"The profitability of digital businesses consists of generating money from the core business", Marc Sansó
14 de May de 2019
14 de May de 2019
Marc Sansó ran a new online session of the Focused Program organized by the Alumni department, entitled "Asymmetrical growth models: Uber, Google and Apple consolidate their success". The Director of the Master of International Business and the EAE Case Study Centre began by analysing Over the Top services (OTT). This acronym encompasses the concept of audio, video and other contents broadcast online without the involvement of traditional operators in the control or distribution of the content. Key examples of this model include HBO, Netflix and WhatsApp. In the Telco segment, Sansó defined asymmetrical business models as brands that burst onto the market not with the intention of generating enormous profits on the market but rather enhancing the profitability of their core business.
The Director of EAE Business School's EAE Case Study Centre drew a comparison between the traditional Telco industry and "all in one" industries, analysing how Telcos have been affected by OTTs in industries such as distribution, with the rising untapped potential of the market, and the service industries, where the market has been disrupted by business alternatives such as asymmetrical business models in decline. It also establishes a relationship between connectivity industries in which a situation similar a to commercialization pressure is happening due to the prisoner's dilemma (whether or not individuals with conflicting interests agree to cooperate).
The consultant and lecturer Marc Sansó analysed the business models generated thanks to the smart disruptive ecosystem on the iOs platform: in terms of operators, as Telcos reduce friction for iPhone companies, platforms like Netflix, EA Games, Facebook and BMW earn money, increase user engagement and generate new applications and services; accessory manufacturers create accessories and share revenue in order to access the market, while Premium users obtain prepaid services and experiences. He also gave an overview of the business models generated thanks to the smart disruptive ecosystem of the Android platform: Google, Play Stores, compatibility certificates, mobile apps, payment for technology and services, as well as users (a mass market with connected people wanting a digital experience).
In traditional models, value is created through the product delivered via an established retailer, with this value being captured through the sale of the product for money. In digital business models, value is generated when a new industry emerges and is transferred through values such as attention (Facebook), intention (Google) or data (Waze) from the core business. Profitability is achieved by making money from the core business.
Asymmetrical business models are based on transferring value between industries. For instance, Amazon has generated value through a product like Kindle, the monetization of its App Store and the ecommerce sales generated. Google has generated value with its smart devices, the Google Play platform and Wallet. In fact, Google has asymmetrically disrupted one industry after another: advertising with Search and AdWords, business software with Google Apps, mobile phones with Android, PCs with Chromebook, television with Chromecast and YouTube, electrical appliances with Nest, travel with Google Maps and Flights, wearable technology with the Android Wear system and transport with Android Auto.
Marc Sansó specified two strategies for boosting growth: diversification and asymmetrical growth. In the initial stage, he discussed launching new products such as iPad or iPhone while the second phase involves developing new markets (for instance, Netflix in the USA and UK). The third phase consists of increasing integration (such as Apple services). Lastly, the lecturer of the MBA focused on acquisition, using Amazon's takeover of Whole Food as an example and the giant's entry into the food retail sector.
In the consultant's opinion, the recipe for the digital model involves identifying accessories for a product in a new market, increasing the demand for accessories (subsidizing or using ecosystems) and grouping components together in the core business.
The Director of the MIB than gave a breakdown of how Apple has developed its devices within the iOS ecosystem: identifying accessories in a new market (mobile apps), increasing the demand for accessories (creating a developer ecosystem and Apple Store) and diversifying the core business (iOS apps only available on iDevice services, Apple Wallet and Apple Store). Meanwhile, Google has developed its devices in its Android ecosystem with the operating system and a developer/App Store system, and diversifying its core business with exclusive Google services.
Amazon Fire was the next model analysed by Marc Sansó, who looked at how it has diversified its core business model focused on ecommerce, to develop accessories such as tablets and smartphones. From that point, it strengthened its cost-per-action services for its users. In terms of diversifying its core business, Jeff Bezos's company shifted from being a marketplace to developing web services web and creating Amazon Prime. The platform has now diversified its products with hardware, company services, streaming music, publications, cloud computing sales and consumables. Amazon's latest move has been the acquisition of Whole Foods, thereby diversifying its product range and increasing its turnover.
Google, Apple and Amazon are clearly asymmetrical growth models that have nothing to do with platforms like Netfix, in which the diversification has been more horizontal. The entertainment commercializer started optimizing distribution in its initial stages as an ecommerce platform, changing the physical product format to streaming and then increasing scalability to integrate vertically and shift from being a content distributor to a generator. Netflix then succeeding in disrupting the television industry (revenue from advertisements and subscriber) and commodifying time and the location of its products. The next step for the company was to introduce Premium content and, from that point, give the company an international boost with a commitment to diversification. Now, Netflix is taking on its biggest competitor, HBO, and fighting for content exclusivity. At this stage, Marc Sansó discussed what may be the next step: "without accessories, without barriers to entry other than those that they impose themselves (producing content is very expensive). Fragmentation leads to significant losses", he explained.