patterns 118 oVerVieW Patterns Overview Unbundling Business Models The Long Tail Multi-Sided Platforms FREE as a Business Model Open Business Models context (before) An integrated model combines infrastructure management, product innovation, and Customer Relationships under one roof. The Value Proposition targets only the most profi table clients. One Value Proposition targets one Customer Segment. A high-value, high-cost Value Proposition is offered to paying customers only. R&D Resources and Key Activities are concentrated in-house: • Ideas are invented “inside” only • Results are exploited “inside” only challenge Costs are too high. Several confl icting organizational cultures are combined in a single entity, resulting in undesirable trade-offs. Targeting less profi table segments with specifi c Value Propositions is too costly. Enterprise fails to acquire potential new cus- tomers who are interested in gaining access to a company’s existing customer base (e.g. game developers who want to reach console users) The high price dissuades customers. R&D is costly and/or productivity is falling. solution (after) The business is unbundled into three separate but complementary models dealing with • Infrastructure management • Product innovation • Customer relationships The new or additional Value Proposition targets a large number of historically less profi table, niche Customer Segments—which in aggregate are profi table. A Value Proposition “giving access” to a com- pany’s existing Customer Segment is added (e.g. a game console manufacturer provides software developers with access to its users) Several Value Propositions are offered to different Customer Segments with different Revenue Streams, one of them being free- of-charge (or very low cost). Internal R&D Resources and Activities are leveraged by utilizing outside partners. Internal R&D results are transformed into a Value Proposition and offered to interested Customer Segments. rationale IT and management tool improvements allow separating and coordinating different business models at lower cost, thus eliminating undesir- able trade-offs. IT and operations management improvements allow delivering tailored Value Propositions to a very large number of new customers at low cost. An intermediary operating a platform between two or more Customer Segments adds Revenue Streams to the initial model. Non-paying Customer Segments are subsidized by paying customers in order to attract the maximum number of users. Acquiring R&D from external sources can be less expensive, resulting in faster time- to-market. Unexploited innovations have the potential to bring in more revenue when sold outside. examples Private Banking Mobile Telco Publishing Industry (Lulu.com) LEGO Google Video game consoles from Nintendo, Sony, Microsoft Apple iPod, iTunes, iPhone Advertising and newspapers Metro Flickr Open Source Red Hat Skype (versus Telco) Gillette Razor and blades Procter & Gamble GlaxoSmithKline Innocentive bmgen_final.indd 118 6/15/10 5:39 PM