Tag Archive | technology of the week

Team 8: ToW Coursera & Duolingo

For our technology of the week assignment, we studied two innovative business models, namely; Coursera and Duolingo. The reason we chose to focus on these companies, is because we were extremely interested in how the rise of the Internet has enabled the democratisation of education; a phenomenon that may revolutionise the education system entirely. The Internet has been regarded as “the world’s largest library” (Becker 1999) as it has enabled individuals to access an enormous pool of information on millions of topics. Furthermore, individuals are able to personally add to that knowledge in the forms of comments, personal blogs or vlogs. Much like we are all doing on this blog now!

The accumulation of an abundance of websites that contain educational content, and geographical, physical and demographical constraints that individuals face have been the driving forces for the creation of alternatives to traditional classroom-taught methods. In turn, these events have paved the way for online platforms and applications that are considered, effective, efficient, user-friendly and in most cases, free. The rise of these newly founded companies, has inspired the development of various business models that can create value for society. In this report, we discussed two innovative business models in online learning, represented by two companies that operate in slightly different areas; Coursera, in higher-education, and Duolingo in language learning. Based on our research, we created two business model canvases to describe the firms.

Coursera Business Model

Coursera Business Model

*Adapted from businessmodelcanvas.com

Duolingo Business Model

DuoLingo Business Model

*Based on information from duolingo.com

There were a few points that stood out the most to us while researching these firms.

Sustaining a Free Offering

The fact that both Duolingo and Coursera provide a free offering makes them quite unique, yet it also complicates the financial sustainability of the firms. Both firms still rely heavily on investor funds. Investors are generous with their investment due to the nature of the industry and the social benefit of the service these firms offer, however, the firms will not be able to rely on these funds forever, and investors will want to see a return on their investments in the near future.

Business Networks

A second interesting point that can be made is the use of business networks. Coursera relies on them, as their partnerships with universities are a main driver for their success and reputation. The risk that can be identified here is that if Coursera continues to grow, universities may no longer be interested in subsidising the platform, especially if MOOCs threaten to replace university offerings. Duolingo also recently started making use of business networks, as it partnered up with Uber. This promises to be a great source of new business and revenues for Duolingo.

 MOOCs: A Hype?

Whether MOOCs are over-hyped remains unclear. For instance, one of Coursera’s founders, Koller (205) states that MOOCs are currently emerging from the trough of disillusionment in Gartner’s hype cycle. The New York Times (2012) referred to 2012 as the ‘year of the MOOC’. It was said that MOOCs had the capacity to entirely overtake educational institutions. However, this did not happen and the success of MOOCs has not diminished either. Coursera has seen steady increases in both user numbers as well as active user numbers (Koller 2015). Furthermore, Google Trends contradict the hype as well. MOOCS have proven to be a complement to university classes as opposed to a threat, many lecturers use a combination of online videos and class discussions and presentations to maximise student learning (Ulrich 2014).

 Disruptive Innovations

MOOCs cannot be considered to be a disruptive innovation, as they are not revolutionary and work as complements to traditional university offerings. Furthermore, MOOCs are not able to replace the true essentials of universities, such as being part of a community, building a network and the true university experience (Terweich 2014). On the contrary, Duolingo can erupt the market and become a strong language learning provider as well as being a complement to schools and universities. This is the case because Duolingo is not a MOOC, it has entered the online educational market as well as the (educational) gaming market. The latter is still a blue ocean, and as a first-mover Duolingo has a great competitive advantage (Shapiro 2015).

Technology of the Week “B2C e-commerce”: The future of shopping

deprives-you-of-tangibility

Since the rise of the internet in our everyday life, a lot has changed. Firms had to revolutionise their product strategies, adapt to a whole new 4Ps conception, and serve a whole new platform of markets, namely e-markets. The trend of e-shopping was then introduced in order for firms to increase sales via the e-commerce channel. This lead to further innovations in order to contrast the vicious competitive environment of e-markets, while trying to transfer the in-store shopping experience directly online. With that being said, this article will introduce two new emerging technologies that are involved in the realistic transition between in-store and online shopping through Augmented Reality (AR).

Social Shopping

Social shopping is an e-commerce methodology bridging social media and online shopping together. Social media impacts the shopping behaviour in a way in which other people like friends, family, bloggers and celebrities recommend and suggest certain products and services to the consumers. The idea behind a social shopping website is that it provides the potential customer with blogs and virtual communities to help him in his decision in buying consumer goods and services. This is achieved by the average consumer share his shopping ideas, exchanging opinions on products, and recommending one another on what to buy and what not to buy.

A research on social shopping in 2010 found out that consumers’ trust in product recommendations had not only a direct and significant positive effect on their purchase intentions, but also a strong indirect positive effect on buying the product from that specific website where the information was originally found. The intention of a consumer to purchase a good directly from the website could in that case directly be affected by the trust in the website, thus creating an incentive to build a online shopping platform (Yu, 2010).

To better understand this, we used Shopcade as an example to analyse the technology further, and base conclusions.

shopcade

Shopcade is a website and mobile app that creates a community of fashionistas and allows anyone to easily purchase the items that they see posted. The site has two main sections: the trending section and the feed section.

The trending feed is curated by the app itself. This means that it is a section with content posted only by the Shopcade team. This content comes usually in the form of blog posts regarding different fashion trends, whether it is for clothing, accessories or other items (for example, one post gave the most recent trends in duvet covers). Being a content provider as well as a service provider definitely adds value for the customers of the company. On the other hand, the feed section contains content created exclusively by bloggers and members of the community. This adds even more to the social aspect of Shopcade, giving a very Instagram-like feel to the whole social experience. This is what Shopcade does successfully. It actually created a situation where online shopping offers an experience that would be awkward to achieve in the store.

Below, the SWOT analysis of Social Shopping can be observed. It is directly applicable to the case of Shopcade.

Schermata 2015-09-24 alle 18.43.52

When it comes to their revenue model, Shopcade offers nothing new. As can be expected from such a business, they make money from affiliate marketing and sales. This means that they receive commission for all the purchases made from their website. In addition, some brands want more exposure, which requires them to pay more money to Shopcade.

Virtual Fitting Room (VRF)

Fitsme-has-built-a-virtual-fitting-room-platform-that-can-be-easily-integrated-onto-the-sites-of-online-retailers.

VRFs are the online substitution of in-store fitting rooms. It is available on PC-laptop and mobile devices. VFRs rely heavily on Augmented Reality (AR), which employs specialized software and hardware to merge the digital and the physical worlds by immersing digital information into real video to generate persuasive looking scenes in real-time. Personal measurements can be included online to allow the framework to build a 3-D avatar of the customer fitting the item. It’s built on a three-step algorithm: it builds/scan the user body through data measurements (size, width, length…), reference points (i.e face and figure) via AR, and finally, it builds the avatar incorporating the clothes on a superimposed 3D image.

Software companies such as Virtusize, Fits.me and Clothes Horse have all adapted this new technology providing it to big retail companies, attempting to tackle the fit challenge with a range of technology-based solutions, from “morphing mannequins” to size recommendation engines, all with the goal to simulate the physical fit and sizing experience (G. Randall, 2015).

Often enough shoppers complain about long waiting lines in shops and poorly set up fitting rooms. Conditions such as terrible lighting and a lack of space in the room tend to dominate the endless list of complaints. The slow but steady introduction of VFR has revolutionised the shopping industry, specifically the e-commerce aspect of it.

Using VRFs could actually increase the pleasure of shopping in many ways. Firstly, there is no hassle of having to physically put on several different clothes. The ability to take pictures whilst “trying on” these clothes means that customers can easily compare outfits. Furthermore, many side-menus can be added into the technology, this would be up to a firm to research what sort of features its customers need when trying on clothes. Some great features that many shoppers and experts posted include the ability to like and dislike garments, save pictures of outfits for later, see reviews and prices of products, as well as the ability to call in real-time service (LinkedIn, 2015).

Below, the SWOT analysis of Social Shopping can be observed, applicable to every aspect of the VRFs. As it can be observed, it is filled with opportunities leaving thoughts and space for improvement.

Schermata 2015-09-24 alle 18.53.09

Future perspectives

With the VFR component only, the customers missed the social element of shopping. On the other side, the current social shopping services do not offer a developed VFR experience yet, making a visit to the store easily a necessity. We believe these technologies will merge together as the result will provide an improved customer experience. In the future those various digital resources – VFR and Social Shopping included- will be combined in an overall bigger market. Indeed, as someone will be shopping from his home -trying out clothes through the VFR system-, the person will be able to ask the opinion of a friend or a shopping assistant; involving social shopping (IBM, 2010).

The combination of those two technologies presses the question whether physical retail shops will exist in the future. It seems not to be a question of “If” but “When” physical stores will become obsolete. The reader should ask himself in how much time this change would have taken place: 5, 10, 20 years? It is difficult to say. Humans tend to think linearly, however the rate at which technology imposes itself on the world rather corresponds to an exponential curve as Ray Kurzweil and the institution of Singularity University (2012) are professing.

Sources:

Yu, K.-L. H.-C.-Y.-P. (2010). Antecedents and consequences of trust in online product recommendations”, Online Information Review.
Randall, G. (2015). Fashion ecommerce: are virtual fitting rooms the silver bullet?. [online] Econsultancy. Available at: https://econsultancy.com/blog/66058-fashion-ecommerce- are-virtual-fitting-rooms-the-silver-bullet/ [Accessed 18 Sep. 2015].
LinkedIn (2015). Virtual changing rooms will revolutionize fashion retail [online] Available at: https://www.linkedin.com/pulse/virtual-changing-rooms- revolutionize-fashion-retail-moles-mba

Team 13:
Claudio Corti
Maximilian Wiedmaier
Alex Furnica
Maxim Gggurevic
Paul Grandjouan

Technology of the week – Amazon Dash and HelloFresh

In our technology of the week project we took a look at two services that target the “modern day’s customer” who demands to get things done fast, with as little trouble as possible, in a convenient and as much as possible fun way.

When watching the commercials (below) of both HelloFresh and Amazon Dash it really stands out much they resonate with what bothers the customer. They build their messages on how they provide solutions to the pains of everyday busy people. Both services aim to make a task that is a regular and time consuming part of everyday life  “easy” or “simple” (Their taglines are extremely similar: “Cooking made easy” and “Shopping made simple”)

HelloFresh, a three year old start-up, which currently operates in seven countries (the Netherlands being one of them) promises to give customer everything that they need for a delicious, healthy, home-made dinner except the chef. They create easy step-by-step receipt, select organic, seasonal ingredients from local providers, and send the exact amounts needed from those ingredients for a meal that can be ready in a maximum of 30 minutes. Apart from the convenience piece HelloFresh also builds on the very common desire of today’s customers to eat healthy and on the environmental friendly packaging and recycling trend. They use word of mouth in an extremely smart way by on one hand providing customers and their friends discounts if they start using the service based on recommendation and on the other hand encouraging the users to share their ready meals on social media. HelloFresh operates in a market where the bargaining power of the buyer is high and of the suppliers low, where – the threat of new entrants is high, given the low barriers to entry, and the lack of switching cost, and last, but not least, where the threat of substitutes is also high so the number of competitors is high and that is one of the reasons why they build a loyal community of customers. After certain amount of meals cooked with HelloFresh users get certificates, can attend breakfasts and dinners where they get to know the providers and share their opinion about the receipts and ingredients.

Amazon Dash is the newest innovation of Amazon, it is a wand with which customers can scan the barcode of anything that runs out in their household or simply just say the missing item “into” the device. These orders are automatically recorded in the user’s AmazonFresh account and once the customer clicks approve it is delivered within 24 hours. In very simple words the Dash ’s promise is that you will never run out of morning coffee or toilet paper ever again. When providing this service Amazon builds on it’s reliable brand, extremely streamline processes and more than 20 years experience in online shopping. On the long run Amazon’s goal with the Dash is to completely eliminate brick and mortar stores and moving shopping entirely online.

Despite being quite different at first look the Amazon Dash and HelloFresh target almost the same customer segment, and both the channels in which they reach their users (delivery and online platforms), their key activities (finding and managing suppliers, storing perishable goods, delivering) key resources (drivers, carriers, packaging, IT systems) and basic cost structure are comparable. Even in their value proposition they both aim to create a convenient experience and save time for their customers, their main difference lies in what exact problem they want to solve for their customer: making it possible to cook home healthy food without the hassles around cooking or never running out of the basic groceries and never forgetting anything during shopping again.

Both have a strong market presence but while HelloFresh has many similar competitors, the Dash has no direct competitor currently. Amazon Dash and HelloFresh work with a business to customer model currently and have the potential to expand to the business to business sector. Although the discussed business models are both innovative, have the potential to decrease or almost eliminate the importance of brick­ and­ mortar stores and change the relation we have to shopping, the Amazon Dash has potential to do even more than that and disrupt whole sectors in the future.

Authors: Group 15
Ekaterina Marinova – 436554
Anargyros Michaletos – 436750
László Nedeczky – 416837
Lina Nota – 440733
Gabriella Pimpão – 437021

Technology of the Week: Ordering your food online: Jumbo pick-up points and HelloFresh

In the 20th century, during the internet bubble, there was a lot of doubt about the role of the internet. People had the idea that brick and mortar locations would become less and less important. Nowadays people buy their groceries online which makes it much faster. An important question to ask ourselves should be, if this new formula for the food market could be successful?

In the Netherlands, the electronic food market is quite innovative. This blogpost focuses on the business models of two innovative firms; Jumbo e-commerce (Pick Up points) and Hello Fresh. Jumbo pick-up points are chosen instead of AH online ordering, due to the successful profit formula Jumbo uses and their market leadership with pick-up points.

Jumbo Pick-up Points
Jumbo, founded in 1921, is a supermarket chain operating in the Netherlands with over 500 stores and is currently the second largest supermarket chain in the Netherlands with a 20.6% market share as of 2014. Since 2014, Jumbo started operating online with several options within its innovative model. First of all, people can choose to pick it up at ‘Walk-in Pick Up point’ in local stores, avoiding queues. Secondly, Jumbo introduced the drive-through at several stores. Lastly, Jumbo created ‘Solo Pick Up point’ for customers who travel a lot by car. Jumbo uses their success formula for every physical and now digital store(s):

Best service + Biggest assortment x lowest prices = Jumbo.

Hello Fresh
HelloFresh was founded in 2011 in Germany by two guys looking to stir up the way people purchase and prepare their meals. Their idea involves people visiting the HelloFresh website where they can order healthy and simple meals of their choice from numerous different recipes. Currently, HelloFresh serves 4 million meals per month, spread over 7 countries. The revenue model that HelloFresh employs is a relatively simple one that is subscription based.

Comparison
The first similarity between the two business models is defined by their incentive; both make it more convenient for the customer to buy their groceries. Secondly the market opportunities, HelloFresh and Jumbo operate both in the electronic food market, which is expected to grow to a 5% share of the total food market by 2015 and 20% by 2020. Jumbo is currently the market leader in pick-up points which gives them an advantage. On the other hand, HelloFresh boosted themselves with aggressive marketing tactics, which gave them a positive brand name.

Conclusion
Both Jumbo and HelloFresh operate in the e-grocery market, but via different business models. Although Jumbo was not the first to enter this market, they have established themselves well by being market leader in pick-up points. HelloFresh, is also an innovative concept, but easy to copy. They will have fierce competition, and will need to overcome this by having a sound strategy. It will be interesting to see how these companies will operate in the future and what innovations they will make.

References
Impact online food retail. food-circle.nl. Retrieved 15 September 2015, from
http://uk.businessinsider.com/e-commerce-disrupting-huge-grocery-market-2014-12?r=US&IR=

Smal, E. (2015). Jumbo gaat boodschappen nu ook thuisbezorgen. nrc.nl. Retrieved 13 September 2015, from http://www.nrc.nl/nieuws/2015/08/25/jumbo-gaat-boodschappen-nu-ook-thuisbezorgen/

Insights (2015). Visie op Supermarkten – Insights. Retrieved 13 September 2015 from
https://insights.abnamro.nl/visie-op-sector/2014/visie-op-supermarkten/

Emerce.nl (2015). Emerce.nl – Jumbo Supermarkten opent Webwinkel Jumbo.com. Retrieved 14 September 2015, from http://www.emerce.nl/nieuws/jumbo-supermarkten-opent-webwinkel-jumbocom

HelloFreshGroup,com (2015). Welcome To HelloFresh. Retrieved 13 September 2015, from
http://www.hellofreshgroup.com/

Gorczynski, T., Kooijman, D. (2015), The real estate effects of e-commerce for supermarkets in the Netherlands, The International Review of Retail, vol 25: 379-406.

Team 20
Daan van Amelsvoort   – 370068
Daan van der Vleuten – 437197
Stefan Bouts – 440300
Rick Vrouwenvelder – 419282
Bram van der Doelen – 374642

Technology of the week: Apple Music vs Spotify

Apple Music vs Spotify

Introduction

With the advance of technology, the world has entered a digital society. The inevitable shift to digital music forced the industry to seek new business models. Legal downloads became available with the launch of iTunes in 2003 and a decade later subscription-based “pay-to-stream” services emerged. The streaming services made a large impact on the industry. With Spotify being the current market leader with 75 million users and Apple Music the latest entrant and a serious competitor, a new battle for market share developed. This article will provide an analysis and future prediction of both companies.

Business models

Spotify uses the so called freemium model, which offers free service with additional features that can only be utilized once someone has subscribed to a premium account. In order to also generate revenue from its free users, Spotify occasionally inserts audio advertisements that cannot be skipped. Unlike Spotify’s freemium model, Apple Music uses a free-trial model, meaning that after the free-trial period users are required to pay a monthly subscription fee to make use of the service. Apple Music is trying to offer an all-in-one solution to music lovers and therefore tries to make the monthly cost seem negligible.

SWOT & future prediction

The defining key trend in early 2015 in the global music market is the continued surge in consumer uptake of streaming services. This uptake of streaming services drives subscription to listen to music. On top of this, there is a substantial untapped potential for growth within the paid-for category. So we can say that Spotify and Apple Music are competing in the right market.

At the same time, the streaming market entered a new phase of growth. In a few years a lot of big players entered the market (e.g. Google, Apple, Amazon and Tidal). The near future of this market will cause intense competition between those companies. For Spotify and Apple music to win this fierce battle, a few key trends are extremely important:

– Revenue model and artist royalties. People will choose the service with the most and the best artists. One important factor to attract the most and the best artists is to have a revenue model that is considered to be fair according to the artists. Due to Apple’s subscription model, we expect that they will be more successful in attracting artists than Spotify.

– Partnerships. In order to accelerate the growth of their customer base, they have to form bundled offers with telecom companies and make exclusive deals with artists and labels. It is hard to predict who will be most successful in this area.

– Competition on curation. Surfacing songs and editor recommendations that are tailored to the listener’s taste is key to customer retention. We expect Apple Music to have the best tech team to be able to outperform Spotify in the future on curation.

Another factor that can’t be left unmentioned and can play an important role in gaining market share in this rapidly developing market is the brand community of Apple.

After the analysis of both companies and taking into account their future potential, we believe, that Apple Music will be the most profitable on the long term.

Group 5

Sjaak Meeuwsen – 437156

Claude Zwicker – 437277

Yinuo Jin – 373227

Hidde van Heijst – 436800

Ruud Schippers – 441698

Say goodbye to job security

Introduction
Have you ever dreamed of being your own boss? Well, maybe we will all be forced to become entrepreneurs of some ilk if these new electronic (auction) freelance markets become the norm for hiring new staff. For our (team 24) technology of the week discussion we decided to dive into a complicated area, namely that of electronic markets for freelancers. What explains the emergence of these electronic freelance markets? Who are the key players in this game and what do they do differently?

Grounded in theory
The emergence and growth of online markets are driven by the electronic brokerage effect, among others (Malone et al., 1987). Our selected companies, Elance-oDesk and Freelancer.com, are prime examples of the brokerage effect. These electronic markets reduce search costs of finding a match between labor supply and demand due to a decreased need for intermediaries and the creation of an open channel between players because all the information required to reach a ‘purchase’ decision is readily available through better information technology.

We see that these electronic (auction) markets reduce seller uncertainty due to the implementation of systems governing perceived trust and reputation levels (Dimoka et al., 2012), such as feedback text comments, ratings, and similar information signals. The biggest threat to electronic markets is, however, product uncertainty as part of the information asymmetry present in electronic market economies. Buyers are unaware of the hidden defects of the ‘product’ (i.e. person they are considering for a project) due to description uncertainty and performance uncertainty (Dimoka et al., 2012), which influences price premiums negatively as uncertainty begets caution, especially when people are risk averse towards buying high-valued ‘products’.

We have therefore considered several opportunities to reduce product uncertainty, spread between two major categories: 1) efforts to reduce information asymmetry through better information signaling, and 2) the development of better information technology to reduce coordination costs. Some examples include providing third party assurances to increase perceived reputation levels, and tools to enhance the textural context to allow for greater degrees of asset specificity.

Differences?
It’s in the way they attract users. Their information signals are different. Freelancer.com has gained a lot of traction through the use of a heavily “gamified” process, while providing just enough feedback signals. The adoption of video game mechanics in value driven business processes encourages people to make continued use of the service (Luminea, 2013). Whilst Elance-oDesk provides simple metrics only (e.g. text feedback comments, ratings, search tools etc.) to help the market coordinate itself, but isn’t incentivized like Freelancer.com.

Conclusion

The freelance economy is here! At least, that’s what we might see happen in the future if these trends continue. Because of the increasing capabilities of information systems, more complex tasks will find their way to online intermediaries as the technology makes them seem less complex. The coordination costs of markets will fall due to the presence of increasingly better information technology, thus online intermediaries seem to become more attractive (Malone et al., 1987). Therefore we expect the online staffing market to increase vastly in the coming years.

Kickstarter vs. Indiegogo

In our Technology of the Week (group 25), we compare two firms operating in an Electronic Market for crowdfunding. We choose for Kickstarter and Indiegogo. Electronic Markets, or E-Markets, are virtual environments on the internet which allow individuals or firms to conduct business electronically, usually through the form of a website or smartphone application. Both companies make use of a new business model.

Indiegogo and Kickstarter are both companies that have developed a crowdfunding platform. Crowdfunding platforms give people who have an idea for a project, cause or undertaking the opportunity to present their ideas to the world on a digital market and collect money or knowledge to further develop their ideas. Crowdsourcing platforms use IT technology to make the ideas of creative entrepreneurs public to anyone with an internet connection.

So what are the differences?

Read More…

Will online-only banks change the banking industry?

Hello BIMpeople!

Our Technology of the Week will be a comparison of two different business models in the online banking industry. We critically evaluated whether the online-only bank is a viable substitute for a traditional bank that has integrated internet into its strategy and whether or not this might mean the beginning of a new banking era. Therefore, we will compare the business model of Knab, the online only bank, with the Rabobank, a traditional bank.

Rabobank
In 1895 a cooperative of farmers started collecting credits from the local community and giving out loans. This was the first foundation of what we today call the Rabobank. The Rabobank specializes in banking, asset management, leasing, insurance and real estate. Today all bank affairs at Rabobank can be managed digitally, however the option remains for customers to visit physical stores and arrange their bank accounts manually.

Knab
Knab is an online-only bank that portrays itself as ‘the bank of tomorrow’. Its striking name is derived from the mirrored spelling of the word ‘bank’. This consumer bank was introduced in September 2012 and is part of the AEGON bank N.V. group. Réne Frijters, the founder of Knab, worked for two years on the launch of the website. His intentions were to create a revolutionary concept that would change the banking sector.

We compared both the strengths and weaknesses of the two business models in the table below:

Knab Rabobank
Strengths Convenience Has lots of different products to offer
New Technologies Good CRM because they still have face-to-face contact
Economies of scale due to lack of brick-and mortar stores Brand name is well known across the country
No reputation
First mover advantage
Weaknesses Poor CRM Reputation due to Libor affair
Safety remains a large concern for online banking due to online fraud Slow moving structure
Offer limited amount of products

Conclusion

Knab and Rabobank both have different business models and a different approach towards (internet) banking. Therefore it is hard to predict if online-only banks will be the future of banking, as so far traditional banks still have more market share, and it is hard to convince customers to switch to online-only banks due to high switching costs. Based on the strengths and weaknesses it looks like in the near future traditional banks will still exist, as the growth of the online-only bank Knab is relatively disappointing.

Online-only banks seem an addition to the market, instead of a dangerous new competitor. However, since the whole world is digitalizing it is possible that in the long run traditional banks will decrease in market share and have to close some of their stores, because their costs are higher than online-only banks. This will lower the competitive edge of the traditional banks as their brick and mortar offices is what differentiate them from online-only bank. For customers an online-only bank can be a good substitute for a traditional bank if they only seek basic products and do not long for a physical store. A new business model has been introduced, but there is not enough evidence to mark the beginning of a new banking era.

~Team 14

A Comparison of Business Models of Sharing Economies (Group 1, TotW)

Bildschirmfoto 2014-09-14 um 21.24.13

An online development of growing popularity is the formation of so-called sharing economies. Companies such a Peerby and 3D Hubs are among the many new businesses that have picked up on the trend of linking consumer demand to consumer supply. Though the basic idea of these online platforms is the same, they have created very different business models and pose great examples of the possibilities of sharing economies for modern businesses.

Peerby

Aiming at the mass market, this company’s free online platform matches its users’ borrowing requests for any product, e.g. drills etc., with users that live nearby and are willing to lend the product in case they own it. This offers the consumer a way to avoid large product purchases. This is especially useful for expensive products that are used only few times throughout their life, e.g. high-pressure cleaners.

3D Hubs

This company’s online platform connects consumers that own 3D printers with those that require the service of a 3D printer. As opposed to Peerby’s customers, 3D Hubs operates in a niche market. Though the matching process is similar to Peerby’s, the company further facilitates the exchange of ideas and questions.

Revenues

A wide-spread problem of web-based companies is the creation of profit streams. As can be seen from well-known examples such an Instagram, growth and popularity do not guarantee profitability. Peerby is facing this exact problem, as it is offering a free service. Without fees, the company has no income besides the financial support received from investors and partners. In contrast, 3D Hubs charges a fee for the printer-usage with an additional 15% commission (Forbes, 2013). Peerby plans to eliminate its weakness in the near future through a novel revenue model, in which income will be created through the issuance of insurance to the lending users. With no quite comparable service available until today, the success of this innovative business model is yet to be determined.

Current Market Situation

Though currently relatively alone in their respective markets, new entrants with more profitable business models are especially threatening to Peerby. By offering advice for its users 3D Hubs is offering additional value while Peerby merely matches its members without being further involved in the actual lending process. The companies will have to ensure that they create strong enough two-sided network effects for themselves and build up a goodwill among their users in order to survive these threats.

We can see that although both businesses are built around the idea of a sharing economy and are facing similar threats, underlying business models are completely different especially with regard to their revenue models. Whether or not their offering will be enough for their survival is yet to be seen. However, with the speed of developments in the web industry it is advisable for both companies to act quickly on their weaknesses if they want to ensure their success and future profitability.

MF Akkurt, R Van ‘T Hooft, B Narozniak, MT Groenestege & M Wagenaar

This comparison was produced in light of the ‘Technology of the Week’ assignment for the course of Information Strategy.

Further reading:

Dervojeda et al., 2013: The Sharing Economy Accessibility Based Business Models for Peer-to-Peer Markets. Business Innovation Observatory Contract No 190/PP/ENT/CIP/12/C/N03C01. European Union: European Commission.

Forbes, 2013: 3D Hubs Crowdsources 3D Printing. Available at: http://www.forbes.com/sites/jenniferhicks/2013/08/27/3d-hubs-crowdsources-3d-printing/

These 8 Internet Companies Are Worth Over $1 Billion – But They Haven’t Made a Dime. Available at:
http://business.time.com/2013/10/29/these-8-internet-companies-are-worth-over-1-billion-but-they-havent-made-a-dime/

Technology of the week: Slingbox and eBooks

For this week’s “technology of the week” we have looked at two technologies that uses the internet to change the way content is provided to consumers, which subsequently effects the business models for companies in these industries. The technologies we have analyzed are the digitalization of printed media, devices that make these digital copies available to consumers and a new technology that allows a consumer to remotely stream content from devices such as dvd players, televisions, ipods and that also enables this user to remotely control the source of the content.

eBooks

Paper books have existed for about five centuries now. Since July 1971 the traditional book has got its own digital little brother: the eBook. The World Wide Web created the opportunity for libraries and newspapers to digitalize their collections and for authors to publish their own work. These ‘online’ books were still written books that had to be shipped and sent to the customer.

The real digitalization of books began in the early 2000’s, when Distributed Proofreaders began digitizing public domain books. A format for eBooks was created, and the large public got used to reading on their laptops, smart phones or electronic readers. Nowadays we can read almost any book, anywhere, anytime however we want.

An eBook reader weighs almost nothing but can carry thousands ofeBooks and documents with you. As a result, people have faster access toknowledge and sources through their own mobile library. The eBook offers the possibility to change or enlarge the font or its background color, while text-to-speech software helps people with dyslexia or vision impairment. Another feature that websites can provide is translating eBooks into another language; this automatically enlarges the potential audience and provides them with a much bigger scope.

With the improvements of recent years in mind will probably become. Lots of book shops would move more towards an e-commerce-only intermediary, with just a few EC-able intermediaries and barely any traditional intermediaries left. This could lead to disintermediation of traditional book stores and publishers. If those companies are willing to turn e-books into their new core product, it could also lead to reintermediation.

Slingbox

When Television sets were relatively new, programs could only be watched at a set time and could otherwise not be viewed, however with the introduction of technology such as VCR’s it was possible to record content and access the content at a later time. This concept is called time-shifting and removes the limitation of time. However, while people were able to view content at different times than programmed, they are still bound to the physical recording of the content and thus constrained by location. Nowadays many people are always connected to the internet and are connected wherever they go by means of Smartphones, laptops or tablets. It seems strange that, while you are always connected to the internet, the use of some types of “old” media restricted to a certain location. A technology called Slingbox is using the concept of place-shifting to solve this restriction.

Slingbox allows a user to view content regardless of time and location. By installing the slingbox device at home and connecting it to devices such as dvd-players, ipods and televisions, it allows you to not only stream content from these devices but also to remotely control the source device.

Currently content is usually tied to a content carrier. By having the same content available on any device you own, content now becomes tied to a user instead. This grants opportunities for cable companies, for example, that can offer greater value to customers by lifting constraints on locations for users.

Technology of the week: Amazon vs BestBuy

In this week’s Technology of the Week we have chosen to evaluate and compare the recommendation systems algorithm used by two of the world’s biggest online retailers: Amazon and Best Buy.

Amazon uses a recommendation platform that is unique for each customer. The recommendations are personalized for each user separately so they provide a unique shopping experience depending on the customer’s interests and preferences. The algorithm Amazon uses is called Item-to-Item collaborative filtering. The effectiveness of this algorithm is based on product grouping. Amazon builds a group of neighboring products for each product on its lists. That means that every time a customer purchases or browses a product X, items from the X neighboring group will be recommended. The question that arises is how does the algorithm recognizes which products are connected. In order to define the similar products and to form the product groups referred above, the algorithm finds items that customers tend to purchase together.  Amazon has hundreds of million products listed on its catalogs and over 30 million active customers. That fact makes recommendation a complicated procedure. There are numerous data sources that have to be mined in order to deliver quality recommendations to the users. Useful information can be provided by the shopping cart of each customer, by their wish lists, by dwell time, by the websites that users were before directing to Amazon, by demographical data, by promotional offers through e-mails and so on.  Amazon released in 2010, a feature that could prove crucial for information mining and to improve their algorithm. This is a Facebook application that enables integration of the user’s Facebook and Amazon profile. Amazon retrieves information from the users’ Facebook profiles and their friends profiles and it provides useful product recommendations for the user and gift recommendations when a friend of the social network has birthday. It also recommends products that are popular among friends, depending on the products that have purchased or liked.

Best Buy is one of the biggest electronics retailing companies. In 2009, Best Buy has introduced the semantic web in their online store in an effort to make basic store information easier accessible. Initially, semantic web was used to inform customers about the operation hours, location, and contact information for its physical stores. After the success of the store finder, the idea of the semantic web was applied to the online store. The semantic web is an extension of the web 2.0 where information is positioned in context and is linked to each other by means of formal languages, so it is understood by computers and users alike. With the integration of sematic web to online retailer shops, information can be structured beyond mere product categories. Connections between products are becoming more clear and understandable to both the computer systems and the customers, and changes in product specifications from the manufacturers are automatically updated to the online shops. The semantic web encodes all relevant features for products in RDF triples rather than simple HTML lists. The computer can understand these triples and organize them as required by the customer on a level of detail that goes beyond product categories and includes every detail and specification of the products. The costumer can, then, specify the aspects of the product that he considers essential and get the feedback of the products he was looking for, without having  to browse through product catalogs. Another feature that is possible with the semantic web is to crosslink products between categories for supplementary or related goods. In this regard it is important to notice that Best Buy can also suggest compatible accessories easily. A simple RDF triple stating compatibility on the company site spares the consumer reading and understanding about compatibility.

Each recommendation system has advantages and disadvantages. Amazon provides quality and fast recommendation to its customers by analyzing their preferences and their interests. But there has been speculation about the trustworthiness of the reviews and ratings that are highly connected to the recommendations. Amazon has been rewarding its top reviewers with free products. That’s the reason that has led people to believe that there are indulgent or even fake comments and reviews.

Best Buy enable customers to find the items they are looking for more intuitively and can compare them easily to other relevant products. But the transition from simple HTML to RDF has a high upfront cost, plus the recommendation system overemphasis on product details at the expense of other important activities (for instance product placement, or how to best utilize the data).

Since both firms have success on the online retailing market, we cannot conclude which recommendation system is better. The conclusion that we can make is that Amazon recommendation algorithms is more suitable for experience goods and Best Buy’s system for search goods, due to its effectiveness comparing and finding technical characteristics.

Group A / Team 8