Book Review: Mobile Service Innovation and Business Models

Current trends that shape the western economies are the growing importance of services, the need for innovation, changes in consumer and business markets, and the advancements in information and communication technology. Technological developments like the digitalization of information, the increased processing capacity of computer chips, miniaturization and increased mobility of devices, the use of sensors and location technologies, increased interoperability between services, security, and natural interfaces (Brouwman, Van den Hooff, Van de Wijngaert, & Van Dijk, 2005) enable mature architectures and platforms for knowledge sharing, collaboration, and electronic commerce transactions, anywhere, anytime.

Nowadays development of the new innovative services is an important driver for economic growth. In the book Mobile Service Innovation and Business Models, the authors present a theoretically grounded yet practical approach to designing business models for electronic services, including mobile ones. The book consists of two parts.

 Part 1 is the theoretical background for the mobile service development process such as Service innovation and business models, conceptualizing the STOF model, the mobile context, Critical Design Issues and Critical Success factors. Part 2 is practical, which focuses on some applications for the STOF method in developing new services for the mobile industry.

The STOF model discussed in the first part of the book provides a holistic view on business models with four interrelated perspectives – Service, Technology, Organization and Finance. It elaborates on critical design issues that ultimately shape the business model and drive its viability.  STOF model is the conceptual business model framework and, based on it the authors developed a business model design method. The Figure 1 below describes the STOF model.

Figure 1. The STOF model.

The authors introduced two important concepts that need to be understood while designing balanced business models. The two concepts are Critical Design Issues (CDIs) and Critical Success Factors (CSFs). The CDIs for the Service domain are Targeting, Creating Value Elements, Branding and Customer Retention. The CDIs for the Technology domain are Security, Quality of Service, System Integration, Accessibility for Customers and Management of User Profiles. The CDIs for the Organization domain are Partner Selection, Network Openness, Network Governance and Network Complexity. CDIs in the Finance domain are Pricing, Division of Investments, Division of Costs and Revenues and Valuation of Contributions and Benefits.

Critical Success Factors refer to the limited number of areas in which satisfactory results will ensure that the business model creates value for the customer and for the business network.  CSFs for creating customer value are clearly defined target group, Compelling Value Proposition, Unobtrusive Customer Retention and an Acceptable Quality of Service. CSFs for creating network value are Acceptable Profitability, Acceptable Customer Base, Acceptable Risks, Sustainable Network Strategy and an Acceptable Division of Roles.

The authors highlighted the types of mobile services, which are:

  • Information Services, which contain text, audio, graphics and video.
  • Communication and Messaging Services: SMS (short text messaging) and MMS (multimedia messaging).
  • Entertainment Services: downloading music, playing games, jokes, horoscopes, gambling and chatting.
  • Transaction Services: mobile payments.
  • Business services: mobile sales-force automation, mobile supply-chain management applications, mobile tracing and tracking, and mobile dispatching and scheduling.

All these services are studied in the Mobile Content Services Market in Finland 2012-2015 report prepared by Idean, a user centric design agency based in Helsinki. The purpose of the report is to provide an overall view on the mobile content market dynamics in Finland. Nowadays increasing share of the total online consumption is moving into mobile devices. Many of the companies and authorities that have ignored or taken only minimal steps in the first phase of the mobile services, have now implemented mobile services or have serious plans for implementations. (Idean, 2012.)

In Finland, the usage of mobile services is growing strongly. Premium rate calls, premium SMS services and application stores for smartphones co-exist today and in the near future. Mobile applications are the fastest growing mobile services, however this doesn’t transform to revenue, as many of them is free of charge. In 2011, only 6% of the total service revenue were represented by applications and mobile marketing.

The combined mobile applications market value in Finland was four million euros in 2011 (with Apple’s App Store generating 57% out of the total). Only a minor share of the applications downloaded in Finland are published by Finnish companies or organizations, which would be even worse without Rovio and Angry Birds. Games was the most popular application category within all of the viewed application stores. Total consumer spending in application stores in Finland 2011 was approximately four million euros, which represents a 152% growth over the previous year (Idean, 2012).

The total installed base of smartphones
in Finland was approximately 2,6 million and represented 37% of the total mobile device base of seven million in 2011. Smartphones are forecast to outnumber feature phones in the beginning of 2013. The tablet device sales boomed in 2011 and the total installed base was approximately 150 000 tablets in the end of 2011. The growth of smartphone and tablet device base is expected to remain strong in the near future. (Idean, 2012.)

Key phenomena and drivers in mobile space are divided into four groups:

  • Data driven service business
  • Real-time, context aware and anticipatory services
  • Unlimited media content supply
  • Mobile driven consumer business

In addition to those drivers and phenomena, there are other trends discussed in the report:

  • Booming mobile browsing
  • Rapidly changing device base (smartphone penetration)
  • Apps and banners driving the growth
  • Growing mobile marketing
  • Growing mobile payments

Text by Laurea SID students Abdalla Elbadawy and Ekaterina Zhiteneva. This blog post was created as an assignment for SID course New Service Development.

References:

Bouwman, H., Hooff, B. van den, Wijngaert, L. van de & Dijk, J. van (2005). ICT in Organisations: Adoption, Implementation, Use and Effects. London: Sage Publications.

Mobile content services market in Finland 2011-2015 (2012), Idean, Helsinki.

Mobile Service Innovations and Business Models (2008), edited by Bouwman, De Vos & Haaker, Springler, Berlin.

One thought on “Book Review: Mobile Service Innovation and Business Models

  1. With increased computing capacity, large screens and complementing software platform availability (ex. HTML 5, Adobe Air) give companies a chance to have higher customized networked applications for their smart phone using customers. These value added applications might be free but adds to the overall value of the service offering by the businesses some of the examples are – mobile banking app offered by consumer banks, content consumer app from the publishers etc.

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