Mobile business development is a category of business development which focuses on attracting new customers in the Mobile Web markets. There are large efforts being made to make innovative mobile ICT services work. Examples of these services include mobile tourist guides and shopping guides for consumers. As an emerging trend, technology and service providers combine their expertise and resources to design these services. This incorporates designing several models: the Value network, a Value proposition, a Revenue model and a Technological architecture.
Together contributors need to create a business model that forms the blueprint of the cooperating network of organisations intends to create economic value from technological innovation. Therefore, it is useful to define the different relevant issues: Customer Value of services, Organizational arrangements, Technological architecture, and possible financial arrangements.
A business model is:
- An architecture for the product, service and information flows, including a description of the various business actors and their roles.
- A description of the potential benefits for the various business actors.
- A description of the sources of revenues.
To facilitate the collaboration between the contributors, the methods can be used to act as a guideline for successful innovation during the pre-product phase. Most methods are based on the innovation prototyping method (3), which emphasizes on the balance between different viewpoints.
The relative large amount of contributing organisations in innovative ICT services has been the cause of important changes that took place in the value chain of these services. Traditionally, one company would perform all necessary activities that make the service work. Nowadays, this is often divided between specialized contributors. This invokes the creation of and ad hoc value net, which replaces the more traditional value chain. In this value web there is less hierarchy and it is more adaptable to changes in roles or contributors. There are also no restrictions on the flow of data between the value net, instead it can flow in all directions all the time.
The following definition of a value net can be found in the book “Value Nets: Breaking the Supply Chain to unlock hidden profits”, by David Bovet and Joseph Martha, John Wiley & Sons, Inc, 2000:
A value net is a business design that uses digital supply chains to achieve both superior customer satisfaction and company profitability. It is a fast, flexible system that is aligned with and driven by new customer choice mechanisms. A value net is not what the term supply chain conjures up. It is no longer just about supply, but it is also about creating value for customers, the company and its suppliers.
The value net differs from the traditional value chain in the sense that it is not a sequential, rigid chain. Instead, it is a dynamic, high performance network of customer/supplier partnerships and information flows.
Customer value of services
The Value Proposition model is used to represent the value of the service from the perspective of the end-user (Customer, Consumer). This model is often surprisingly complex for the design of mobile ICT services. This is because the characteristics are very different from physical products. The SHIP-acronym can be used to define four important characteristics of mobile ICT services (3):
- Simultaneously produced and consumed. This mean that the end-user is part of the production of content, and that the producer is also present during the transaction.
- H This means that there is a (almost) unique instance of the service made for each end-user.
- I Although the service is intangible, they are often coupled to physical products.
- P The value of the service disappears after consumption by the end-user.
A value proposition model incorporates the consequences of these characteristics into the development process. This model can be in the form of a textual/graphic model, or even a demonstration version of the proposed service. The composition of the Value Proposition forces the designers to think about different important characteristics of mobile ICT services, the FBBM method addresses the following issues in this context 10:
- Context in which the service will operate, e.g., in a ‘shopping mall’, or at the ‘office’.
- The proposed target group, e.g., ‘museum visitors’, or ‘travelling business people’.
- Added value in comparison of existing services, ‘easier to use’, or ‘gives more information’.
- Estimation of its use, e.g., ‘how often will consumers use it?’, and ‘what does it mean to the user?’.
The information about service-characteristics that are gathered in this part of the Method is usually sketched in use-cases diagrams. This illustrates the part how the proposed services would interact with the end-user.
A Revenue model is used to identify all cash flows concerning the service. These are all costs and revenues that are the result of economic activities. Therefore, the value of each activity must be measured (or approximated) using performance indicators. In the model, the cash flows can be described qualitative at first (high, medium, low) and more in detail at later stages of the development process. The model uses lines representing in- and outgoing cash flows between the value activities and the actors drawn the model. The meta-model consists of the financial arrangements, which describe the costs and the revenues of a service, using performance indicators.
The Technological Architecture model is used to give an overview of the technical functions, and infrastructure needed to provide the service. For example, the way information is stored, or content is generated and broadcast. Although will be a high-level view of the technological architecture, it can be passed to technical developers who add more detail at a later stage of the development the ICT service.
The meta model
After exploring possible or desired Customer value of services model, Organizational arrangements model, financial arrangements Model and Technological Architecture model, are finalized. This means that they take on their concrete form by actual companies and organizations. This means that the contributing organizations have to fill-in their positions in the value net and decide and negotiate the various design choices for the models.
A good mobile business development method should have a metadata model can be similar to the meta models below.
The outcome, in the form of a business model can be used to communicate an innovative ICT project outline to investors/participants. It describes the proposed value chain in great detail, because it consists of an overview of the sub models (Customer Value of services, Organisational arrangements, Financial arrangements and Technological architecture) that are balanced. In the total scope of the development of an innovative IT service, a business plan is very helpful in the decision process within the organisations of the participants.
Situational method engineering
Methods can be designed with the use of Situational method engineering. Situational method engineering can be described as the creation of an ad hoc method from fragments (method fragments) from known methods. This enables the creation of development methods to be me suitable for any development situation.
In case of mobile business development, there are methods available for specific parts of the business model design process and ICT development. Situational method engineering can be used to combine these methods into one unified method that adopts the characteristics of mobile ICT services.
The method fragments frequently used in mobile development are (6):
- Quality Function Deployment — Quality function deployment (QFD) is a structured methodology that incorporates mathematical tools used to identify and quantify customers’ requirements and translates them into key critical parameters. For a complete description of the QFD method, see this page in Wikipedia.
- Brainstorm Techniques — The FBBM method uses some brainstorm techniques known for a long time in application development. They are used in development sessions.
- Financial Analysis — The methods incorporated in financial analysis are targeted at calculating the prospects of a firm. By including financial analysis methods in a method, business can calculate important factors like the consumer-price of their services and their Return on Investment (ROI) beforehand.
Shop owners in all large shopping mall have a plan to enrich the shopping experience in their mall. They want to develop a wireless application to be used on smart phones or on PDAs, which will be made available for rent at the entrance. The application will have an informative and an entertainment component. This way, the shop owners hope that they will create added value for their customers and improve their competitiveness.
Because there are many contributors to the development of the application (shop owners, (wireless) network provider, hardware provider), the business model is very complex in this case.
The contributors have composed their interpretation of the Value Proposition, the Value Network, the Revenue model and the Technological architecture in a first quick scan. At several more sessions during the pre-product development stage, these work models were compared and balanced. This process then was repeated until all contributors are satisfied with the resulting business model. The end result is a thought through, and working innovative application that is slowly starting to generate more sales for the participants.
The museum of modern arts has become inspired by other museums to use modern technology to guide its visitors through the museum. It plans to develop a wireless application that runs on museum owned pda’s that are lent out to visitors at the entrance. The application uses gps to determine the position of the visitor and streaming video and audio to take on the role as museum guide.
The museum board has demanded the creation of a solid business model. The business model will be the basis for future decisions about the project and to explain the project to the museums donators.
The museum has found a partner for its project, a wireless Internet provider (WISP) will provide the network and hardware for the application. The WISP can use the museum for promotional activities in return.
Together they have composed their interpretation of the Value Proposition, the Value Network, the Revenue model and the Technological architecture in a first quick scan. At several more sessions during the pre-product development stage, these work models were compared and balanced. This process then was repeated until both contributors are satisfied with the resulting business model. The end result is a rich media application that is beneficial to the visitors experience and a clear display of wireless capability for future clients of the WISP.
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder TBIL.co STATX Fund.