Advertising
  • Target customer – Anyone over 13 years’ old
  • Distribution channel – web, apps

Fishpond

  • Value proposition – New Zealand’s biggest online store
  • Revenue model – commission
  • Target customer – people in New Zealand
  • Distribution channels – web

Github

  • Value proposition – Online collaborative code repository
  • Revenue Model subscription
  • Target customer – developers who want a code repository
  • Distribution channels – web and apps

We then were tasked to discuss differences between B2B and B2C business models, where B2B focuses on the supply chain of raw materials, to manufacturers, to distributors, to retailers, versus the B2C supply chain of Retailers to Consumers.

The Internet makes it possible to disintermediate companies from the supply chain. A good example is Amazon.com which plays both the role of the Distributor and Retailer. As Amazon gained experience in distribution, they then expanded themselves to offer that as a service to other organisations notes (Services.amazon.com, 2015).

The most interesting change I believe the move from Manufacturer to Customer, bypassing Distributors and Retailers, a good example of which is AliExpress (http://www.aliexpress.com/). (Aliexpress, 2015) states the purpose is the find wholesale products from China Wholesalers, allowing customers to purchase at far lower costs, but with less confidence about quality, than through a retailer.

The final focus for this week was to focus on a business model that wasn’t covered in the lectures. The business model I selected was disintermediation, where airlines sell directly to customers via their online booking websites, rather than going through a travel agent. The most well known airline in New Zealand with online booking is Air New Zealand at http://www.airnewzealand.co.nz. Interestingly, the experience gained by Air New Zealand in online bookings has allowed them to expand their offering into booking hotels states (Airnewzealand.co.nz, 2015), which is reintermediation in a different associated industry to airlines. The net consequence is that travel agents are starting to move to a Pay as you go model, where each booking is paid via a service fee directly to the consumer notes (Houseoftravel.co.nz, 2015), rather than being subsidised through rebates by the airline.

Another example of disintermediation is (Apple.com, 2015), who sell directly to consumers through their stores or online. However, they haven’t fully embraced disintermediation, and still wholesale to other retailers.

Finally, we needed to create a business model for a startup idea. I choose Eneropp, a startup I’ve created which is a subscription service for energy utilities which allows them to quickly provide a mobile online services website and app to their customers (Eneropp, 2015). The business canvas I created is:

businesscanvas

at https://canvanizer.com/canvas/DDbgBJ-KhRQ

The business model the start-up uses is Lock-in & Subscription in combination.

References:

Services.amazon.com,. (2015). Boost your sales with Amazon’s world-class fulfillment.. Retrieved 24 July 2015, from http://services.amazon.com/content/fulfillment-by-amazon.htm

Aliexpress,. (2015). Find Quality Wholesalers, Suppliers, Manufacturers, Buyers and Products from Our Award-Winning International Trade Site. Wholesale Products from China Wholesalers at Aliexpress.com.. Retrieved 24 July 2015, from http://www.aliexpress.com/

Airnewzealand.co.nz,. (2015). Hotels – Air New Zealand. Retrieved 24 July 2015, from http://www.airnewzealand.co.nz/hotels

Houseoftravel.co.nz,. (2015). Fees – House of Travel. Retrieved 24 July 2015, from http://houseoftravel.co.nz/popups/fees.htm

Apple.com,. (2015). Mac – Shop Mac Notebooks & Desktops – Apple (NZ). Retrieved 24 July 2015, from http://www.apple.com/nz/shop/mac

Eneropp,. (2015). Eneropp. Retrieved 24 July 2015, from http://eneropp.com/

Week One – e-Business Cases – Netflix

This week covered e-Business Cases, around three particular companies, Google, Amazon, and Netflix.

For Netflix, we looked at the products offered, which are stated at (Ir.netflix.com, 2015) include:

  • Streaming Internet TV for movies and TV series;
  • DVD rental;
  • Original content licensing to TV networks.

(Ir.netflix.com, 2015) states that Netflix’s Business Model is:

Netflix is a global Internet TV network offering movies and TV series commercial-free, with unlimited viewing on any Internet-connected screen for an affordable, no-commitment monthly fee.

Netflix is quite social, with recommendations being at the heart of social activity. (Netflix.com, 2015) notes that social features include connecting to Facebook, and sending recommendations to friends.

(Netflix.com, 2015) states that the information that Netflix collects includes:

  • Information you provide to Netflix to operate the platform, such as your name, and credit card information;
  • Rating information and viewing preferences;
  • Information collected automatically about how you interact with the platform, such as what devices, when, where, and what network speeds;
  • Social networking information if enabled;
  • Demographic information and browsing behaviour where possible.

(Techblog.netflix.com, 2012) highlights some of what recommendations can be based on, including:

  • Household viewing interests, not just individual viewing interests;
  • Context;
  • Title popularity;
  • Evidence;
  • Novelty;
  • Diversity;
  • Freshness.

 

References:

Ir.netflix.com,. (2015). Netflix : Netflix’s View: Internet TV is replacing linear TV. Retrieved 16 July 2015, from http://ir.netflix.com/long-term-view.cfmpl

Netflix.com,. (2015). Netflix – Watch TV Shows Online, Watch Movies Online. Retrieved 16 July 2015, from https://www.netflix.com/SocialTerms?locale=en-US

Netflix.com,. (2015). Netflix – Watch TV Shows Online, Watch Movies Online. Retrieved 16 July 2015, from https://www.netflix.com/PrivacyPolicy

Techblog.netflix.com,. (2012). The Netflix Tech Blog: Netflix Recommendations: Beyond the 5 stars (Part 1). Retrieved 16 July 2015, from http://techblog.netflix.com/2012/04/netflix-recommendations-beyond-5-stars.html

Week One – e-Business Cases – Amazon

This week covered e-Business Cases, around three particular companies, Google, Amazon, and Netflix.

For Amazon, we looked at the products offered, which are stated at (Services.amazon.com, 2015) include:

  • A marketplace for selling products;
  • A marketplace for selling services;
  • A B2B marketplace;
  • Advertising;
  • Payment Gateway;
  • Order fulfillment;
  • Customer-service-as-a-Service;
  • Cloud platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS).

A former employee of Amazon, (Wei, 2015) notes that Amazon’s Business Model is:

Amazon is a classic fixed cost business model, it uses the internet to get maximum leverage out of its fixed assets, and once it achieves enough volume of sales, the sum total of profits from all those sales exceed its fixed cost base, and it turns a profit.

Amazon’s Retail business has social throughout the technology, specifically recommendations based on what others have purchased, as well as product reviews. Amazon is investing in social, with the recent purchase of Goodreads notes (Eha, 2013).

(Amazon.com, 2015) states that Amazon.com captures information about you including:

  • Information you give them, such as your shipping address;
  • Information gathered through the use of their services such as items placed in your shopping cart;
  • Information from mobile devices, if you’ve used their mobile applications or devices;
  • E-mail information such as whether you’ve opened an e-mail from Amazon.com.

Amazon.com has made a play on monitising The Long Tail. (Wunker, 2015) defines The Long Tail as:

Long tail business models sell small quantities of a very large number of items.  They are the antithesis of blockbuster business models, which sell large quantities of a few items.

People have niche interests that when scaled over the whole world, provide enough volume to make selling products in that niche profitable. Amazon.com has the scale and the discoverability on the Internet to make The Long Tail profitable.

References:

Services.amazon.com,. (2015). Sell on Amazon: Amazon business services. Retrieved 16 July 2015, from http://services.amazon.com/content/amazon-seller-services-products.htm?ld=NSGoogleAS

Wei, E. (2015). Amazon and the “profitless business model” fallacy. Remains of the Day. Retrieved 16 July 2015, from http://www.eugenewei.com/blog/2013/10/25/amazon-and-the-profitless-business-model-narrative

Eha, B. (2013). Amazon Gets Social, Buys Book Recommendation Site Goodreads. Entrepreneur. Retrieved 16 July 2015, from http://www.entrepreneur.com/article/226243

Amazon.com,. (2015). Amazon.com Help: Amazon.com Privacy Notice. Retrieved 16 July 2015, from http://www.amazon.com/gp/help/customer/display.html?nodeId=468496#GUID-A2C397AB-68FE-4592-B4A2-7550D73EEFD2__SECTION_467C686A137847768F44B619694D3F7C

Wunker, S. (2015). Long tail business models — Amazon on offense and defense. Newmarketsadvisors.com. Retrieved 16 July 2015, from http://www.newmarketsadvisors.com/blog/bid/36296/Long-tail-business-models-Amazon-on-offense-and-defense

Week One – e-Business Cases – Google

This week covered e-Business Cases, around three particular companies, Google, Amazon, and Netflix.

For Google, we looked at the products offered, which are stated at (Google.co.nz, 2015) include:

  • Search
  • Social
  • Mobile
  • Analytics
  • Cloud platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS).

(Google.com, 2015) states that Google’s mission is to:

Google’s mission is to organize the world’s information and make it universally accessible and useful.

Which is reflected in their broad product offering.

Google’s Business Model is primarily advertising, with (Investor.google.com, 2015) stating that for the first nine months of 2014, 90% of revenue came from advertising, and 10% coming from other sources such as the Google Cloud Platform.

Google had a big bet on social, with the creation of their Google Plus platform, which hasn’t been very successful notes (Denning, 2015), with the following quote:

The number of truly active users on Google+ is significantly less than 1% of the total 2.2 billion Google users

And has led to the fragmentation of Google Plus into discrete products such as Google Photos.

(Google.co.nz, 2015) states that Google captures information about you including:

  • Information you give them, such as profile information for Google Plus;
  • Information gathered through the use of their services like YouTube statistics and interactions with advertising;
  • Device information from the device you use to access their services;
  • Location information;
  • Cookies they’ve stored.

One of the key technologies of Google is the Search Engine. Google has a function called the Knowledge Graph, which (Google.co.nz, 2015) explains:

With the Knowledge Graph, Google can understand the difference, helping you more precisely express what you mean as you enter your search.

The Knowledge Graph is how Google can determine that when you search for weather, that when combined with your location, you want the results for the weather in Wellington for the next few days.

Of course, all sites look much the same on the Internet. So in order to provide trust to results, a social component is added, Recommendations through Google Plus, or other platforms like Yelp! for restaurant reviews. These Social recommendations allow users to determine if a site is trustworthy, with the number of users recommendations used a proxy about whether to trust a recommendation.

In the past, search engines competed with directories, including physical world equivalents such as the Yellow Pages. But directories only ever provide a static view towards looking up information at another site. Google with the Knowledge Graph has started to interpret queries, and return results directly without pointing to other websites. For example, searching for “convert 100 usd to nzd” returns back an actual conversion based on a conversion rate, rather than a directory, which would only direct you to a currency conversion website.

As (Investor.google.com, 2015) states, advertising is the big revenue earner at Google. Google has the attention of the world, and as (Solveforinteresting.com, 2015) notes:

Converting money to attention is simply advertising.

References:

Google.co.nz,. (2015). About Google – Products. Retrieved 16 July 2015, from https://www.google.co.nz/about/products/

Google.com,. (2015). About Google. Retrieved 16 July 2015, from http://www.google.com/about/

Investor.google.com,. (2015). Retrieved 16 July 2015, from https://investor.google.com/earnings/2014/Q3_google_earnings_tab6.html

Denning, S. (2015). Has Google+ Really Died?. Forbes. Retrieved 16 July 2015, from http://www.forbes.com/sites/stevedenning/2015/04/23/has-google-really-died/

Google.co.nz,. (2015). Privacy Policy – Privacy & Terms – Google. Retrieved 16 July 2015, from http://www.google.co.nz/policies/privacy/#infocollect

Google.co.nz,. (2015). Knowledge – Inside Search – Google. Retrieved 16 July 2015, from http://www.google.co.nz/search/about/insidesearch/features/search/knowledge.html

Solveforinteresting.com,. (2015). The three currencies of the online economy – Solve for Interesting. Retrieved 16 July 2015, from http://solveforinteresting.com/the-three-currencies-of-the-online-economy/

MSYS559-15B(NET) Blog for Waylon Kenning

As part of my Masters in Electronic Commerce, I’m taking a paper called MSYS559 – E-Business Technologies. Over the next 12 weeks I’ll be posting regular updates on this blog about my findings throughout the course.

IMG_3768But first, about myself. My name is Waylon Kenning, and I completed a Bachelor of Electronic Commerce from the University of Waikato in 2008. Seven years later (!), I’ve decided to take up the online Masters of Electronic Commerce. The reason for doing this masters is twofold:

  1. I study all these technologies in my day job, so why not consider them from an academic perspective, and gain a masters degree?
  2. Having a masters degree would make it easier to gain a Danish Working Visa, or to move to Germany and find a job there.

For this course I hope to gain a more critical understanding of some of the technologies that I’m exposed to day-to-day. I also look forward to bringing to the class my practical experiences with these technologies, and being able to have a critical discussion about them.

In my day job, I’m an Enterprise Architect at Contact Energy, a listed Energy Generator and Retailer (or Gentailer) in New Zealand. Things I’m considering in my day to day job are:

  • How we can use Cloud platforms such as Infrastructure-as-a-Service, Platform-as-a-Service, and Software-as-a-Service to either reduce our Cost-to-Serve (or Opex), and gain agility in our ability to deploy new technologies to meet the needs of the organisation;
  • How we can deploy mobile technologies to deliver better customer experiences, or to increase the safety of our employees, using tools such as Google Glass;
  • How we can start to process large amounts of customer information using big-data technologies such as in-memory databases to create insights into customer behaviour;
  • How we can take advantage of social channels like Twitter and Facebook, and integrate those into our Customer Relationship Management system, so we have a unified way of responding to customer interactions through multiple channels;
  • Understanding the cultural impacts of technology and their vendors, as we gain a better understanding of our SAP ERP and CRM platform.

I’ll be doing the course mostly from the privacy of my own apartment in Wellington. Occasionally I’ll be doing it from my desk at work throughout my lunch break, but typically I reserve the 9pm-12am slot of time to course work throughout the week.