Ivanka Visnjic

The Gang of Four: Acquaintances, Friends or Foes? Towards an Integrated Perspective on Platform Competition

The economics literature extensively focused on pricing and openness as key strategic choices of platforms in two-sided markets, with the ultimate goal to obtain network effects and win over direct competitors within the boundaries of a single market. We argue that, due to the business model innovations, such as platform envelopment, the platform competition today grows beyond the boundaries of a single market. To theoretically derive the competition implications of these business model innovations, we use the lens of the multi-market contact theory. Our study argues that platform competition unfolds in two distinct, though interdependent stages. At first, platform owners make business model choices aimed at attainment of network effects and enhanced user experience within a single market. At the second stage, platforms expand from their core by enveloping into neighboring platform markets, seeking to further enhance user-experience through cross-platform complementarities. Platform envelopment is likely to coincide or lead to envelopment by the platform firm in the neighboring market; these parallel envelopments lead to convergence of neighboring markets and emergence of supra-platform market, where diverse platform players co-habitate: compete, collaborate and engage in business model innovation.

From Process to Promise: Business Model Choices of Complex Service Providers

While value creation and the capture of strategic choices regarding firm boundaries, such as ‘make’ versus ‘buy’ or different forms of collaboration, have been carefully studied on the individual level from one value-creating lens at a time, their interconnections and the overall ‘gestalt’ of firm transactions and activities are just starting to enter academic discourse through research on business models. Our research on the business model evolution of 12 complex service providers points to strong interconnectedness between boundary choices; all of the firms we studied engaged in the simultaneous extension of transactions on the demand/customer side and the supply/supplier-partner side. For example, a firm moved from providing one service on an ad-hoc basis to guaranteeing the outcome associated with a number of services; to deliver this outcome, it deepened relationships with suppliers and entered into new partnerships for complementary resources. Firms configured the transaction and activity nexus – the business model – to reap value on the demand side (e.g. customer’s economies of scope) as well as the supply side (e.g. resource complementarities and transaction efficiency). This value-creating spiral comes at a price though; by extending transactions on both sides, the firm extends its accountability for a (growing) solution, while loses control over its provision to the ecosystem. We argue that firms need to set their business models so as to balance this ‘accountability spread’ while maximizing enduring sources of value on the demand and supply sides.

Servitization: Disentangling the Impact of Service Business Model Innovation on the Performance of Manufacturing Firms

As manufacturing businesses compete in an ever more competitive and global economy where products get easily commoditized, innovating by adding services to the core product offering has become a highly popular strategy. Contrary to the expected strategic and economic benefits, recent findings warn of implementation hurdles that lead to a potential performance decline, the so-called service paradox. In this paper, we analyze this paradox by disentangling the value creation and value appropriation processes of 44 subsidiaries of a multinational manufacturing firm that has been successfully developing an after-sales service business. Empirical analysis reveals that products and services act as revenue complements, thereby managing to transcend the inherent substitution of products by services. In addition, more labor-intensive services, which imply higher levels of customer proximity, further enhance product sales. Finally, our findings reveal a positive yet non-linear relationship between profitability and the scale of service activities: while initial levels of servicing result in an increase in profitability, a period of relative decline is observed before the positive relationship between the scale of service activities and profitability unfolds again. While these findings suggest the presence of initial short-term gains, they also indicate the presence of a profitability hurdle; sustainable (profitable) growth seems feasible only to the extent that investments in service capabilities are translated into economies of scale. In helping to clarify the performance implications of service innovations, our findings suggest pathways to sustainable growth for manufacturing firms.