Archive for the ‘General’ Category

A Digital Advisory Board – Start small, think big, move fast

Thursday, January 22nd, 2015

Recently I chaired a round table discussion with some of the best digital thought leaders in the industry co-chaired by James Humphreys of Wilton & Bain Management Solutions. Below is a summary of the discussion:

The Digital Advisory Board

Businesses face a serious digital skills gap. This gap is exacerbated for enterprises that are either outside the digital hub of Central London, or outside the locus of desirable, digital names-to-have-on-your-CV.

Just before Christmas, a group of seasoned and senior digital experts joined the WBMS Insights panel to discuss the challenges facing “Digital” in business.

So, what is digital? Digital is not simply running a website, or even having a Twitter presence. Today, digital technology pervades the whole value chain.

“Digital is business. The same principles apply, only the execution is different.”

Digital is mainstream

Digital is now clearly mainstream. Digital technology reaches all along the value chain and has penetrated deep into many organisations. For others though, there are significant challenges. If a firm is not already digital, where does it start?

The members of the WBMS Insights panel were all at relatively early stages of taking their organisations digital. They shared three, interrelated challenges:

  • The digital skills gap
  • Integrating digital and non-digital
  • Legacy versus agility

The digital skills gap

Many of the panel were building digital skills within their new businesses. The digital skills gap presents a very real problem to established industry. As James Humphreys, who leads Commercial Practices at WBMS, observed, “It is very hard for an established, but less ‘sexy’ brand or sector to hire digital natives. How do you attract someone who has grown up with Facebook or Google to join a traditionally more steady-state sector like manufacturing or transport?”
“Digital is business. The same principles apply, only the execution is different.”

If the skills can’t be hired, where can businesses go? Panellists felt that traditional consulting firms could not supply the necessary innovation: “The Big Four consultancies are steeped in established, Old World best practice. Often, we know more than the consultants about the New World.”

Equally, panellists cautioned about the inappropriate use of marketing agencies, “You can’t outsource what you don’t understand. You must have the skills internally to manage an agency.”

You can successfully outsource tactical execution, but not strategic thinking.

There is also a subtler aspect of the digital skills gap: larger projects are typically run by the most senior people … who often have the largest personal skills gap: “Many organisations underestimate the level of change in marketing over recent years and their senior teams are simply not up to skill. Too often, digital skills stop where seniority starts.”

Many organisations are looking at training or mentoring to develop digital skills at senior levels.
With knowledge transfer a key requirement, many panellists “in-sourced” the required skills, choosing to work very closely over a short period of time with one or several hands-on experts. These were typically highly-skilled individuals hired on an interim, or consulting basis, with a remit to deliver results and to transfer skills, leaving the organisation in a stronger position.

The panel discussed the current vogue for Digital Advisory Boards (DABs). While there might be a limited “halo effect” from a DAB comprising high-profile, celebrated digital champions, there is a risk that such bodies are too removed from the business – and too vulnerable to poor or incomplete information – to be of real value in driving digital change.

Integrating digital and non-digital

Should a digital team be separate from its non-digital counterparts? Some panellists had inherited this situation and the tensions it created. Some challenges are obvious, some less so.

If digital is now mainstream, how do you fold the digital team back into the main business? A separate team of digital marketers (say) is invariably viewed as the ‘sexy’ side of the business. How then do you maintain interest, skills and talent in un-sexy but vital, non-digital roles?

“You can’t outsource what you don’t understand.”

How do you prevent the digital team drawing its own not-my- business boundaries?

And, when digital offers such clearly measurable ROI, how do you defend still-vital but hard-to-measure activities like events?

Panellists felt that, other than in a small set of unique circumstances, it was vital that “digital” was no longer a separate team: “Digital is business”.

Only marketers think in channels. While the common business mantra is for a “single view of the customer”, in reality the customer wants a single view of the business.

Nor can this be any sort of digital takeover. Digital technology pervades the entire business but it cannot be the entire business. Success is coming to those who take a “Digital Plus” approach.

Digital Plus combines the best of online with great offline service, whether that is having access to the same products online and in store, or combining digital data with physical assets like Virgin Money’s new customer Lounge service.

Legacy versus agility

“Too often, digital skills stop where seniority starts.”

Digital is synonymous with agility; legacy IT systems are not. Panellists frequently wrestled with developing agile, customer-centric solutions on top of their business’s existing systems. One panellist described the challenge of using new technology to drive utility across the brand, to truly enable the customer journey.

The general approach was: “think big, move quick and be smart.”

Panellists favoured building small teams of high calibre individuals and taking a Lean Start-Up approach of quickly developing, low cost “minimum viable” prototypes. Small scale A/B testing and rapid roll-out was often the solution. Today’s technology supports fast, low-cost solutions that provide the required functionality at a fraction of the legacy systems’ cost. Many organisations are taking the approach of developing a new user interface over the top of legacy systems and then working to replace the old system piece by piece.

A good CTO, it was agreed, is like gold-dust.

“Technology is changing. It used to be that IT supported business strategy. Today, IT is shaping business strategy.”

Another important ally for change? “Get the CFO on-board.” Digital activities in all areas of the value-chain are attractive because they can clearly be measured. Legacy IT systems typically carry a huge amount of operating cost. Anything that reduces that and produces measurable results will be attractive to the finance team.

Download the whole insight paper in PDF with credits here

My journey from techie to consultant to entrepreneur to big corporate

Thursday, October 30th, 2014

Earlier this year I was very honoured to speak at the Ecommerce UK event on the future of ecommerce and multi channel at the The Royal Society in London.

My presentation was called “The Extreme Generalist” and in it I talked about my leadership journey which had at its heart my philosophy of making myself uncomfortable every day in order to constantly challenge and expand my skill set and knowledge.

The presentation is embedded above and I will briefly discuss the main points of each slide.

 Slide 1 – Extreme generalist

Before I wrote this presentation – didn’t realise how varied my career had been, I have worked in 20 different digital roles across 15 different industries.

The advantages of this variety as I see it are:

  1. Industry breadth means I can take the strengths from each industry into my own best practice mental model
  2. It allows me to join the dots between different digital departments and see the big picture
  3. I can relate to my team as I have walked a mile in their shoes

Slide 2 – A generalist with a digital specialism

I am generalist in terms of function and industry BUT a specialist in digital and ecommerce. Every single job I have ever had has been in digital and ecommerce.

There have been four distinct phases to my career:

  1. Techie – a programmer building ecommerce software, designing systems and managing servers and databases
  2. Consultant – worked with senior teams on the biggest digital challenges across a range of industries
  3. Entrepreneur – building my own business, launching products and learning how to scale
  4. Corporate – post MBA I have been running big digital teams and owning big P&Ls

Each one of these phases has really shaped my thinking and taught me very different lessons.

Slide 3 – What I think employers find interesting about my skill set

Customer: Listening to and delighting the customer, my job is to be the voice of the customer in every meeting and to do this I spend a large chunk of my working week with customers.

Trading: Hitting your trading numbers is an underrated skill in digital. It has give you a lot of credibility when asking for investment or when you require scarce resources.

End to End Experience: Working across the digital business as well as large and small companies allows you to see the big picture and make an impact across the channel quickly.

Personality: Being yourself and being authentic with the people in your team as well as resilience to bounce back from set backs can be one of the most important skills in business.

Strategy: The digital landscape can change quickly so building a flexible organisation as well as personally being curious and comfortable with uncertainty and ambiguity can make life a lot easier.

Slide 4 – Change is accelerating – Matrix and more centralisation

This slide introduced how I have seen organisations try to organise themselves to incorporate digital teams.

More matrix working
Many of the digital teams I have worked in recently have been heavily matrixed. This allows the digital teams to get ecommerce on the senior company agenda especially if you are working inside a company that has only had one channel for most of its trading history.

More centralisation
Along side this there is a trend towards fewer ecommerce teams and more multichannel teams.  Do you need multiple marketing teams, trading teams, operations teams is it not better to think about multi channel upstream? This is also a good way to take cost out of the business and create a more joined up customer experience.

Slide 5 – Ability to target customers anywhere, anytime

Ecommerce used to be simple – you had to think about only desktop users who were on the internet at home or in the office.
Now the Internet is everywhere and there are some interesting questions you need to ask yourselves.

  1. Which products should we sell on mobile versus tablet versus desktop? i.e. is it ethical to sell a loan on a small mobile screen?
  2. How do we deal with the huge additional number of logins mobile devices bring? i.e. more hardware investment
  3. How do our customer behaviours change in different channels? i.e. browsing versus buying
  4. How do we market to customers on a small screen?
  5. What about day parting? e.g. Saturday is the biggest day for loans should we talk to customers differently on Saturday?

Customers expect seamless ecommerce however delivery and last mile are still the bane of every ecommerce operation, they are slow, expensive and inflexible for customer. Customers want same day delivery at a time and location of their choosing.  This is an area I think is ripe for innovation and has not changed much since the early beginnings of ecommerce.

I think we will start to see a revolution in last mile solutions:

  1. New click and collect solutions including pop up click and collect
  2. Pick and deliver – where the customer picks their items and then has them delivered to their door
  3. Secure delivery lockers in high traffic urban areas or train stations
  4. Unattended delivery in secure boxes at customers homes – good for operational efficiency and also means customers do not need to be at home
  5. Automated delivery – such as Amazon drones, driverless delivery vehicles etc

Slide 6 – Reversing Digital to physical as a cost saving

When you spent ten or hundreds of millions of pounds on a digital platform you need to sweat the asset and have very high investment hurdle rates for projects.

Many digital platforms have had 1000’s hours of designing and testing the best experience for customers, why shouldn’t colleagues get the same experience? This is why many companies are extending their platform to transform their internal back office systems.

Using digital is also a great way to make operational cost savings – taking manual steps out of process and take cost out at the same time streamlining operations.

A final comment …

Digital will continue to disrupt business models, change industries and cause change in operating models for the foreseeable future and some argue that this change will only continue to accelerate.

How Netflix built a high performance culture

Monday, March 17th, 2014

I have recently been reading a case study of how Netflix built a culture of excellence and I wanted to share the key points that stood out:

1. Adequate performance gets a generous severance package

Netflix’s metaphor is that they are a team not a family – which means that leaders need to hire, develop and cut smartly so that they have stars in every position. There is no room for adequate people because one outstanding employee gets more done and costs less than two adequate employees.

The way that Netflix leaders identify outstanding people is with the keeper manager test:

“Which of my people, if they told me they were leaving, would I fight hard to keep?”

Anyone in your team, who you cannot answer yes to this question should get a generous severance package so a star can be recruited to replace them.

2. A culture of freedom helps talented people get more done

There are few policies and red tape around expenses, travel, entertainment and clothing and instead all employees are expected to “Act in Netflix’s best interests”.  Less process allows outstanding people more freedom to get more great work done.

An example of this is that there is no holiday tracking at Netflix, you take as much time off as you want so long as you get the job done. Netflix leaders then set a good example by taking holidays and coming back inspired with big ideas.

3. Paying the top of market salary is core to high performance

A big salary is the most efficient form of compensation – ignore perks, bonuses, options and instead roll all of these expenses into big salaries.

The goal is to keep re-baselining each person’s salary to the top of market by asking:

  1. What could this person get elsewhere?
  2. What would we pay for a replacement?
  3. What would we pay to keep this person if they had a better offer?

I would be interested to hear other people’s thoughts on how they go about creating a high performance culture. Share your thoughts in the comments section below.

Using a lean start-up approach in a company with 100,000 people

Wednesday, August 7th, 2013
Report (Before)

Report (Before)

Working in a large organisation, such as Lloyds Banking Group with over 100,000 people in a highly regulated environment, it can sometimes take a long time to get things done.

As I have a lot of start-up experience I have recently been experimenting with how a large company can start to adopt a more lean approach in order to speed up delivery times.

I started with a task with narrow scope; I wanted to redesign our weekly performance report, so that it would be more effective for stakeholders and give them the information they wanted quickly.

Here is how I went about it and the lessons we learned:

Report (After)

Report (After)

Focus a small team

It is very important to get a small team together with a range of skills and views; I love the Facebook quote that teams should be small enough to feed with two pizzas. My sense is that 2-4 people is the ideal team size.

Make sure that the team is focused, clear their diaries and make it clear that there are no other tasks to do until this one is complete.

Start with an outcome/ problem statement not a solution

People tend to move to solutions far too quickly because it feels comfortable, however it is really important to define the problem/ outcome and what success looks like.

Our outcome statement was:
“To simply and elegantly communicate whether this was a good or bad week for digital performance”

Success would be that high level stakeholders could get a snapshot of performance in less than 30 seconds while still giving a level of detail that key stakeholders required. It would also need to be fully automated and fit on one page of A4 paper.

Start fast and iterate faster

I found that it was useful for everyone to work by themselves for the first iteration, in that way their thinking is not biased by strong personalities in the room. But keep it short, the first iteration should be complete within 15 minutes, this is the ideas stage and you do not want to give people enough time to polish their ideas.

Once you have your initial ideas then each person shares them with the group. It is important that as the group leader you do not let people be overly critical with other people’s ideas, you want to encourage behaviour that feedback builds on each person’s ideas.

At this stage I like to focus on ruthless simplicity and when making trade offs I optimise for simplicity and speed. The reason for this is that before you put your ideas in front of customers then you are simply guessing what your customer’s want, it is much easier to simply ask them what they want.

We iterated and mocked up around five designs in the first hour and at the end of the hour we were all in agreement that we should start to iterate with end customers (internal stakeholders).

Collaborate with customers early in the process

We then took our idea to a wide range of customers to get their feedback and I find that it is useful to show the old and the new design side by side so people can contrast the two.

Collect all the feedback and then weight each comment based on how important the stakeholder is. You should find that trends start to emerge and even if you do not agree with the feedback then I suggest that you act on it because your customer’s know more than you do.

Build the beta version prototype

This is a step that is often missed. After you have gained customer feedback then you need to design one more prototype and then show it to your customer’s just to check that you have translated their feedback correctly.

You may need to loop back over this step a few times as you work with different customer groups.

Build the minimum viable product to get to market quickly

Once you have a general agreement from your customers (remember you will never please everyone) then build the product quickly. Up until this stage most of the work will have been done on paper, or as wireframes, so now you need to make the vision a reality.

Again I would suggest speed over perfection, build the most important features first and worry about the nice to have features later.

Develop a feedback process for future versions

Once your project is live you need to make sure you have a feedback process that allows customer’s to continually feedback as their needs change over time.

The results

The result was that using this new approach we had a new weekly pack live for our weekly performance reviews live in under a week and while the new design was not perfect, our feedback suggests that customers thought that the new version was a big improvement and we will continue to listed to feedback and improve the design over the coming weeks.

How to balance your management and leadership tasks

Wednesday, April 3rd, 2013

I am back at Cass Business School this week taking a leadership elective as an alumni. It felt really good to be back in the lecture theatre and engaging the academic grey matter.

The first lecture gave us the opportunity to unpack the differences between management and leadership, which I will cover in my next post.  During the lecture I realised that getting the balance right between management (operational) and leadership (strategic) tasks is not easy. I have had a few instances over the last few weeks where I have not been in balance one way or the other.

So it was quite timely that I recently found a simple set of questions that helps me keep track of this balance:

Leadership and Management Task Matrix

Leadership and Management Task Matrix

Operational tasks

  • Do I have the right balance between operational and strategic tasks?
  • Have I delegated appropriately?
  • Are there any tasks that I can defer or remove?
  • Do my team have the skills to pick up more operational tasks? If not what do I need to do to develop them?

Operational people issues

  • Am I supporting the individuals in my team to deliver their objectives?
  • Do I give the right amount of face to face contact?
  • Are my direct reports managing their teams appropriately (e.g. recruiting, coaching, performance management)?

Strategic tasks

  • What are the priority activities that will enable me to deliver my business plan?
  • Do I spend enough time working on these tasks? If not then why not?
  • Are my team aligned to these activities?
  • Is my strategy fit for purpose for the future or do I need to revisit it?

Strategic people issues

  • Have I created the right structure to deliver my strategy?
  • Do I have the right skills profile to deliver my scorecard objectives?
  • Am I creating a talent pipeline alongside a robust succession plan?
  • How close am I to creating a high performance culture?

I generally tend to use this checklist on a Friday evening as I review my working week and ensure that any issues are addressed for the following week.  I also find it useful to track the balance between operational and strategic tasks over time.

Evolving the business models of photographers

Wednesday, October 31st, 2012

I find it almost impossible to take good photos of my children so I thought I would leave it to the professionals and went to see an independent photographer for the first time.  I visited a photographer in North London and it was not an experience I would care to repeat anytime soon; the studio was dirty, the photos were grossly overpriced and the whole process was slow and manual.

I came away thinking that it is high time that photographers evolved their business model to provide better value and service for the customer while at the same time improving their long-term profitability.

As ever when I analyse a business model I am looking for Blue Oceans by analysing value curves and finding gaps in the current offerings.

Developing a new value curve

A high level summary of going to a photographer:

  • Time consuming. Not only do you have to take time to visit the studio for the photo shoot you have to sit through the viewing after the photos have been edited.
  • Expensive. Paying £900 for a small canvas that I can purchase independently for £50 seems like a complete rip-off.
  • Limited. As digital rights are not usually provided I am forced to chose only the products the photographer offers.

To develop a blue ocean and a new value curve I ask myself the four questions on the graphic on the right as a way to stimulate new ideas:

  • Reduce
    • Level of service – clean, efficient and professional but not flashy.
    • Range of products – fewer in-house products with the option to utilise 3rd party services to extend product offering.
    • Level of pricing – cheaper, more affordable pricing while still at high profit levels.
  • Raise
    • Speed of getting your photos – photos provided within a few hours.
  • Eliminate
    • Cost of the photo shoot – no charge for the photo session.
  • Create
    • Digital access rights – every photo provided to the customer via secure website.

High level value proposition of the new photography model

Using the ideas from the four questions above I can now articulate the proposition for the new blue ocean for photography.

The studios would be clean, crisp and modern but not flashy, this is not a premium offering.  Studios would be located in out of town retail outlets in order to negate the high rents associated with high street locations. The reason for this is that going to see a photographer is not an impulse purchase so having clients travel to the studio will not reduce the attractiveness of the offering.

Clients would pay £300 for the photoshoot which would give them full access to the digital rights for all the un-edited photos.  This is a big shift from the current model that does not provide digital rights. The customer can then use their photos in whatever way they see fit.

All the photos would be uploaded to a secure website immediately after the photoshoot, so that subject to upload speeds, the photos would be ready for the customer to download when they return home.  The photos could be shared with friends of family allowing the photographers brand to be shared virally.

Value-added services would also be provided like existing photographers such as photo editing, printing, canvasses etc.  These value-added services would be at lower profit margins that existing photographers in order to encourage a larger number of sales.  However third party services would allow customers to extend the use of their photos, for example to create personalised merchandise, websites, specialised printing.

A blue ocean in photography

Using my ideas that were generated from the four questions I have roughly modelled Richard Kerber, Venture Photography and a my proposed new model in the following value curve.

Modelling Photographers On A Value Curve

High level financials

The new model changes the profit profile of photographers. Currently there is a small loss leader fee for the photoshoot and then a huge profit on a small number of customer purchases. However it is very likely that some customers will only buy one photo or some will not buy any.

In the new model there is a large profit even on the base level packages. Up-selling, of prints or other services, will increase profits further.

Assuming that a photographer can see ten clients per day:

Old model = £30 photo shoot fee x 10 = £300

New model = £300 digital rights x 10 = £3,000

Even though the margins on the value added services are higher for the old model the probability of selling them are much lower.  These figures show that even with no value added services the new model is making £3,000 per day in revenue.


Recommendations to maximise Internet company value

Thursday, October 18th, 2012

The following recommendations have been drawn from the research targeting a range of stakeholder groups who are involved with publically listed companies.

Management looking to maximise valuation should concentrate on growing revenues not cutting costs.

While cost cutting may have some effect on market value, the data point to revenue as the dominant driver of market value for Internet businesses as a group.
Generating revenue for Internet companies takes time and many firms are heavily loss making until they find ways to monetise their traffic or assets. However by the time a company IPOs it needs to have successfully developed its financial metrics or it will be pressured by the financial markets to do so.

Know your business model and understand its specific drivers.

Whilst revenue is the dominant driver of value across the aggregated population I found that not all business models have the same drivers. With this in mind it is essential that managers understand those value drivers that most impact their business model.

Be aware that drivers change based on the maturity of the company.

The Value Driver Maturity Model suggests that value drivers move from being dominated by non-financial when a company is young, towards financial drivers as the company matures.
As a business reaches its strategic milestones it must assess whether it has moved along the maturity curve. If it has then it needs to change it focus and this should be reflected in its management-reporting dashboard. If a company fails to recognise that it is now being judged more on financial metrics this may negatively impact its share price.

B2B and Ecommerce companies should concentrate on financials.

B2B companies should concentrate on revenue to drive their market value. The data showed the market value of B2B companies is not driven by traffic at all. This is perhaps because the B2B market is smaller and transactions are typically of lower frequency and higher value.
Ecommerce companies are driven by earnings and to a lesser extent revenue, like B2B companies their value drivers are purely financial. Ecommerce companies should focus on improving their profit margins, either through increasing scale or by backward integration along the value chain.

B2C companies should focus on traffic with the long-term focus on revenue.

B2C companies are primarily driven by traffic. Therefore the mentality for new companies in these categories is to grow traffic at the expense of earnings. This means a higher degree of external investment will be required to fund the growth phase. This approach implies that breakeven may be later than for traditional businesses, as a revenue model may not be developed until a critical mass of users is established.

Low barriers to entry mean new businesses should be confident about entering the market.

I found no relationship between market value and age, which dispels the notion of the ‘first mover advantage’ producing long-lasting competitive advantages for Internet companies. The data shows that there is a good chance that new entrants are able to overcome industry barriers to entry. This is perhaps due to the fast pace of change or because customer switching costs are low.

Venture Capitalists (VCs) should look for ‘home runs’ in the Community, Content and Marketplace categories.

Business models vary in their attractiveness with some categories achieving higher median valuations. Most notably Community, Content and Marketplace have the most attractive market values. VC returns have been dominated by a small number of very large winners (Fraser-Sampson, 2010); these home runs can make or break a fund. Therefore VC funds should concentrate on funding companies with the highest-ranking business model to give them the best chance of achieving home runs. However it could be argued that focusing on the most successful categories could potentially mean competing with the most successful companies.

Investors should consider looking at traffic data when analysing opportunities.

Investors who invest in Internet companies should consider trends in traffic data especially for Content and Community categories. Especially in early-stage companies the traffic growth trajectory can be indicative of future revenue, assuming that management have a proven revenue model to convert the traffic into profit. Finding appropriate databases of Internet traffic is not easy and each database has its own advantages and disadvantages. However the benefits of utilising traffic data could give investors an edge in picking the best performing stocks.

Non-US firms might reconsider listing on a US stock exchange.

The data weakly concluded that non-US firms are not priced as favourably when compared with their US counterparts. This loosely suggests that non-US companies might be better off listing in another geography (such as Europe). However there may be other attractions to listing on the US exchanges that are not factored into the price, such as access to capital, the credibility gained from listing in the US or access to lobby or special interest groups.

Internet value driver maturity model

Tuesday, October 16th, 2012

Maturity models seem to be all the rage at the moment and as I did not want to be left out I have developed my own maturity model to model the relevance of different value drivers as Internet companies mature.

The evidence for this model come from the following trends from my research:

  • Internet companies are becoming more profitable over time.
  • For young business models (e.g. Community); non-financial drivers play disproportionate role in valuation in the absence of earnings.
  • Mature companies (public companies) are judged by whether they meet revenue and earnings targets.
From this evidence I infer that Internet companies go through phases with varying emphasis on value drivers.

Internet Value Driver Maturity Model (Harbott, 2012)

The Internet value driver maturity model shows that younger companies are judged more on traffic, whereas more mature companies are primarily judged on financial metrics.

This suggests why pre-IPO companies can command large valuations without established revenue and furthermore why post-IPO their share price falls if earnings and revenue targets are not met. Post-IPO the market has moved the company along the maturity model and thus changed the criteria on which they are judged.

For example, take Facebook whose IPO market value was high relative to its revenue figures. Since its IPO Facebook’s share price has tumbled around 50% after missing revenue targets. Perhaps becoming a public company is a game-changer in so much as the company is now being judged on its financial performance i.e. it has moved along the Value Driver Maturity Model.

Value drivers for Internet business models

Wednesday, October 10th, 2012

Analysing listed Internet companies as one homogenous group there is no doubt that revenue is the strongest predictor for Internet market value. In fact my research showed that the regression between revenue and market value had an R2 as high as 0.93.

However an analysis at the disaggregated business model level reveals another story. In fact almost every Internet business model has a variety of different drivers.

Descriptive statistics summary and interpretation

These results also highlight the usefulness of both financial and non-financial measures in explaining market valuation between different business model categories.

Interestingly some business models have very clear value drivers and others do not.

Categories with a higher proportion of B2C companies focus more on traffic than B2B companies, which seems logical. B2B firms are more transaction orientated and the quality and type of traffic is more important than the volume. In B2B firms the financial metrics were much more important than traffic.


Building a new Internet business model classification framework

Wednesday, October 3rd, 2012

After researching the current literature I found no universally accepted method of classifying Internet business models. It was also noted that classification frameworks were out of date and did not accommodate newer business models.

Therefore I developed a new classification with the following criteria:

  1. It needed to accommodate new businesses such as Facebook and cloud services. Many of the classifications were written before these innovations were developed.
  2. It should flexible enough to accommodate emerging business models in the fast moving Internet sector.

In the end I decided to combine and extend Laudon & Traver (2008) with Wirtz et al. (2010) because these were the most up-to-date classifications found.

New Internet business model classifications

The first table shows the new classification that I created with corresponding category traits and common revenue models.

Improved business model classification with characteristics

Classification rationale

The second figure hows how the categories were combined or renamed. Two additional categories, infrastructure and software, were added as they were not listed in the classifications.

Business model classification framework rationale