growing a platform business while adapting the industry phase

An exploratory case study on Billy operating the

Danish accounting industry

Philip Westerlin Roslyng Copenhagen Business School

Cand. Merc. Management of

innovation & Business Development

Master Thesis Supervisor: Maria Theresa Norn

1st of June 2016

Characters/pages: 152.032/76

Growing a platform business while

adapting the industry phase

“TheOnlyThingThatisConstant,isChange”―Heraclitus

ABSTRACT Platformbusinessesareoftencharacterizedastwo-sidedwithdistinctusergroups,butwho

needoneanotherandusestheplatformtotransact.Inaddition,theemergingphenomenon

ofplatformbusinessesoftenoperateonaneco-systemlevelwithpotentialtoimpact

concurrentindustries,suchasUberandAirbnbimpactingTaxicompaniesandHotels.

Thisthesisprovidesanexploratoryresearchintohowaplatform-basedaccountingbusiness,

Billy,experiencesgrowthontheDanishSMEmarket.Foundedinthetechnological

developmentofonline-platformbusinesses,thisthesisfinds,thatnewandemerging

accountingsystemshassuccessfullyshifteditstwo-sideduserfocusfrommainlyserving

auditorsandbookkeepers(specialists)tonowservingcompanies(end-users).Thishasthus

stirredthesomewhatconservativeandtraditionalindustryinitsentirety,whengoingfrom

complextosimpleprocessesforthebenefitoftheend-users.Therapidinnovationandend-

user-centricfocushascreatedamarket-rivalrywithemergingonlineaccountingplatforms

takingonestablishedandviceversa.Thecontextisfurthermoreparadoxicalchallenged,as

accountingplatformslikeBillyneedspecialiststogrow,butareincreasingspecialists’

redundancythroughinnovationdevelopment.

Thethesiswillidentifythedistinctcharacteristicsofplatform-basedbusinesses’inthe

contextualframeofaccounting.Thisisdonebyinvestigatingandessentiallyexplainingthe

strategicchallengesforBillyinorderto‘growtheirplatformbusinesswhileadaptingthe

industryphase’.Hereof,atheoreticalframeworkwillbedevelopedonmergingplatform

theoryandindustryphasetheory.Theoriginalframeworkwillbealteredthroughoutthe

researchinordertomatchthecaseofBilly.Thealteringiscomposedbyanalyzingempirical

datainatheoreticalcontext.

Findingspointtochallengesofapotentiallyindustryimpactbyanindustryphaseshift

towardsadiscontinuity.Combinedwithahighmarketrivalrytheresearchmakes

suggestionsonhowtoprepareBillyforsuchchallenges.Otherfindingshighlightedtheuse

ofinnovationcouldpotentiallyhelpBilly’sdisengagementfromthehighrivalry.A

suggestioninapproachingthischallengeisbybalancingBilly’swayofconnectingtheirusers

oftheirplatformona‘counselling’and‘routine-based’-workfunctioninglevel.

TABLEOFCONTENT

CHAPTER1:INTRODUCTION..............................................................................................11.2Researchquestion..........................................................................................................41.3Thesisstructure..............................................................................................................41.4Scope-&limitationsofthesis.........................................................................................5

CHAPTER2:BILLYASACASE..............................................................................................72.1Industrypresentation.....................................................................................................72.2Casepresentation...........................................................................................................8

CHAPTER3:MEHTODOLOGY&DATACOLLECTION............................................................93.1Researchphilosophy:Pragmatism.................................................................................93.2Researchapproach:Abduction....................................................................................103.3Researchdesign:Casestudy........................................................................................113.4Datacollection:Primary&Secondary..........................................................................123.5Datacollection:Reliability,Validity&Limitations........................................................16

PARTONE........................................................................................................................20

CHAPTER4:KEYCONCEPTS&THEORETICALBACKGROUND............................................204.1Platformbusinesstheory.............................................................................................20

4.1.1Thetrendofplatformbusinesses........................................................................................214.1.2Networkeffect....................................................................................................................214.1.3Switchingcosts&multi-homing.........................................................................................22

4.2Theindustryphase.......................................................................................................234.2.1S-curves&dominantdesigns..............................................................................................244.2.2IntroductiontoAfuahandUtterback.................................................................................25

CHAPTER5:THEORETICALFRAMEWORK.........................................................................265.1Structuringthetheoreticalframework........................................................................275.2Understandingthemarketlandscape..........................................................................30

5.2.1Ratingtheindustryattractiveness......................................................................................305.2.2Valuingthefirmassets.......................................................................................................315.2.3Summationofstepone.......................................................................................................32

5.3Adaptingtheindustryphase........................................................................................325.3.1Summationofsteptwo.......................................................................................................36

5.4Competingstrategically................................................................................................365.4.1Complementaryproducts...................................................................................................375.4.2Platformadoption...............................................................................................................385.4.3Networkeffects..................................................................................................................395.4.4Summationofstepthree....................................................................................................40

5.5Innovationdevelopment..............................................................................................415.5.1Ambidextrousorganization(ambidexterity).......................................................................425.5.2Userdrivencommunity.......................................................................................................435.5.4Summationofstepfour......................................................................................................44

5.6Aframeworkforgrowingaplatformwhileadaptingtheindustryphase....................44

PARTTWO.......................................................................................................................47

CHAPTER6:ANALYSIS.....................................................................................................476.1Marketlandscapeoftheaccountingindustry..............................................................48

6.1.1Industryhistoryonaccountingsystems..............................................................................496.1.2Theindustryofaccountingsystemsanditsdrivers(porterfiveforces)..............................516.1.3FirmresourcesofBilly.........................................................................................................56

6.2Thephaseoftheaccountingindustry..........................................................................576.2.1Identifyingthephase..........................................................................................................576.2.2Planningfornextphase&surroundingmarkets................................................................59

6.3Strategicdecisions........................................................................................................606.3.1Platformadoption...............................................................................................................606.3.2Networkeffects..................................................................................................................63

6.4DevelopingtheBillyplatform.......................................................................................646.4.1User-centricvs.“original”basedinnovations.....................................................................646.4.2Managingthreatsandopportunities..................................................................................65

6.5Summaryofanalysis.....................................................................................................66

CHAPTER7:DISCUSSION.................................................................................................677.1Competinginahighrivalrymarket..............................................................................697.2Theuncertaintiesininnovation....................................................................................727.3Summaryofdiscussion.................................................................................................73

CHAPTER8:MAINCONCLUSION......................................................................................75

REFERENCELIST...............................................................................................................77

APPENDICES....................................................................................................................92AppendixA:InterviewswithSpecialists–tableofcontent...............................................92AppendixB:InterviewswithBillyEmployees–tableofcontents...................................151AppendixC:BillyPresentationforSpecialist2016–tableofcontent.............................179

TableofFiguresFigure1-Thesisstructure&outline........................................................................................5Figure2-Billylogo...................................................................................................................8Figure3-Overviewoverinterviewees...................................................................................14Figure4-S-curve....................................................................................................................24Figure5-Catalystframework................................................................................................28Figure6-Structureoftheoreticalframework(Authorsown)...............................................29Figure7-Detailedtheoreticalframework(Authorsown).....................................................45Figure8-Historicoverviewindominantdesignofaccountingsystems...............................51Figure9-Portersfiveforces..................................................................................................51Figure10-Marketsharebymostsignificantaccountingsystems.........................................54Figure11-Mappingofrivalryinthecloud-basedaccountingindustry.................................55Figure12-AuthorstheoreticalframeworkwithBillychallengeshighlighted.......................68Figure13-Potentialinmarketrivalryofcloud-basedaccountingsystems...........................69Figure14-Billydifferentiationopportunity...........................................................................70Figure15-Adaptedtheoreticalframework(Authorsown)...................................................74

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CHAPTER 1: INTRODUCTION

Platformbusinesseshasoverthelastdecadesbecomeincreasinglyimportantinthe

economy(Cenamoretal.2013;Eisenmannetal.2011;Ceccagnolietal.2012).Thevariety

ofplatformsaremanyaswellasfirmsthatrevolvearoundthem.Someofthemostvaluable

companiesintoday’seconomyareplatformbased,suchasUber,Facebook,Airbnbor

Googletonameafew(Evans&Schmalensee,2016).Theseplatformsareoften

characterisedbyhavingnoinventory,andinstead,thriveononlinetechnologywhichserves

thetransactionbetweenconnectingtheiruserswitheachother.Moreover,theplatforms

areoftentwo-sidedwithadiverseuserbase.Aconstellationinwhichthetwoareco-

dependent,andwherevalueisprovidedthroughtheplatformswhenthetwosidestransact.

Platformshavehadanimmenseimpactoncurrentindustries.Uberinfluencestaxidriver

companies,Airbnbaffectsthehotelindustry,andbothhavestirredthepublicdebateabout

ethicsandgovernmentalrulesandregulations(Frizell,2014;Coldwell,2014).Inan

academiccontext,aninterestingaspectofthecurrentdebateishowtheseplatforms

competeonanecosystemlevelinsteadofonaproductbased(Sampere,2016).Itseems

thatthetechnologicalevolution,seeninthebloomingtrendonplatformbusinesses,have

createdaworldwithnoboundariesonanyindustry(Srinivasan,2016;Andersen,2015;

Accenture,2016).

ThetrendofonlineplatformshasalsoreachedtheaccountingindustryinDenmark

(Sørensen,(a)2011;Christensen,2013;Mygind,(a)2008;Mygind,(b)2008).Accounting

systemsfundamentallyfunctionasatoolforkeepingcompanies’accountinguptodate.

AndcompaniesareobligatedtoactbytheDanishaccountinglegislation(Tax,2016;Skat(a),

2016;Erhvervsstyrelsen(a),2016;Erhvervsstyrelsen(b),2016;Retsinformation,2016),

whichrulesaremanyandcanbeverycomplicated.Becauseofthis,accountingsystems

oftenoperateasatwo-sidedplatformwithcompanies/end-usersononeside,whoneeds

helpwiththeiraccounting,andbookkeeperandauditorsontheother,whocanprovidethe

firstsidewithinformationandhelp.Ihavechosentocallbookkeepersandauditorsfor

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specialistsfromnowoninthisthesis.Thereasoningbehindthis,isnotonlythatthe

understandingwillnotbelost,butmoreover,thefactthatspecialists(bookkeeperand

auditors)hasspecialisedthemselveswithinaccountancy.Infact,anentireindustryisbased

onspecialistswithinthefield,suchasPwc,DeloitteandErnst&Youngtonameafewactors

ontheDanishmarket.

Despitethehighcomplexityofaccounting,manynewonlineaccountingsystemshaveseen

thelight.Manyofthemhavecomewithanewapproachofsimplifyingthecomplexityof

accounting.Before,anaccountingsystemwouldserveasatoolforthespecialisttoperform

theaccountancy–irrespectivetothecomplexityorknowledgeneededinordertoservethe

system.Thenewapproachisbuildingonline-accountingsystemswithsuchanintuitive

interface,thatpracticalanyonewithoutpriorknowledgewouldimmediatelybeabletodo

theaccountingthemselves(Finans,2014;Boye,2014;Jensen,2013;Wittorff,2011).With

theshiftfromcomplexitytosimplicity,ashiftoffocushasfollowedfromaccommodating

specialists,toagreaterextentaccommodatingcompanies/end-users.

Fosteredmyinterest(Purposeandrelevance)

Inmyprofessionallife,IhaveworkedinDeloitteasaprojectconsultantwhereIhadclose

relationswiththeaccountingdepartment.OurclientsweretypicallySMEsandinorderto

servethemasbestpossible,weusedanonlineaccountingplatformthatwasprovidedbya

thirdcompany,hence,anaccountingplatformcombiningDeloittewiththeirclients.Here,I

gottoseefirst-handhowtheindustryworks,andmoreover,theimpactofthetechnological

developmentnewaccountingsystemspotentiallyhad/have.Firstly,thesenewsystemsomit

theneedforfinancial/professionaltermssuchasdebit/credit,whichisthemostessential

thingtounderstandinaccounting(Spec2,2016;Spec3,2016;Spec6,2016).Obviously,this

createsscepticismforspecialistsastheirprofessionisbeingdevalued.Secondly,several

onlineaccountingsystemshaveopenlyarticulatedhowtheirtechnologicaldevelopment

wouldeliminatetheneedforspecialists(Simonsen,2016;Moses,(b)2013).Thisimmediate

radicalchange,however,hasnothappenedquiteyet.Anexplanationforthiscanbegiven.

Thehighswitchingcostsandtherelativelylowcomplexitythatthenewaccountingsystems

possess,whichmeansonlyclientswithlowaccountingneedscanusethem.Toillustratethe

contradictingaspect,thesameaccountingsystemswhoarticulatedtheeliminationofneed

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forspecialistsarereferringtheirend-userstoconnectwithspecialists(Dinero,2016;Billy

(a),2016).Acontextualexplanationtothiscanperhapsbefoundinthefactthatthe

specialists,whooperateasprofessionalswithintheirprofession,havelongfunctionedas

ambassadorsfortherespectiveaccountingsystem(Riis,2014;Spec5,2016;Spec6,2016;

Spec7,2016;Spec8,2016).

Theabovedescriptionsparkedmypersonalinterestforwritingthisthesis.Thechallengefor

atwo-sidedplatformtoexperiencegrowth,butisparadoxicallychallengedbytheir

positioningwithintheindustryofaccounting.Theparadoxicalchallengeisseen,asthe

platformneedsspecialistsbutcontradictoryareincreasingthespecialists’redundancywith

everyinnovationmadebytheplatform.

Furthermore,Ifindpurposeinassistingafirmwithpracticalrelevance,whichiswhyI

ultimatelychooseBillyApsasmycasestudy.Billyisanonlineaccountingplatformandis

amongthefirst-moverswiththeintuitiveapproach.Moreover,theyareamongthosewho

havearticulatedspecialists’redundancy(Moses,(b)2013;Spec2,2016).Billymainly

focusesoncompanies/end-users,whichwillbeelaboratedoninchaptertwo.

Naturally,understandinghowtogrowaplatformhasmanyaspects.Forthisthesis,Iinclude

twodifferenttheoriesinordertogiveathoroughunderstandingofthefield.Thefirst

frameworkisthecatalystframeworkofEvans&Schmalensee(2007),whichwillalsoserve

asthestructureforthethesis’theoreticalframework.Tobetterunderstandthe

technologicalevolutionaspect,thethree-stepprocessbyAfuah&Utterback(2007)willbe

includedandmergedwithEvans&Schmalensee’.Alongsidethis,Iwillcomplementthe

theoreticalframeworkwithotherscholarsandinterestingliteratureonthefield,aswellas

presentingmyempiricalfindings.

Throughouttheexplorativeandempiricalcasestudy,therewillbeelementsofabductive

reasoning.Thedevelopedtheoreticalframeworkwillserveacombinationofplatform

theoryandindustryphase.Throughtheempiricalfindings,thecompany’sstrategic

challengesinrelationtothecontextspecifiedresearchareawillbeanalysed.Themaingoal

wasnevertogeneralise,however,onecannotargueagainstthethereofpossibilitytowards

similarbusinessesinsimilarcontext.

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1.2Researchquestion

Incontinuationoftheabovedescriptionofanexpandingplatformbusiness,thatistwo-

sided,andwhosesidesincomparisonareveryunbalancedintermsofunderstandingthe

subjectofaccounting,Iwillattempttoanswerthebeneathresearchquestion.Inaddition,

theclaimoftechnologyovertakingtheonesideisalsoconsidered.

• HowcanBillyexperiencegrowth?

Andinordertoanswertheabovemainresearchquestion,Iwillhavetoanswerbeneath

sub-questions.Thefirsttwosub-questionsrepresentthetheoreticalpart,andthelattertwo

representstheempiricalpart.

1. What are the challenges to growing a platform business?

2. What additional challenges does the industry phase create for growing a

platform business?

3. Howdo the challenges effect the case company?

4. WhatmeasuresareneededforBillytoovercomeimposedchallenges?

1.3Thesisstructure

Thestructureofthisthesiswillhaveanintroductorysection,whichwillserveasacourseof

action.Thefollowingwillbedividedintotwolargerparts,withpartonefunctioningasthe

theoreticalpart,andparttwofunctioningastheempiricalpart.Anillustrationofthe

structureisindicatedbelowinfigure1.

TheintroductionwillcontainthecurrentChapteroneaswellasChaptertwoofcaseand

industrypresentation.Chapterthreewillincludethemethodanddatacollection.Combining

thefirstthreechapterswilltherebyfunctionasathoroughintroductiontothemainthesis

in-depthinvestigation.

ThefollowingPartoneservesasthetheoreticalpart,whichwillproduceatheoretical

catalystframeworkwithafocusongrowingaplatformbusinesswhileadaptingtheindustry

phase.Thispartwillprovidetheanswersforthefirsttwosub-questions.

5

Lastly,Parttwowillserveastheempiricalpart,wherethefindingswillbeanalysedand

subsequentlydiscussed.Thiswillthenprovideanswersforthelattertwosub-questions.

Andfinally,amainconclusionwillbemade,formingananswerforthemainresearch

question

1.4Scope-&limitationsofthesis

Duetothenaturalextentofscopeforaresearchpaperlikethis,thetheoreticaland

empiricallimitationswereimplemented.

AfuahandUtterback(2007)serveaninfluentialelementinstructuringthethesis,andits

theoreticalframework.AfuahandUtterback(2007)presentathree-stepprocesstoanalyse

thetechnologicalevolutionandhowacompanyadaptsaccordingly.Theyalsoproposethe

analysisofallgivenphases,whichIwillnot.Thisisnotonlybecauseofthe

comprehensivenessofsuchanalysis,butalsobecauseunderstandingthepresentphase

wouldserveasthehighestrelevancetoBilly.Iwill,however,discussthefollowingphase,

butwillnotanalyseittothesameextentasthepresentphase.

Segmentation

Inordertoillustratethecomplexsubjectofaccounting,thefollowingsegmentswere

needed.Ihavesoughttosegmentwithoutlosingcontextoftheoverallunderstandingof

subject,whichIhaveachieved.However,onecannotarguethelossofnuanceswithinthe

subject.Again,thiswasneededduetothenaturalextentofscopeforaresearchpaperlike

this.

Figure1-Thesisstructure&outline

INTRODUCTION PARTONE PARTTWO

Researchquestionetc. AnalysisKeyconcepts

Case-&industrypresentation DiscussionTheoreticalbackground

Method&datacollection ConclusionFrameworkdevelopment

6

AlthoughBillyalsohasoperationsintheUS(Bil1,2016),thisthesiswillsolelyfocusonthe

Danishmarket.Thisisbecauseofthecomplexityoflawsetc.thatanaccountingsystem

possesses,whichhereofincreasessubstantiallywhencomparingdifferentcountries.More

thoroughresearchwouldarguablybeneededfortheindividualstudyofeachcountryin

ordertocompare.

Theoverallfocusoncompanies/end-usersneededsegmentationaswell.Inthisthesis,Iwill

focusontheSME(Smallandmedium-sizedenterprises)market.Thereasoningbehindthisis

simplyduetoBilly’ssystemnothavingthecomplexitytoservelargeenterprises.This

therebydisclaimstheimmediateimportanceforBilly.Additionally,Irecognisetheexistence

ofcompaniesthatdonotoutsourcetheiraccounting,butinsteadhaveemployeeswho

managetheaccounting.Theseemployeesfunctionasspecialistswithinthecompany,which

signifiesanothersegmentIwillnotfocuson.Thisisbecausethesegmentislargely

associatedwithlargesenterprises.Andmoreover,theoneswhodofitthesegmentofSME

willhaveanentirelydifferentadoptionprocess,havehigherswitchingcosts,andultimately,

arenotasegmentthatBillyfocuseson(Bil1,2016;Bil2,2016).TheinterestingpartforBilly

isthecouplingofspecialistsandend-users.

Ialsorecognisethelimitationaspectindefiningbookkeeperandauditorsasspecialists.I

understandthedifferencesbetweenState-authorizedauditors,auditors,bookkeepersand

thefactthatneitherauditornorbookkeeperisaprotectedtitle(Fsr,2013).Thismeans

anyoneisallowedtocallthemselvesthat.Theargumentfordefiningthemasoneunitis

baseduponthedifferentiatingamongthesetitlesaremuchmoreclearthemore

complicatedtheaccountingisorthebiggersizethecompanyhas.AsBilly’ssystemisfor

relativelysimpleaccounting,andbecauseitservestheSMEmarket,itstrengthensthe

argumentforaminimumoflossindefiningthemasspecialists.SMEsareobligatedtoreport

theiraccounting,whichtheytechnicallycandothemselves,butarenotobligatedtohave

theiraccountingauditedbyanauditor(Erhvervsstyrelsen(c)2016).

Lastly,thedifferentiationbetweencounsellingandroutine-basedworkrequiresthe

reasoningbehind.Iunderstandthedifferentiationisonagenerallevel,whichtherebycan

influencethenuancesoftheunderstanding.Irecogniseaspecialists’pricelistwillbemore

diversethantwodifferentpricesbasedonanhourlyrate.Touseanexample,thespecialist

7

mighthaveafixedpricefordoingaclient’syearlyaccounting.However,thefixedpricewill

becomputedbythelevelofcounsellingvsroutine-basedaspect.Andhereby,the

significationofdifferentiationisarguablyreinforced.Moreover,thecomprehensionofa

specialistwillthroughoutthethesisbebetterassisted.

CHAPTER 2: BILLY AS A CASE

Billyoperatesasatwo-sidedplatformwithintheaccountingindustry,wherealarge

segmentofthesetup’sindisputablefunctionsononesidewithcompanieshavingto

producetheiraccounts,andontheotherside,amarketwithspecialistsspecialisinginthe

verytopicofaccounting,ultimatelytryingtoservetheothersideofcompanies.

Asmentioned,thissetuphasexistedforalongtime,whichtherebysignifiesthereasoning

fordescribingtheaccountingindustryinordertobetterdescribeBilly,andultimately

reasoningthecontextwhichBillyoperateswithin.

2.1Industrypresentation

CompaniesinDenmarkareobligatedtoreporttheirtaxesandaccounting

(Erhvervsstyrelsen,(b)2016;Skat,2011).Theselaws,definedbythegovernment,aremany

andcanquicklybecomedifficulttounderstandfully.Thisincentivisesopportunitiesinthe

marketforsegmentstospecialisewithin,hencebookkeepersandauditors(specialists).The

abovedescriptionisnottospeakagainstspecialists’rightsorvalue-addingfoundation

towardsthemarket,butrathertoillustratehowthemarketoperates.Furthermore,are

theselawsultimatelyincentivisingtransparencywithinthemarket,whichisagoodthing.

Technologyhasthen,throughtime,createdtoolsformaintainingcompaniesaccounting,

whichspecialistshaveusedwithgreatcareandcompanieshavepaidfor(Iwillelaborateon

thisaspectinsection6.1.1–Industryhistory).Theconstantevolutionwithintechnologyhas

reachedtheaccountingsystems,andhasnowrevolutionisedthewayaccountingis

produced(Christensen,(a)2013;Svarre,(b)2009).

8

InreferencetothesegmentofSMEsandthestartingofacompany,itisrarelyaccounting

thatisthefirst-priority(Bil1,2016;Spec2,2016;Spec3,2016;Spec5,2016).Whena

hairdresser,designerorcraftsmanetc.startstheirbusiness,itisnotbecausetheyaregood

withnumbers,accountingoradministrativeworkingeneral–infact,theymightstartin

spiteofthat.Thisdescriptionisfundamentallythefoundationoftheapproachthatnew

accountingsystemshaveutilised.Theevolutionoftechnologyhasreachedalevelwhere

processeswithintheaccountingfieldarebeingsimplifiedtothelevelwherepeoplewithout

anaccountant-orauditorbackgroundcanmanageit(Jensen,2013;Wittorff,2011;Moses,

(b)2013;Simonsen,2016).Thesesimplifyingprocessesserveadditionalaspects,where

somearemorecomplicatedthanothers.Inordertoillustrate,thesimplicityexercisedby

thesenewaccountingsystemscan,amongothers,beshownbythesystematicelimination

ofusingprofessional/technicalterms.Professional/technicaltermsthatformerlywereonly

ofusetospecialists(Spec3,2016;Spec4,2016;Spec6,2016;Spec7,2016).Thismay

ultimatelydevalueoratleastcreatetheillusionofadevaluationofthespecialists.

2.2Casepresentation

“Billyisthepersonificationoftheaccounting

system”(Bil2,2016).Theirsystemiscloud-

basedandoperatesasaSaaSsolution.

Moreover,Billydifferentiatesthemselvesasan

alternativetocomplexandprofessional

accountingsystems,andfurtherenablessmallbusinessestobeabletodomostoftheir

accountingthemselveswithoutbeinggreatatunderstandingdebit/creditorotherfinancial

terms(Bil1,2016;Bil2,2016).Billy’saccountingsystemhasaveryintuitive-basedapproach

withahighfocusontheend-users’perspective(Boye,2014;Wittorff,2011;Bil1,2016;Bil

2,2016;Bil3,2016;Spec3,2016).Everythingissimplifiedinordertoforcetheusertoface

aminimumofdecision-making;incomparingBillywiththeircompetitorE-conomic,Billy-

userswouldonlyhavetousetwenty-onemouse-clicksinordertocreateaninvoice,

whereasE-conomic-userswouldneedfifty-six(Bil2,2016).Billy’scustomersaretypical

companieswithonetotenemployees,andarepreferablySMEs,withanemphasisonsmall

Figure2-Billylogo

9

firms.Thisisconnectedtotherelativelylowlevelofcomplexitythattheirsystempossesses

(Bil1,2016;Bil2,2016;Bil3,2016).

Billy’shastworevenuestreams,whichincorporatesapricingstructureadjustedtoend-

usersandspecialists,respectively.Forend-users,Billyoperatesafreemiummodel.

Specialistspayasmallmonthlyfeeperclient(account)theyoperateinthesystem,which

getscheaperperclient(account)themoretheyoperate(Billypresentation,slide21,2016).

Billyhasapproximately35.000end-usersusingthefreeversion,andanadditional7.050

payingcustomers(Bil2,2016;Billypresentation,slide5,2016).

Billycurrentlyhasnineteenemployees,whichisroughlydividedintooneCEO,a

marketing/communicationdepartmentofsevenpeople,acounsellingdepartmentofsix

people,andadevelopmentdepartmentoffivepeople(Billy(b),2016).

CHAPTER 3: MEHTODOLOGY & DATA

COLLECTION

Thepurposeforthischapteristoprovideanoverviewoftheresearchmethodologythathas

beenadoptedinordertobestservethemaingoalofansweringthemainresearchquestion.

ThemainfocusforthisthesishasbeenassistingthecasecompanyofBilly.Thishas,among

other,beendonebydevelopingatheoreticalframeworkwithmergingplatformtheoryand

industryphasewithcomplementsofothertheoristsandliterature.InthischapterIwilltry

toenlightenhowmychoicesonresearchphilosophy,-approachand-designareinterrelated

andhowtheyaffectmychoiceofresearchmethodology.Last,Iwillprovideanoverviewon

myempiricaldataandgiveacriticalperspectiveonmyuseofmethodology.

3.1Researchphilosophy:Pragmatism

Researchphilosophyrelatestothedevelopmentofknowledgeandthenatureofthat

knowledge(Saundersetal.2009).AsmystudyrevolvesaroundacasestudyIwantedto

help,Itookapragmatismapproach.Iunderstandthepossibilityofnumerous

interpretationsofgivenphenomenon’s,whichiswhymygoalwasnevertoachievea

10

definitetruth.

TashakkoriandTeddlie(1998)contendthatpragmatismisintuitivelyappealing,largely

becauseitavoidstheresearcherengaginginwhattheyseeasratherpointlessdebates

aboutsuchconceptsastruthandreality.Pragmatismistherebycentredonproblem-solving

andassessestheoryonthecriteriaofthetheoriescapacityforsolvingproblems.A

pragmatismstudyapproachshouldfocusoninterestandvalue;whichresultsshouldbeof

valueaccordingtotheresearchers’valuesystem.Pragmatismfurtherdefendsthepossibility

ofworkingwithvariationsofsources,methodsandsciencemethods,asthefreedomof

choiceprovidesthemostreliableanswer(Saundersetal.2009).

3.2Researchapproach:Abduction

Thelogicbehindthisresearchevolvedwiththedeepeningofresearch.Initially,theresearch

wasinfluencedbyaninductiveapproach(Saundersetal.2009)–theoryfollowsdata.The

investigationpriortothisthesisisarguable.However,onecannotdenymyinsightintothe

industryreasonedbymyprofessionalcareerinDeloitte.Iindisputablegainedinsightinto

howaspecialistoperates,aswellastheeffectinnovationwithinaccountingsystemshadon

them.Iwillfurtherelaborateonthisformofdatacollectionin3.4.Nonetheless,these

insightsfosteredmyinterestfortheindustryphase,hencethelinkbetweentheplatform

theoryandtheindustryphase.Essentially,laidoutthefoundationforpurposely

constructingtheinitialframework.

Theinductiveapproachisfurtherdescribedbythelessstructuredapproach,andhowit

mightrevealalternativeexplanations.Additionally,itismoreconcernedwiththecontextof

eventstakingplace,whichgivesreasontostudysmallersamplesofsubjectsinsteadof

largerones.(Saundersetal.2009)

Mythoroughresearchinvestigationopenedmyawarenessforundiscoveredaspects.

Combiningtheinitialframeworkwithempiricalfindingsandcaseanalysisshowedtheneed

fortheframeworktoevolvethroughoutthethesis.Thisaspectrequiredmetoobtainan

abductiveapproach,whichislinkedwithmovingbackandforthbetweendataandtheory

(Dubois&Gadde2002;Saundersetal.2009).Theabductiveapproachfurtherstresses

11

theorydevelopmentratherthantheorygeneration,meaningfocusingontherefinementof

existingtheoryratherthaninventingnewones(Dubois&Gadde2002).

Theabductiveapproachisseenthroughoutmyresearch.Myunderstandingevolved

throughanalysingdata,whichhasforcedmetoreturntomyinitialframeworkandmake

modifications.Myproposedframeworkendedintwointerrelatedstagemodelinsteadof

theformerfour-stage.

3.3Researchdesign:Casestudy

Thefoundationofthethesisisbasedonacomprehensivecasestudy.Themajorityofthe

datahasbeencollectedthroughsemi-structuredinterviews,whichIwillelaborateonlater

insection3.4.

Selectingthecasestudydesignwasnotbasedonresearchingexistingtheories,butbased

onresearchingthecompanywiththehelpoftheories,andultimately,supportingthecase

companyinevolvingitsplatform.

Acasestudyhasbeendefinedasagoodstrategyforresearching“particularcontemporary

phenomenonwithinitsreallifecontext”(Saunderset.al.2009page145).Furthermore,a

casestudyserveswellforsourcingmultipledatatypes,alsoreferredtoastriangulation

(Saunderset.al.2009page146).Andalthoughsomeprefermultiplecasestudies

(Eisenhardt1989),singlecasestudieshavealsobeenpreferredasthebasisforadeeper

understandingofcontextisemphasised(Dyer&Wilkins1991).Moreover,acasestudy

designevokesthepossibilityofanalysingonmultiplelevels,whichtherebylaysthe

foundationforpossiblygeneratingtheory(Eisenhardt1989).Dyer&Wilkins(1991)further

arguethatsinglecasestudiesarebetteratfocusingonthesocialsetting.Sincemultiplecase

studiescanpossiblybebiased,byfocusingonthecarefulselectionoftheminstead,which

mightbedoneinordertobetterillustratethetheoreticalconstructorpointbeingmade.

MyanalysiswilldescribetwoaspectswithBillyasthecaseandtheindustryforwhichthey

operatein.Moreover,asIultimatelywantedtohelpBilly,thetheorywillbeadaptedto

serveBillybestaspossible.Thisleadstogeneratingatheoreticalframework,whichIwill

elaborateoninchapterfive.

12

3.4Datacollection:Primary&Secondary

ThefollowingdataresourceswereusedinordertofullyaccommodatetheresearchofBilly.

Thus,thedatacollectionwasderivedfromdifferentsourcesinordertosupportthesub-

questionsandoverallresearchquestion.Primarydatahasbeenconductedthroughtheuse

ofsemi-structuredinterviewsand,whatIdefineas,“observer”observation.Secondarydata

consistsofarticles,literatureandinternetsources.Thecombinationofsecondarydataand

“observer”observationsservedthefundamentalchoiceofBillyascasestudyandthe

developmentofthetheoreticalframework.Thecombinationofprimarydatawithsemi-

structuredinterviewsandsecondarydatahasallowedtheprogressionofthethesisprocess

tobesomewhatflexible.Ithasallowedmetogainathoroughknowledgeofthefieldin

developingandredefiningthetheoreticalframeworkusedinthisthesis.

Primary–Semi-structuredinterviews

Tomakethemostoutoftheinterviews,Ichoseasemi-structuredinterviewapproach

whereopen-endedquestionswereused.Iusedopen-endedquestionsinordertoavoid

simpleanswerslike“yes”and“no”.IinterviewedBillyasthecase,andfurthermore

interviewedspecialistsworkingintheindustry,asthecontextofwhichBillyisaffectedby.I

hadfourareasofinterestbeforestartingtheinterviews,butwantedtheoftenprovided

advantagethatasemi-structuredinterviewprovides,whichisallowingnewideasetc.tobe

broughtupduringtheinterviewandthemeanstovarythequestionsaccordinglytoserve

theinterviewbestpossible(Saunderset.al.2009page320).Thefourareasofinterestwere;

(1)Interviewee’spersonalbackground,their(2)viewontheaccountingindustry,(3)useof

system/Billy’sapproachtotheirusersandtheir(4)viewoninnovationintheindustry.For

theinterviews,Iusedasemi-structuredinterviewguideasaguidelinetoensurethe

relevanttopicswhereaddressed.

Thisstudycanfurtherbecategorizedasanexploratoryresearch,wheretheemphasisison

thesemi-structuredinterviews,whichservewellforin-depthinterview.Semi-structured

interviewscanoftenbehelpfulinfindingout‘whatishappening’andto‘seeknewinsights’

(Saunderset.al.2009page322),whichisinlinewithexploratorystudies(Saunderset.al.

2009page139).

13

Ihadeightintervieweeswithspecialists,whocoveredadiversityofmanagerswithinlarge

companiessuchasBDOandVisma,andcompanieswithuptofouremployeestosmaller

self-ownedbusinesses.Theseintervieweesfurthercoveredtheaccountingroleofauditors

andauditorswithbookkeepingfunctions.Thiswasdoneinordertoreachthehighest

knowledgewithinaccountingsystemsoftheSMEmarket.ItherebybelieveIachievedthe

aimofinterviewing‘experts’withinthefieldofuseforSMEaccounting.Thisisinlinewith

anexploratorystudy(Saunderset.al.2009,page140).Bycombiningthediversityin

accountingrolesandcompanieswithprovidedanswers,IfurtherbelievethatIreacheda

respectivesaturation.IninterviewingBillyasthecase,Ihadthreeinterviews,which

comprisedoftheCEO,headofmarketingandasoftwaredeveloper.Inlinewiththeabove

descriptionofspecialist-interviews,Ibelievebycomparing,respectively,thesame

foundationof‘expert’interviewingandsaturationwasachieved.Anoverviewofthespecific

interviewscanbeseeninbeneathtable3.Inaddition,Itranscribedeveryinterview,which

canbefoundinappendixA&B.

14

Table3–overviewoverinterviewees.Name&Initials Jobtitle Accounting

functionDate&Duration

Type

ClausDyrelundJohansen(Spec1)

Manager&responsibleforOdenseandKoldingatVisma

AuditorroleApril19th,4:00P.M(19min)

Phone-interview

MetteQuottrup(Spec2)

Ownerandstate-authorizedpublicaccountantatMQRevision

Stateauthorizedaccountant

April25th,10:00A.M(54min)

In-person

DorteViborg(Spec3)

OwnerofJuelViborgRegistreredeRevisorer

Stateauthorizedaccountant

April25th,6:00P.M(38min)

In-person

ChristianLysehøj(Spec4)

Auditor&ownerofRevisorfirmaetLysehøj Auditorrole


In-person

StefanBuchHenriksen(Spec5)

TraineeatVisma TraineeApril28th,10:00A.M(33min)

In-person

Anonymous(Spec6)

ManagerofAccountingDepartmentatBDO Auditorrole


In-person

NataschaSkriver(Spec7) PartneratTasterietApS Auditorrole


In-person

JonasMartinsen(Spec8)

OwnerofJMRegnskabsservice Auditorrole

Mai3rd,8:00A.M(32min)

Phone-interview

KatrineRasmussen(Bil1)

HeadofmarketingatBilly x


In-person

JonasMidtgaard(Bil2) CEOatBilly x


In-person

HenrikTudborg(Bil3)

SoftwareEngineeratBilly x

Mail6th,9:30A.M(42min)

In-person

Figure3-Overviewoverinterviewees

15

Primarydata–(“Observer”observation)

Personally,IhaveworkedasaprojectconsultantinDeloitteforthreeyearsandserved

clientsintheSMEmarket.Iworkedcloselyincollaborationwiththeaccountingdepartment

ofDeloitte,wherealargepartofmyjobwasconvertingcompanyaccountsfromonesystem

toanother.Becauseofthis,Ihavegainedinsightintothemarketmechanismswhichhas

affectedmyviewofhowpartsoftheindustryfunctions.Iwillcategoriseordefinethisdata

informationasan“observer”observation.Atthetime,Iwasnotawarethatmyinsights

couldbeusedasdataformythesis,whichmeantIhadnounderstandingofwhattypeof

datawasneeded.Nonetheless,mybackgroundhasultimatelyaffectedandhelpedshape

thisthesis,whichiswhyitshouldbetakenintoaccount.Theconcretedefinitionsofthis

dataarearguablydifficult,andIdonotseethecollectionofthisdataasparticipant

observation.However,itcanbearguedthattheyhavesomesimilaritiesincommon.By

workingintheindustryIultimatelylearnedthe“intuitiveunderstandingofwhat’sgoingon

inacultureandallows(ed)you(me)tospeakwithconfidenceaboutthemeaningofdata”

(Bernard2006,page355),whichcanalsobereferredtoasunderstandingtheinternal

jargonoftheindustry(Saundersetal.2009).Thisservedmetodeveloprelevantquestions

towardsthedeepeningofinvestigationandessentiallyhelpedshapethisthesisthewayit

hasbeenshaped.

Secondary-articles,literatureandinternetsources

Tostrengthenmyunderstandingofthethesisresearchsubjectandtosupportmyprimary

data,Iincludedsecondarysourcesofresearch.Thisservedto‘triangulate’(Saundersetal.

2009page146)myfindings.Thesecondarydataconsistedofarticles,literatureandinternet

sources.Ontheoverallstructureofthisthesis,thebookoncatalystsbyEvansand

Schmalensee(2007)servedtoshapethetheoreticalframework.Inaddition,Afuahand

Utterback(1997)threestepprocessalsohelpedinformingthetheoreticalframework.For

wherethedeepeningofissuesathand,additionaltheorieswouldbeadaptedwhere

appropriate.

16

3.5Datacollection:Reliability,Validity&Limitations

Asinanyresearchpaperwherequalitativeresearchisused,theresearchbasiswill

ultimatelycontainseveralsourcesforbiasesand/orerrors.Toavoidormitigatethis,

differentmeasureshavebeentakenintoaccount.

Reliability

Ensuringreliabilityisadifficultissuewhenusingsemi-structuredinterviews.Thisisbecause

socialsettingscanchangeovertimeandresponsesfromintervieweesoftenreflectwhat

theyfindtrueatthespecificmoment,aswellastheinterpretationofanswerscanbe

understoodinmultipleways(Saunderset.al.2009page156).Theseareoftenreferredtoas

participanterror/biasandobservererror/bias.Inordertoreduceparticipanterrorandbias,

Iheldnineoutofeleveninterviewsinquiet,controlledsurroundingsattheirownoffices.In

choosingtheinterviewees,IsteeredaroundtheDeloitteemployeesinordertomitigatethe

somewhatsmallpossibilityofDeloittebeingdifferentthananyoneelse.However,Iwanted

toresearchinareasthathadnotalreadyprejudicedmyownview,whichinarguably,my

timeinDeloittehas.

Furthermore,Imadesurethatparticipantsknewthattheyhadfulldiscretiontoaskfor

anything,aswellastohavetheoptionoffullanonymity.Oneintervieweewantedthat.The

interviewsweresomewhatofteninfluencedbyintervieweespersonalmeaningon

retrospectiveandprospectivetopics,whichleadtodifficultiesinfullymitigatingparticipant

bias.Anexampleofthisishowspecialistsmighthavebeenprejudicedtowardsspecific

accountingsystemsbecauseoftheireverydayuseorhabits.Thistherebydoesnotreflect

themarketofaccountingsystemsinitsentirety.Whentalkingaboutchallengesto

overcomeintermsofBilly,intervieweesmighthavebeenaffectedbytheirownidealism

andpositiveassociationstowardsBillysucceeding.

Itshouldalsobementioned,howobservererror/biasoftenisreflectedinthemanywaysof

interpretingreplies(Saunderset.al.2009,page156).Thisdoesnotonlyeffectmy

interviews,butalso,becauseofmypersonalbackgroundwithintheindustry,my

preconceptionofthephenomenoncouldhaveaffectedhowIaskedquestionsand

interpretedtheoutcomes.Tominimizethis,Istrivedtokeepahighstructuretowardsmy

17

interviews,stillmaintainingmysemi-structuredapproach.Moreover,theapproachtoboth

theorizinganddatagatheringwithgoingbackandforthforcedmetochangemy

understandingofdifferenttopicswithsmallmodificationonquestionsthroughoutmy

interviews.

Validity

Thevalidityofsemi-structuredinterviewsisoftenconsideredhighlyachievable(Saunders

et.al.2009page327).

Externalvalidityreferstothegeneralisabilityofaresearch(Saunderset.al.2009page158).

Withasinglecasestudy,generalisabilitywasobviouslynotmymaingoal.Contrary,ithas

beenarguedhowhighergeneralisabilitycanbeachievedwithabroadertheoretical

significance,ifyoucanrelatetheresearchprojecttoexistingtheory(Saunderset.al.2009

page335).Therefore,Iattemptedtohaveastrongrelationwithusedtheorywithmy

processofdatacollectionandanalysis.Tofurtherelaborate,becauseofthisthesis’scase

studyofacatalyst,themarketindustryaffectedbythiscatalyst,anddataderivedfrom

here,couldpotentiallybevaluabletoothercatalysts(casestudies)operatinginthesame

industry.Morespecifically,theobtainedunderstandingofspecialistsintheaccounting

industrycouldpotentiallyserveotheraccountingsystemssimilartoBilly.Withoutthe

potentialtogeneralise,mytheoreticalsuggestionsanddevelopedframeworkcouldstill

furtheropentheopportunityoffurthertestingindifferentcontexts.

Limitations

Theoveralldatasampleofthestudyisrelativelysmall,morespecificallyforthespecialists

ofwhichIhadeightinterviews,whichisarguablyinsufficienttocapturetheheterogeneity

oftheaccountingindustry.Butassaidearlier,mymaingoalwasnevertogeneraliseabout

thepopulation,butrathergeneralisetotheorybyusing“ampleselectiontechniqueandthe

purposeandfocusofyour(my)research”(Saunderset.al.2009page233).Thiswas

reflected,asIstillachievedarespectabletheoreticalsaturation(Bernard2006page501),

whichmightbeexplainedthoughmysamplingmethodasmyrespondentssharedsimilar

traits.HadIinterviewedspecialistsemployedbyacompanyonlyservingthesamecompany

oroperatinginthesegmentoflargeenterprisesImighthadfoundwiderrangeofopinions.

18

Additionally,thepreconceptionofmystudyconcerningtheretrospectiveelementsandits

influenceonthecurrentmarketsituationmeantthatmydataandtheorisingabouthow

firmsneededtoovercomethosechallengescarriessomedegreesofsupposition.

Furthermore,Ihadpreconceivednotionstowardstheaccountingindustrybeinglockedby

rulesandlaws.Therefore,Iwashighlysensitivetobeinfluencedbynewinnovation,which

meanttheresearchcouldnotbefreefrombias.Still,thethesisdoesencompass,throughits

practicalcapability,asteppingstonetowardsfurtherresearch,eventhoughmyfindings

maynotcoverthefullpicture.

EventhoughIdescribedmybackgroundroleasan“observer”asprimarydata,I

fundamentallyonlyusedonequalitativemethodwhengatheringandanalysingdata.This

hamperedmyabilitytotriangulate(Saunderset.al.2009)withotherprimarydata.

Gatheringthedata,thefocuswasonthemesatagenerallevelwherethepurposewasto

obtainausefulnesstowardsBilly,insteadofdeterminingquantitativefactsofdifferences

andsimilarities.Quantitativequestionnairesareoftenusedwithgreatpurposeforcase

studies(Saunderset.al.2009),butIdidnotfindthemuseful,asmanyofmytopicswere

contextembedded,whichmeantthemeaningofmyquestionswouldbedifficulttoobtain

throughquestionnaires.

19

PART ONE

20

PART ONE

Thefirstpart(one)ofthisthesiswillpresentthetheoreticalbackground,whichwillbeused

inthefollowinganalysis.Atheoreticalframeworkwillbecreatedthroughoutpartone,

whichwillprovideconclusionstothefirsttwosub-questions,whichareasfollows:

1. What are the challenges to growing a platform business? 2. What additional challenges does the industry phase create for growing a

platform business?

CHAPTER 4: KEY CONCEPTS & THEORETICAL

BACKGROUND

Thischapterwillintroducekeyconceptsinformofplatformtheoryandindustryphasein

ordertopresentthechallengesemerginginbuildingaplatformbusiness.Literatureand

theoriesonbothconceptswillbepresentedwhichwillprovidethefoundationfora

frameworktobecreatedinthenextchapter(5).

Insection4.1platformtheoryanditsmainareasofinterestwillbedescribed–Thetrendof

platformbusinesses,networkeffect,switchingcost&multi-homingandenvelopment.And

section4.2willgiveadescriptionontheindustryphase–s-curves&dominantdesignand

adaptingtheindustryphase.

4.1Platformbusinesstheory

Gawer&Henderson(2007)definesaplatform“owner”asafirmthatownsacoreelement

ofthetechnologicalsystemthatdefinesitsforwardevolution.Platformbusinesseshasbeen

aroundfordecadesandmoderntechnologyhasmadeitpossibleforplatformbusinessesto

21

experienceanalmostinfinitegrowthexpansion.Itisalsoarguedhowplatformscanchange

orcreatenewecosystems,wherethemoreobviousexamplesareMicrosoftandintel

(Cusumano2010;Gawer&Cusumano2002).Thislaysthefoundationforhowonline

platformbusinesseshaveexperiencedgrowthandchangedcurrentindustriestothepoint

wherein2015“theworld’slargesttaxicompany,ownsnovehicles.Facebook,theworld’s

mostpopularmediaowner,createsnocontent.Alibaba,themostvaluableretailer,hasno

inventory.AndAirbnb,theworld’slargestaccommodationprovider,ownsnorealestate...”

(Goodwin2015).Anothercharacteristicpartaboutonlineplatformbusinessesishowthey

areoftentwo-sidedwithapotentialtobecomemulti-sided.Forsomebusinessesthiseven

opensupfortheopportunitytohaveadditionalrevenuestreams(Eisenmannetal.2006;

Hagiu&Halaburda2014).BecauseofthefocusonBillyascasecompanyinthisthesis,the

examplesgivenonplatformbusinesses,willprimarilybecloud-basedandatleastbetwo

sided.

4.1.1Thetrendofplatformbusinesses

Theriseandsuccessofplatformbusinessesthroughoutthelastdecadescanbeattributed

manydifferentreasons.Someofthebiggestreasonsarecostreductionsoncomputer

processing,storageandcommunicationaswellastherapiddistributionofbroadband.

Theseaspectshavemadeitfundamentallyeasierforplatformbusinessestoariseandhas

loweredthebarriersforscalability(Evans&Schmalensee,2007).Scholarshaveevenargued

howplatform-basedmarketshavebecomehighlyimportantintheeconomy(Cenamoretal.

2013),asplatform-basedcanperformonaecosystemlevel(Sampere,2016)andfurther

fosteractivitiesforfirmstorevolvearoundtheseplatform(Cenamoretal.2013;Eisenmann

etal.2011).

4.1.2Networkeffect

Referringtoplatformbusinesses,networkexternalitiesoftenshowsasanexampleof

increasingthevaluetotheplatform.Takingthetelephoneasexample,themorepeople

thathasatelephone,themorevaluableitbecomestoeachuser.(Park&Chung2011;Katz

&Shapiro1985)

Inonlineplatformbusinesses,itismoreoftennetworkeffectthatisbeingreferredtoasthe

wayofcreatingvalue.Onlineplatformbusinessesoftenprovideinfrastructureandrules

22

thatfacilitatetwoormoregroups’transactionsandcantakemanyguises(Eisenmannetal.

2006).Thegroupinteractingwitheachotherarefundamentallyattractedtooneanother,

whichisreferredtoasthenetworkeffect(Boudreau&Hagiu2010).Orinotherwords,the

valueoftheplatformincreasestothespecificuserasthesizeofusersgrowontheother

side.Andsuccessfulplatformoftenthrivesbecauseofnetworkeffects,andfurthermore

oftenexperienceincreasingreturnsonscale.Ithasbeenshownhowuserswillpaymorein

ordertogetaccesstoabiggernetwork,whichmeansmarginsincreasesastheuserbase

grows(Eisenmannetal.2006).Iwillinchapter5elaboratedeeperonnetworkeffects,asit

canbeagreattoolforenhancingplatformadoptionandagreatwayoncompetingwith

competitors.

4.1.3Switchingcosts&multi-homing

Thedefinitionofswitchingcostsisexplainedasacustomers’perceptionofthemagnitude

ofadditionalcostsrequiredtoendthecurrentrelationship,andsecureanalternative

supplier(Blutetal.2014).Followingtheprevioussection,wecantaketheactivityofgetting

anewphoneasswitchingcostexample.Therearenumerousfrustratingelementsingetting

anewphone-frominformingfriendsaboutanewnumbertolearningthefunctionalityof

theunexploredplatformonthephone,ortheexitfeeschargedbyyouroldoperator.

Variationofswitchingcostsaremany,whichhasledBurnhametal.(2003)todevelopa

managerialtypologyforcompaniestoidentifyandcategorizeswitchingcoststowards

consumerperception.Theseconsistsof;(1)proceduralswitchingcosts,(2)financial

switchingcostsand(3)relationalswitchingcosts(Burnhametal.2003;Park&Chung2011).

Burnhametal.(2003)furtherargues,thatthisshouldbeusedwithcare,asthesatisfaction

andswitchingcostscannegativelyinteractwitheachother.Meaning,asswitchingcosts

rise,thedegreeofsatisfactiononintentionstostaywithaprovidermaydecrease(andvice

versa)(Burnhametal.2003).Fundamentally,switchingcostscanbeusedasatoolfor

strengtheningtheproductorservice,butshouldneverovershadowthefundamentalfocus

ofsatisfactionasadriver.

Anothercentralconceptonplatformtheoryismulti-homing,whichiswhenusersononeor

bothsidesusenumerousplatformsinordertocompletetheirfullneeds(Evans&

Schmalensee,2007).Examplesofmulti-homingcouldbebothbuyersandsellersusing

23

Trendsales,DBAorTradonoasplatformsfordoingso.Heretheywillbeusingoneormore

outofconvenienceandpastexperiences.Oppositeofmulti-homingissingle-homing,which

impliesusersonlyusingoneplatform.Thesituationofsingle-ormulti-homingvariesamong

platforms,includingpossibilitiesoftwo-sidedplatformswithsingle-homingononesideand

multi-homingontheotherside.Armstrong(2006)callsthis“competitivebottlenecks”,

wherethemulti-homingsidedoesthisoutofextendedvaluethroughthenetworkbenefits,

ultimatelygivingthemaccesstothewidestpopulationontheotherside.Ontheopposite,

thesingle-homingsidedoesthistoavoidthecostofdealingwithmorethanoneplatform.

Switchingcostisespeciallyinterestingforplatformbusinesses,sincetheycanincentivize

consumersbyofferingsoftheirplatform,andthenbyusinghighswitchingcost,theycan

retaintheirconsumers(Cusumano2010).

Aswithmulti-homing,thesecosts(switchingcost)areoftenhighforoneuserside.Thisis

because“homing”costscomprisetheexpensesnetworkusersincurinordertoestablish

andmaintainplatformaffiliation.Thesecostscanbereflectedinadoptionoftheplatform,

functionality,costoftimeetc.Changingfromawindowssoftwareplatformtoanothercan

serveasanexample(Gawer&Cusumano2002).(Eisenmannetal.2006)

4.2Theindustryphase

Theimportanceofthephaseoftheindustryhasthroughthepastdecadesshownhow

adaptingaccordinglycanchangethefutureofagivencompany.Themostknownand

referredtermmightbedisruption,asthistermissynonymouswithwhathashappenedto

endlessindustries.

Thephaseofanindustryifoftenperceivedfromatechnologicalevolutionperspective.

Competence-destroyingandcompetenceenhancingistermsusedfordescribingtheimpact

technologicalshiftcanhaveonexistingfirmsinindustries(Anderson&Tushman1986).

Examplesofcompetencedestroyingcanbethemovementfromsteam-todiesel

locomotiveswhereknowhowetc.fromthesteamtechnologysuddenlynolongerhadany

advantage(Anderson&Tushman1990).Examplesofcompetenceenhancingishowthe

internethasevolvedfromnothingtoaffectingmostpeopleintheireverydaylife’sin

multipleways–constantbetteringthetechnologythroughservicesetc.

24

Theevolvingtechnologythenhasthepossibilityofchangingindustriesorbetteringcurrent

ones.Inotherwords,thetechnologyevolvesasthefirmsexploitingitinteractwiththeir

environments.Andasthetechnologyevolves,sodoestheindustrystructure,attractiveness

andcriticalsuccessfactors.Andconsideringthestageoftheevolvedtechnology,the

importanceofadaptingaccordinglyisunderpinned.(Abernathy&Clark1985;Utterback&

Abernathy1975)

Thetechnologyevolutionphaseisdescribedfromtheuprising,thenbeginningof

standardizationtothedominantdesignandtheemergenceofanewone.Afuah&

Utterback(1997)describesthesephasesas;fluid-,transitional-,specific-anddiscontinuity

phase.Iwillelaborateonthesephasesin4.2.2and5.3.

4.2.1S-curves&dominantdesigns

S-curve

Consideringtheworksofanindustry,thes-curveservesasagreatexampleofhowan

industryofatechnologyevolutionoftenoperates.Thebasicworkofans-curveisillustrating

howtherateofatechnology’simprovementanditsrateofdiffusiontothemarkettypically

followsans-shapedcurve.Whenstartingoutthetechnologyoftenimprovesslowlyuntila

certainpointwhereitgetswidelyadoptedandthenacceleratesasunderstandingincreases.

Thetechnologyhasthepotentialaftermuchexperimentationtobecomethedominant

design,butstillwithoutreachingitslimitorfullpotential.Thisisoftenbecausethereisnot

muchtogainorsimplybecausethetechnologyisbeing

replacedbyanewbetterone.(Anderson&Tushman

1990;Henderson&Clark1990)

Followingthepreviousexamplesofphones,theycan

againserveasanexample.Figure4showsbyans-curve

theillustrationofphonesbeingreplacedbythenew

technologyofsmartphones.

Dominantdesign

UtterbackandAbernathy(1975)introducedthetechnologymanagementtermdominant

design,whichisthetechnologythatwinstheallegianceinanindustry.Ormorespecifically,

Figure4-S-curve

25

itisthesinglearchitecturethatestablishesdominanceinaproductclass(Afuah&Utterback

1997;Abernathy1978;Sahal1981).Thedominantdesignforcescompetitorsandinnovators

tofollowiftheyhopetocommandasignificantmarketshare(Suárez&Utterback1995;

Uusitalo2014).ThetheoryisfurtherelaboratedbyAnderson&Tushman(1990)whoargues

dominantdesigntobeinfluencedbytechnologycyclesoferas,suchasfermentand

incrementalchanges.Thetechnologycyclemaybedividedintotwophases–thefluidand

specific.Themarkingoftransitionfromfluidtospecificphasecanbedescribedasthe

fundamentalemergenceofadominantdesignandisthekeyeventintheevolutionofan

industry(Anderson&Tushman1990).

Thereasonofselectingdominantdesignaremany,butlearningeffect,network

externalities,thesizeoftheinstalledbaseandtheavailabilityofcomplementarygoodsare

allfactorsthathasahighimpactontheadoptionrate.Andcombinedtheyfunctionasa

self-reinforcingcycle.(Anderson&Tushman1990)

4.2.2IntroductiontoAfuahandUtterback

AfuahandUtterback(1997)arguesforanincompletelinkbetweentheproduct-marketand

resource-basedviewswithouttheexplorationoftheevolutionoftechnologythatunderlies.

Productmarketview

Afirms’profitabilitydependsontheattractivenessoftheindustryinwhichthefirm

competesanditspositioningintheindustryaswellasitslocalenvironment(Porter,1991).

Teeceetal.(1997)furtherobservedthatthesuccessfulactorsinamarkethavebeen

thosewhowereabletoreconfiguretheirexistingcompetencesandadaptingtochange.

Thesuccessthusdependsonthestructureoftheindustryinwhichitoperatesandthisis

illustratedbyPortersfamousFiveForceswhichcanerodethelong-termprofitabilityofany

givenindustry.Theforcesconsistofthreatsofnewentrants,threatofsubstituteproducts

orservices,thebargainingpowerofsuppliers,thebargainingpowerofbuyersandthe

rivalryamongexistingcompetitors.

Resourcebasedview

Theresourcebasedviewassumesheterogeneityamongfirmresources.Thefocuslieson

specificresourcesasthesourceofasustainablecompetitiveadvantage,insteadofafirm’s

26

positioningwithintheindustry.Thesearetangibleandintangibleassetswhicharedifficult

tocopyinanyway.(Teeceetal.1997;Barney1991;Afuah&Utterback1997;Barneyetal.

2001).Iwillfurtherelaborateontheresourcebasedviewinsection5.2.2.

TechnologicalEvolutionandIndustrystructures

Afuahetal.(1997)arguethattheattractivenessofanindustryandthecompetences

neededvaryfromonestageofthetechnologicalevolutiontotheother.Describedstages

arethefluid-,transitional-,specific-andthediscontinuityphase,whichallhavedifferent

strategieslinkedindividually.(Utterback&Abernathy1975)

Afuahetal.(1997)thenproposeathree-stepprocessforcompetitiveanalysis.First,ateach

ofthefourphasesoftheindustrialinnovationcycle,thefirmanalyzesthepressuresbeing

exertedbyPorter's(1980)fiveforcestodeterminetheindustry'sattractiveness.Second,the

firmevaluatestheextenttowhichitscompetencesandfirm-specificassetsmeetthelevels

andqualityneededtosuccessfulofferproductsateachphase.Thirdandfinally,ateach

phase,thefirmaretomakestrategicstepsthatalsoanticipatethenatureofthenext

phase(s).

CHAPTER 5: THEORETICAL FRAMEWORK

Ihavenowpresentedthisthesis’keyconceptsandtheoreticalbackground,whichwasdone

inordertooutlinethedevelopmentofthetheoreticalframework.Thepurposeofthis

chapteristherebytoillustrateandconstructaframeworkofmergedtheoryandliterature.

Thekeyconceptsshowninchapterfourwillbeelaboratedthroughputchapterfivewhere

otherscholarsandtheoristwillcomplementwhereappropriate.Theframeworkwillthen

serveasafoundationforthefollowinganalysis.Additionally,partoneofthisthesiswillbe

1.Step

AnalysepressureexertedbyPFF

2.Step

Analysefirmcompetencies

3.Step

Strategicallystepstowardstechnological

phase(s)

27

concludedbytheendofthischapter,andtherebyprovideanswerstothefirsttwosub-

questions.

Inconstructingtheframework,partsoftheEvans&Schmalensee(2007)catalystframework

willbeusedasanoverallstructure.Itwillnotbeusedasastep-by-stepprocess,butwillset

theoverallframeforwheremorerenowntheoristscanbeapplied,whereappropriate.In

settingtheframework,Afuah&Utterback’s(1997)three-stepprocesswillmoreoverserve

asafundamentalpartindevelopingtheframework.Thethree-stepprocesswillbedivided

andappliedintotheframeworkwhereappropriate,whichwillfurtherbeelaboratedon

throughoutthischapter.

5.1Structuringthetheoreticalframework

EvansandSchmalensee’s(2007)bookon‘thestrategiesbehindtheworld’smostdynamic

companies’haspresentedagoodfundamentalviewinunderstandingthethoughtsandway

ofnavigatingthatgoesintoservinganddevelopingplatformbusinesses,alsoreferredtoas

catalysts.Thebookdefinesaneconomiccatalystas:“Anentitythathas(a)twoormore

groupsofcustomers;(b)whoneedeachotherinsomeway;butc)whocannotcapturethe

valuefromtheirmutualattractionontheirown;and(d)relyonthecatalysttofacilitate

value-creatingreactionsbetweenthem.”(EvansandSchmalensee,2007page3).Referred

toasthecatalyticreaction,istheprocessintheeconomywhere“valueiscreatedby

facilitatingtheinteractionbetweentwoormoreinterdependentgroupsofcustomers”

(EvansandSchmalensee,2007,page3).EvansandSchmalensee’s(2007)goesontocreatea

catalystframeworkthatpresentssixfundamentalelements.Theseelementsaretasksand

challengestoovercomeorsuggestedstrategiestofurtherprogress.Theseelementsareall

essentialforsuccession.

28

ThecatalystframeworkbyEvans&Schmalensee

Identifytheplatformcommunity

Establishapricingstructure

Designthecatalystforsuccess

Focusonprofitability

Competestrategicallywithothercatalysts

ExperimentandEvolve

·Identifydistinctgroupsthatneedeachother

·Determinewhyandhowmuchtheyneedeachother

·Evaluatewhoelseisservingthecommunity.

·Compareamultisidedbusinesswithasingle-sidedone

·Setseparatepricesforaccessandusage

·Setpricesforbalancedemandfromtwosides

·Pricetogrownslowly–atfirst

·Paycustomerstobelong–sometimes

·Priceforlong-termprofits

·Attractmultiplecustomergroupsthatneedeachother

·Promoteinteractions

·Minimizetransactioncosts

·Designforevolution

·Studyindustryhistory

·Useforecaststoenhanceprofitability

·Anticipatecompetitoractions

·Aligninterestsinternallyandexternally

·Understandthedynamicsofcatalystcompetition

·Lookforcompetitionfromdifferentbusinessmodel

·Leveragetoattack

·Considercooperation

·Knowwhentobefirst–andwhentofollow

·Controlgrowth

·Protectyourback

·Planforwhat’snext

·Lookoutforthecops

·Findoutwhoneedswhom–andwhy

·Shapeparticipationandmaximizeprofits

·DrawCustomersandfacilitateinteractions

·Visualizepathtowardlong-termprofit

·Challengeexistingcatalystsandreacttonewcatalystthreats

·Pursueevolutionarystrategyforgrowth

Figure5-Catalystframework(Evans&Schmalensee,2007,page40)

Thesesixelementsprogressfromstartingaplatformtocontinuouslyexperiencinggrowth.

ThisthesiswilladaptthemostrelevantpartsoftheEvans&Schmalenseecatalyst

frameworkandredefineittofitthecontextandcasecompany.Therelevantpartswill

moreoverserveasstructureforthisthesis.Theselectedpartsarethethreelatterstagesof

theframework,whichare4.focusonprofitability,5.competingstrategicallywithother

catalystsand6.experimentingandevolving.Additionally,Afuah&Utterback's(2007)three

29

stepprocesswillbeincludedinordertounderstandthetechnologicalevolutionandits

phases.

Duringtheresearchforthisthesis,Ihaverealizedaneedforaddingastepbetweenthe

originalfourthandfifthstepofthecatalystframework.Theaddedstepconcernsthe

unravellingoftheindustryphase,asthisreflectscompaniestoadaptitsbusinessaccording

totheindustryphase.Iwillthereforedividethethreestepprocessandmergeitwiththe

threelatterstagesofEvans&Schmalenseecatalystframework.Thisindustryphasepartwill

haveAfuah&Utterback(1997)asthemainperspective.Moreover,eachstageofthe

adaptedframeworkseenbelow,willbecomplementedbysupplementarytheories,where

appropriate.Tosumup,theoverallformationofthedevelopedtheoreticalframeworkhas

thencometogetherbycombiningEvans&SchmalenseewithAfuah&Utterback,sothat4.

Focusonprofitability+1st&2ndstepofAfuahandUtterback’sthreestepprocessàMarket

landscape;Afuah&UtterbackàIndustryphase;5.Competingstrategicallywithother

catalystsàCompetingstrategically;and6.ExperimentandevolveàInnovation

development.

Intheendofthischapter,afinaltheoreticalframeworkforgrowingaplatformwhile

adaptingtheindustryphase,willbepresented.Essentially,theelementspresentedinthis

chapterwillgiveanswerstothefirsttwosub-questions.

Market

landscape

Industry

phase

Competing

strategically

Innovation

development

Figure6-Structureoftheoreticalframework(Authorsown)

30

5.2Understandingthemarketlandscape

Thefourthstageofthecatalystframeworkinvolvesunderstandinghowcatalystscanlearn

tosecurealong-termreturnfromtheirinvestmentsinbringingcommunitiestogether.The

maintaskatthisstepittohelpcatalystsrealizetheirpotentialforprofitsorwhentomodify

theirpricingmodels(Evans&Schmalensee,2007).Reachingthisunderstandinginvolves

studyingtheindustryhistorysuccessandfailures,planningyourbestcountermovestowards

youranticipationofmultisidedstrategiesfromincumbentcatalystornewentrants,and

aligninterestbothinternallyandexternally(page142).

Thefundamentallyviewonthevalueofunderstandingthespecificindustryhistoryholds,

thathistoryisabletotellwhathasworkedornot,failedandwhyitfailed.Further

emphasizedbytheviewpoint,thatgreatbreakthroughoftencomesthroughfurther

developmentorrefiningandtweakingofcurrentstandard.Purenoveltyofbusinessmodels

etc.rarelyemergeswherehistoryhasnotbeenusefulinsomeway(Evans&Schmalensee,

2007)

5.2.1Ratingtheindustryattractiveness

Understandingthespecificindustryandhowtonavigatewithinit,canhelpafirm

positioningitselfsoitbecomeslessvulnerable.Porters(1980)fiveforceshasamore

externalview,wheretheessenceofcompetitivestrategyformulationas‘relatinga

companytoitsenvironment’(Teeceetal.1997,page511),andhaslongbeenkeyin

obtainingandstructuringthisknowledge.Alloftheforcescanvaryfromindustrytoindustry

aswellastheopportunitiesforsustainedprofitability(Porter1979).Throughoutmy

analysis,Iwilllargelyfocusontherivalryasitismyassessment,thatthisinthestrongest

forceconcerningBilly’sindustry.Evans&Schmalensee(2007)furtherarguesthatwhen

maneuveringwithinanindustry,thefirmshouldanticipatecompetitoractions,andmore

specificallyforfollowersinanindustrywithmultisidedbusinesses,theyshouldpreparefor

overcomingexclusivedealsbyestablishedcatalysts.Combinedwithporterfiveforces,the

companyshouldtrytopositionitselfintheindustrywheretheyhavetheirbestchancesof

defendingagainstorinfluencingthesedifferentforces.

31

5.2.2Valuingthefirmassets

Justlikefocusingonpositioningthecompanywithinanindustryinordertoenhanceits

chancesforsuccess,focusingontheinternalassetsofafirmisjustasimportant.

Boththeexternalandinternalviewsupportstheopportunityindifferentiationexistsin

creatingasustainedcompetitiveadvantage.ArguedbyBarney(1991),asustained

competitiveadvantageiswhenacompanyimplementsauniquevaluecreatingstrategy

whichothercompaniesareunabletocopy.However,catalystsshouldalwaysexpect

imitationofcompetitors(Evans&Schamalensee,2007,page136).

Inthecontextofaresourcebasedview,bothBarney(1991)andHamel&Prahalad(1990)

hascontributedtothefieldofresearch.Althoughtheybothcontributetothesamefieldof

research,theyaredifferentinanumberofways;Barney(1991)seescapabilitiesaspartof

firm’sresources,andHamel&Prahalad(1990)seesafirm’smostvaluableresourcesas

corecompetencies.Marino(1996)explainsthedistinctiononwhethertheresourceis

knowledge-ortechnology-based.Meaning,competenciesareoftendiscussedasaresource

foundation,whereascapabilitiesaremoreoftenbuildonprocessesandbusinessroutines

(Marino1996).Barney(1991)arguesforcompetitiveadvantageinstaticenvironments,

whereasTeeceetal.(1997)emphasizesontheimportanceofbuildingcapabilitiesthatcan

beusefulinenvironmentswithrapidchange.Discussingthedistinctions,thedynamic

capabilitieshasoftenmorecommonalitiesacrossfirmsthananticipated,whereasthe

characteristicsismorebasedonthefirmsprocessesaswellasthepaceofchangeinthe

environment(Eisenhardt&Martin2000).Foracompany,thismeans,thatdynamic

capabilitiescanbeconsideredthecapacityofwhichopportunitiesandthreatsareseizedor

sensed,andatbest,actingontheopportunitieswhilemanagingthethreats(Teece2007).I

willinsection6.4.2elaborateonthemanagementofthreatsandopportunities.

Withplatformbusinessesinmind,theyoftenpossesstheopportunityofbeingmultisided,

whichoftenleadstomultirevenuestreams,whereEvans&Schmalensee(2007)underpins

therisksofcreatinginternalsiloesofprofitability(page140).Theriskiswrongfullymanaging

multisidedbusinesseswithastandardprofitandlossstatementforeveryside–insteadthe

multi-sidedstrategyshoulddriveorganizationandincentivesconcurrent,andprofitsshould

besecuredfortheplatformoverall.Hereitisfurtherunderlined,thatfocusshouldnotbe

32

onoptimizingtheproduct,butthattheinternalteamshouldhaveincentivesthataligning

activitiesthatwilldrivetheprofitabilityofthemultisidedfirm(Ibid.).Amultisidedbusiness

hasseveralgroupswithdifferentinterests,whichmeansthataligningthoseinterests

becomesanecessityfordrivingthebusinesstowardachievingprofitability.Ultimately,

thesecriteriathusbecomearesourceproblemforthecompany.

5.2.3Summationofstepone

Boxonereflectsthesummationpoints,whichhasbeen

elaboratedonthroughcurrentsection,andmoreover,

reflectstheelementsofimportanceforunderstandingthe

marketlandscape.Astheabovesectionsshow,

understandingthemarketlandscapeisultimatelyreinforcing

theopportunityforbusinessprofits.Anygivenplatform

businessshouldstudyitsindustryhistory,asthisgivesan

understandingofwhatwentwrongorwhatworked

previously,whichwillgivethecompanyfreelearningaspects.Aswellasunderstandingthe

historyoftheindustry,understandingthecurrentindustryservesahighpurpose.Analyzing

thecurrentindustrymapsoutopportunitiestodifferentiateitselfandhelpsthecompany

navigatein,orunderstandhowtoinfluencetheindustrytoownadvantage.The

understandingoffirmresourceswaspresented,whichshowedhowacompanycan

potentiallyadaptitsresourcesintovaluecreatingstrategieswithinthedynamicmarkets.

Lastly,aligningtheincentivesoftheactivitieswithinthemultisidedcompaniestowardsits

groupsofinterestshouldbeconsidered.Thiswillhelpthecompanytoabetter

understandingofitsservedgroups/sides,andmoreover,minimizingtheriskofcreating

internalsiloprofitability.

5.3Adaptingtheindustryphase

Theoristsandexpertshaveunderlinedtheimportanceofunderstandingthetechnological

evolutionagivenindustrypossess.Thisisbecausedifferentstrategiesarerequiredinorder

toadaptbestpossibletowardstherespectivephase(Afuah&Utterback1997;Teeceetal.

1997;Anderson&Tushman1986).Throughouttheanalysisinthisthesis,IwilluseAfuah&

1. Understand the market landscape

• Industryhistory• Analyseindustryanditsdrivers(portersfiveforces)

• Specifyfirmresources• Aligningactivitiesincompany

33

Utterback(1997)asthefoundationforunderstandingthephasesofagivenindustry.This

willbesupportedbyrelevanttheoristsandliterature.Afuah&Utterback(1997)arguesa

technologicalevolutionundergothefollowingphases;fluid-,transitional-,specific-and

discontinuityphase.Thesephasesareelaboratedbelow,astheyservethedeepeningof

understandingthetechnologicalevolutionanditsimpactonanindustry.

Fluidphase

Throughoutthisphase,thereisalotofproductandmarketuncertainty.Mainlybecauseof

thecompetitionwithnewandoldtechnology.Oftenthisaffectsbothcustomersand

manufacturesaseitherhavecertaintyinhowtheproductshouldbeformed(Afuah&

Utterback1997).ThephasehassimilardescriptionsasearlyadoptersbyRodgers(2003)or

theverybeginningofthes-curvebycurvebyAnderson&Tushman(1990).Thesebeginning

allhavesimilarcharacteristics,suchaspeopleoperatingandthrivinginthemoftenpossess

adventurousandriskwillingcharacteristics.

Despitethetechnologyitself,aplatformownershouldcarefullyunderstandthisphase

becauseofthepossibleevolvingofaplatformtobemultisidedandbythat,thepossibilityof

migratingtocomplementarymarkets(Gawer&Henderson2007).Bythisstatement,the

possibilityofaplatformoperatinginmultiplemarketswithdifferentphasesshouldbe

consideredandtakenintoaccount,asthisultimatelycanhamperaplatformwayof

navigating.

Transitionalphase

Dominantdesignstartstoemerge,whichmeanssomestandardizationofcomponents,

marketneedsandproductdesignfeaturesaretakingplace.Thiscausesreductionin

uncertainty,experimentationandmajordesignchanges,whicharecharacteristicsofthe

transitionalphase.Oftentherivalrybetweenexistingcompetitorsstartstoincreaseaswell,

withlessdifferentiatedproductstocompetewith.Thecharacteristicsofadominantdesign

areobviouslyahighpercentageofmarketshare,butcanalsobedescribedasonewhose

majorcomponentsandunderlyingcoreconceptdonotdiffersignificantlyfromproduct

models(Afuah&Utterback1997).

34

Specificphase

Thedominantdesignisnowfound,andthisphaseofteninvolvealargeremphasison

processinnovationwithproductinnovationslargelybeingincremental,alsoknownasthe

eraofincrementalchanges(Anderson&Tushman1990).Productsarenowwelldefined,

anddifferencesbetweencompetitorsareareoftenfewerthantheirsimilarities.And

becauseofthecommoditynatureoftheproduct,therivalryamongcompetitorsincreases

tohigh(Afuah&Utterback1997).Thisisthephasewheretheoveralltechnological

potentialwillbereached,alsosimulatedbytheendofthes-curve(Anderson&Tushman

1990).

Throughouttheemergenceofadominantdesign,atechnologywithalargeinstalledbase

willattractdevelopersofcomplementarygoods.Andatechnologywithawiderangeof

complementarygoodswillattractusers,whichinturn,willincreasetheinstalledbase;a

self-reinforcingcycleensues.Andasearlierdescribed,platformbusinesseswithmultisided

potentialcanpotentiallyinvolveintomanycomplementarymarkets,respectivelywherethe

underlyingtechnologyisdifferent.Andinthecasewheretheinterfacebetween

complementarymarketsareevolving,theincentivestoinnovateappearambiguous.Fora

wellestablishedplatform,CarltonandWaldman(2002)suggestthatstrategictie-insto

evolvingcomplementarymarketsmaybeawaytoextendmonopolypowerintoanewly

emergingmarket,whichinthiscase,theinnovationisarguedtolikelybesuppressed.

Contradictory,Microsoftservesasanexamplewiththeirentryintocomplementary

markets,followedbyproductintegration,whichthenfacilitatedthedevelopmentofnew

applications.Itshouldbementioned,thatcomplementaryproductscanbedistinguished

betweenin-house&thirdpartydevelopments(Cenamoretal.2013).Gawer&Henderson

(2007)arguesthatthetreatmentofintellectualpropertyandtheavailabilityof

developmenttoolsultimatelyaffectsaplatformowners’abilitytocontroltheevolutionof

theplatformarchitectureandtherebytheinnovationincomplementarymarkets(page6).

Whenenteringcomplementarymarketsanunderstandingofthephaseoftheentered

marketthenbecomesincreasinglyimportant,asdifferentstrategiesforimplementation

mightberequired.

35

Thephaseofdiscontinuities

Theformerdescribedphasesnowrepeatitselfwhenanewtechnologywiththepotentialto

rendertheoldonenon-competitive,isintroduced.Oftenbyatrulyradicalinnovation,

whichfurtheroftenareintroducedbyacompetitorfromoutsidetheestablishedindustry.If

trulyradical,thetechnologicaldiscontinuitywillmostlikelyrendertheoldtechnologynon-

competitive,whereasthebarriersthatfirmshaveerectedaroundtheminthespecific

phasemaybecomeuseless.Thisresultsinadiscontinuity,plungingtheinnovationcycle

backtothefluidphase(orbeginningofanews-curve)withanotherwaveofenteringfirms

(Afuah&Utterback1997;Anderson&Tushman1990).Thisoftenincreasestherivalry

amongincumbentssincethenewtechnologyinvadestheold,whichmeansincumbents

whoarenotshiftingtowardsthenewtechnologywillexperienceanincreasedpressure.This

canleadtoleadersinformertechnologyforcedtocannibalizetheirownproducts.Andifthe

incumbentshavehighexistcostontheirformertechnology,thepressureonlyextentsby

thethreatofincreasingnewentrantsenteringtheindustrywiththenewtechnology.

Asallofthesephasesdifferinwaysofnavigatingwithinandproposedifferentchallengesto

overcome,whichiswhytheimportanceofunderstandingthegivenphaseisenhanced.

Additionally,thisproposeanunderstandingforhowfarin,theindustryisinthegiven

phase,andthereforetheanticipatingofthenextphaseinordertoadaptproperly.

Focusingontherightdominantdesignisessential,andeventhoughthetechnological

evolutionfigurativelyoftenisreferredtoastheunderlyingtechnologyitself,thepresence

ofproductasthedominantdesignisalsoapplicable.Oneofthebestexamplesmightbethe

softwareplatformforpersonalcomputing.In1998MicrosoftWindowshadapproximately

86%marketsharewiththeirclosestcompetitor(Apple)on5%(CNET,2002),whichshows

thatbuildingsoftwareapplicationsneededtofitwindows.AndasarguedpossiblebyAfuah

&Utterback,thiswastherealitygettingintothemarketformanycomplementaryproducts,

eventhoughotheroperatingsystemswherebetterandeasiertodevelopon.

36

5.3.1Summationofsteptwo

Theabovementionedsectionsshowhowimportantitisfor

companiestoanalyzeagivenindustryphase,asdifferent

strategiesareneededtonavigatewithinthespecific

industry.Marketdriversaffectthecompany’swayof

navigatingwithinanindustryphase,thuscompaniesneed

tobeawareandunderstandtheframeinwhichthe

companyissituated.Theimplicationswheni.e.dominant

designexistsinagivenindustry,iscrucialforthe

sustainabilityofacompany.Furthermore,itunderpins,thatifenteringsurrounding

complementarymarkets,thephaseofordominantdesigninthegivenindustrycandiffer

andshouldthereforealsobetakenintoaccount.Lastly,thecapabilityofdistinguishing

betweendominantdesignasatechnologyormerelyaverywellmarket-positioned

companythatcontrolsagivenplatformwaslaidoutforcompaniestobetterunderstandthe

industrydynamicsthatwillaffectit.

5.4Competingstrategically

Asdefinedin4.2.1andfurtherelaboratedonthroughout5.3,theaspectsofdominant

designcanbeamatterforstandardwarstoarise.Thepresentrealityofacatalysthasbeen

normalizedtostrategicthinkingcentredon‘howtotakeonanexistingcatalyst’or‘howto

overcomeacatalystthatwanttoreplaceyou’(Evans&Schmalensee2007),whichinbroad

aspectscanbereferredtoasstandardwars(Shapiro&Varian1999).Obviouslyfora

multisidedbusiness,thestrategicthinkingextentbeyondthis,whichIwillelaborateon

throughthissection(5.4),butunderstandingthefundamentalviewpointoncompeting

strategicallywithothercatalystsareimportant.

Inmarketswithstrongnetworkexternalities,standardwarsoftenintensify,asstrong

networkexternalitieswillcauseconsumerstohavevalueoncompatibilities.Theoutcomeof

thesestandardwarsvary,withfighttothedeathoutcome,whichwasseenwithBlu-rayvs.

HDDVD(HDDVDvanished).AnoppositeexampleshowedhowtheCDtechnologywith

SonyandPhilipspooledtogetherandopenlylicensedtheirpatents.Orasseeninmany

2. Industry phase

• Analyseindustryphase• Understandthedominantdesign

• Dostrategicanalysefornextphase

• Knowsurroundingcomplementarymarketsphases

37

markets,duopolyormorehasarisenwithmultiplestandardsbattlingeachother(Shapiro&

Varian1999).Nintendo,PlayStationandXboxservesasanexamplehere.Evans&

Schmalensee(2007)arguesonnavigatinginsuchmarkets,thattheunderstandingof

whetherleveragetoattackorcooperatetosurviveareessential.Andbecauseofmodern

technology,overlapping-orintersectingcatalystshasincreasedasanadditionalthreat,

whichtherebycausescatalyststowatchoutfornewtechnologiesintrudingtheirindustries

asanadditionalaspect.

5.4.1Complementaryproducts

Fewhightechnologyplatformcompaniesthriveinisolation.Instead,itislargelyunderstood

thatexperiencingsuccessfulcommercializationoftendependsontheavailabilityof

complementaryproductsthatworktogetherseamlesslywithyourproduct(Nambisan2002;

Cenamoretal.2013).Acomplementaryproductisdefinedbyitsvalueenhancementofa

primaryproductwhenbothareseamlesslyusedtogetherbyend-users(Sengupta1998;

Park&Chung2011).Additionally,arguedbyKimandMauborgne(2005),onthebasisof

blueoceanstrategy,thesignificanceofprovidingcomplementaryproductsandservicesthat

affectsthevalueofmainproductstoreconstructamarketborderline.Meaning,the

fundamentalvalueofamainproductcanbeincreasedthroughthedevelopmentofdiverse

andcompatiblecomplementaryproducts,whichultimately,leadstothestrategicdecision

onhowinvestingincomplementaryproductscansupportthevalueenhancementofthe

mainproduct(Park&Chung2011).

Nambisan(2002)identifiesthedistinctionofthreetypesofcomplementaryproduct

integration;value-addedinternal,add-onmodule,anddatainterface.Value-addedinternal

integrationinvolvesintegratingthemainproductwithacomplementaryproductinternally

whilemergingthedataandthefunctionsofthetwoproductsseamlessly.Bycouplingthese

productsadditionalfeaturesareoftenofferedwheretherealvalueoccurs.Theadd-on

moduleintegrationissimilar,thoughtheintegrationisthroughanexternalmoduleor

component(i.e.,separatefromthecoreproductitself).Lastly,thedatainterfaceintegration

involvesaexternalintegration,butisdefinedbythetechnicalinterfaceneededtoeffectthe

transferofdataacrossthetwoproducts(Sengupta1998).Themainpointhereendsin,how

theplatformcompanybestpositionsitselfthroughcomplementarypartnershipswhichwill

38

bevalueexpandingtowardsadoptersoftheplatform.Aplatformowners’wayofnavigating

intheindustrywiththisunderstandingcanbecriticalinordertosetitselfupforabetter

platformadoption.

5.4.2Platformadoption

Theunderstandingofplatformadoptionfromacustomerperspectiveservesmanyfacets.

Oftenitisaatechnologicalsystemconsistingofasetofcoreelements(theplatform)witha

groupofsurroundingelements(thecomplementaryproducts),thatfundamentallyserves

thearchitecturebehindmostplatform-basedmarkets(Baldwin&Woodard2008;Cenamor

etal.2013).Andoftenadditionallyagents(platforms&complementaryproducts)willbe

offeringtheseelementcausingpotentialadopterstofacecomplexdecision-making

(Cenamoretal.2013).Moreover,thesedecisioncanbeinterrelated,asadoptersand

providerschoiceswillaffectorbeaffectedbyotheradoptersandproviders(Parker&Van

Alstyne2005).Thisultimatelymeans,togetafullcomprehensionoftheplatformadoption,

ananalysisoftheimpactofotheragentsintheecosystemareneeded.(Cenamoretal.

2013)

Additionally,thisalsoleadsbacktomulti-homingandswitchingcosts.Complementary

productsultimatelyincreasesswitchingcostsandvaluetothemainproduct,whichthereby,

becomesawaytofurtherincreasesalesandcustomerretention(Park&Chung2011).On

thecontrary,theneedforaspecificcomplementaryproductcanbesoinherent,that

Burnhametal.(2003)arguesforfinancialswitchingcostifnotestablished.Meaning,

financiallosscanoccurtotheendcustomer,ifincompatiblecomplementaryproductsdo

notfunctionwiththemainproduct.

Forplatformadoption,theunderstandingofwhethermulti-homingispresentornotis

important,asthisservestheunderstandingoftheuseofplatform.Whetherbothsidesof

themarketaremulti-homingoutofconvenienceorifsomesidesarecontentedwithsingle-

homing.Andifcomprehended,applyingtraditionalnetworkeffecttheory,usedwith

caution,canhelptippingmarketswheremulti-homingisprevalent(Choi2010).

Understandingtheuseofnetworktheorywillbeelaboratedoninnextsection(5.4.3).

39

Pricing

Anotherelementforoptimizingplatformadoptionwithtwosidedmarketsisfindingthe

optimalpricingstructure(Choi2010;Eisenmannetal.2006).Dependingonwhichsidehas

thehighestattractionrateforadoption,subsidizingcanbeusedinordertoattractaspecific

side.Choosingwhichsidetosubsidescandependontheresponsivenesscustomershas

towarddifferentfactors,suchasquality,sensitivityortheabilityofcapturingcross-side

networkeffects(Eisenmannetal.2006).Hagiu(2009)furtherelaboratesonpricecutting

towardsdegreesofsingle-andmulti-homing,thatpricecuttingwillbelesseffectivein

adoptionwhenthestrongercustomerfeelstowardsmulti-homingand/orthemoremarket

powerproducershaveovercustomers.

Thoughitcanbeacostlyaffair,theuseofmarqueestrategy(Eisenmannetal.2006:Evans

&Schmalensee2007)canhelpincreasetheadoptionoftheplatform.Thestrategyoutlines

howtheplatformcanincreaseitsoverallvalue(attractiveness)tooneofitsusers’sideby

recruiting“marqueeusers”,whichareuserswhowillbehighlyvaluablebytheothersideof

thenetwork.The“recruiting”processoftenreferstosubsidizingorevenpayingforthe

marquesforadoptingtheplatformorcommittingnottouserivalplatforms(Eisenmannet

al.2006).

5.4.3Networkeffects

Earlierinsection4.1.2,Iexplainedthevalueenhancementnetworkeffectcanhaveon

platforms,asthevalueofacatalystincreasestothespecificuserasthesizeofusersgrow

ontheotherside.Andconsideringnetworkeffects,therearemanywaysofusingittowards

creatingvalue.Therefore,afundamentalunderstandingonthisconceptisimportant,asit

opensupfordifferentwaysofusingitasastrategy.

Consideringnetworkeffects,termslikenetworkgoodshaschangedthefundamentalview

onproductmanagement,whichhavecausedfirmstorethinkstandardprinciples(Bhargava

2014).Thisisbecausenetworkgoodsrefertohowproductqualityisshapedbytheactions

ofotherusers,meaningyoutubeprovidesaplatformandwouldneverhavesucceeded

withouttheirusers(producers)providinggreatcontent(Bhargava2014).Networkgoods

canbothbeintrinsic(standalonebenefit)orextrinsic(networkbenefit).

40

Moreover,Katz&Shapiro(1985)arguedthroughnetworkexternalitiestodistinguish

betweendirectandin-directnetworkeffects(Park&Chung2011;Suarez2005),also

referredtoassame-sideandcross-sideeffects(Bhargava2014;Eisenmannetal.2006).

Direct(same-side)networkeffectsoftenappliestocommunicationproductsorservices,as

theproductitselfenhancesasmorepeopleareusingthesameproduct.In-direct(cross-

side)networkeffectis,onthecontrary,theincreaseofusageofaproductornetworkwhich

furtherincreasesthevalueofacomplementaryproductornetwork,thatinturn,provides

valuebacktothemainproduct.Mostusedexamplemightbethecomplementaryadoption

ofsoftwareandhardwarecombined.

Aninterestingpartofthispoint,ishownetworkeffectscanreflectsmallerpartsinmarkets

andpredominatethemirrespectiveofwhetherthatsystemhasthelargestoverallnetwork

(Suarez2005).Meaning,Appleasapersonalcomputerchoicemightbethepredominant

choiceinthepublishingandmediaindustry,despitethefactthatMicrosofthasamuch

largerinstalledbasewithlargerdiversificationoncomplementaryproducts.Thiscarvesout

forcompaniestopursuenichestrategiestowardspredominationinspecificpartsofthe

marketandexpandfromthere.Thistypeofnetworkeffectwouldbeadirect(same-side)

networkeffect(Eisenmannetal.2006;Bhargava2014),buttargetsspecificgroupsoutlined

byspecificelements.Thekeytake-awayhereis,thatplatformswhofundamentallythrives

onIn-direct(cross-side)networkeffectcanalsohaveorobtaincharacteristicsofdirect

(same-side)networktofurtherincreasetheirvaluetowardstheirusers.

5.4.4Summationofstepthree

Onlineplatformrarelythrivesinisolation,andrarelyhave

zerocompetitors.Thissetsthestageforunderstanding

otherplatformswayofoperating,aswellasunderstanding

surroundingmarkets.Bothintermsofpotential

cooperation,butalsointermsofknowingwhenoverlapping

catalystsimposes.Furthermore,athoroughunderstanding

oftheadoptionprocessisneededaswellastheuseof

single-vs.multi-homingforbothsides.Moreover,the

importanceofunderstandingtheuseofnetworkeffectwas

3. Competing strategically

• Understandcatalystsoperatinginorsurroundingmarkets(overlapping)

• Identifycomplementaryproducts

• Understandadoptionprocessinthemarket

• Single-vsmulti-homing• Identifyoptimalpricestructure

• Usenetworkeffects

41

emphasizedasthiscancreatesynergiestowardsincreasingtheadoptionratewithinthe

platform.Andatlast,identifyingtheoptimalpricingstructuresservesforsettingthebest

foundationforanoptimaladoptionratetowardsbothsidesoftheplatform.

5.5Innovationdevelopment

ThelaststepofEvans&Schmalensee's(2007)frameworkisnamedExperimentandevolve,

hencefocusinonsuccessfulgrowth.Keytasksconcernamongothertheabilitytoknow

whentobefirstorsecond,controlgrowthand/orplanforwhatisnext.Evans&

Schmalensee(2007)furtherelaboratesonthecontextofplatformsabilitytocontrolgrowth.

Howharnessingthepowerofthecatalystreactionshouldbealignedwithaspectssuchas

pricing,designandotherkeystrategies.Thekeytake-awayishowwellthecatalystmanages

itsopportunitiesandthreats.Itcanthenbeargued,thatmanagingopportunitiesand

threatsonatechnologybasedfoundationwouldbeapplicablethroughinnovationasthe

context.

Innovationstreams(Exploitation&exploration)

Companieswithaninnovativeapproachareoftenfacedwithtwoconflictingprocessesof

organizationallearning;theexploitationofoldcertaintiesandexplorationofnew

possibilities.Theexploitationisoftendefinedbyrefinement,choice,execution,certainty

andincrementalinnovationsetc.Herearereturnsoftenpositive,proximate,orpredictable.

Explorationismorecontrarydefinedbysearch,experimenting,risksandradicalinnovations

etc.Andherearethereturnsoftenmoreuncertain,distant,oroftennegative.Thediversity

ismoreoveroftenexplainedinhowexploitationcharacterisesbyashorterdistanceintime

andspacetowardsachievingprofitablereturnscomparedtoexploration.(March1991)

Otherscientistsexplainsexploitationaslocalsearch(Fleming&Sorenson2004;Raisch&

Birkinshaw2008),whichreferstothehowdevelopmentsarebasedonpreviousexperiences

inresearchanddevelopment(Fleming&Sorenson2004).Thebenefitinlocalsearchare

linkedwithagreaterliabilityintheinnovationprocess,aspastexperiencesprovidesthe

inventorbetterinsightinto“whattodoorwhatnottodo”.Contrary,thispotentialbenefit

alsofunctionsasapotentialdownside,aspastexperiencecanpreludetheinventorfor

42

investigatingmoredistantandpotentiallymorevaluablepossibilities(Fleming&Sorenson

2004).

Andbecauseofthepotentialup-anddownsidestheseinnovationstreamsposses,various

scientistsemphasisestheimportanceofpursuingexploitationandexploration

simultaneously(Guptaetal.2006;March1991;Raisch&Birkinshaw2008),alsoreferredto

asorganizationalambidexterity.

5.5.1Ambidextrousorganization(ambidexterity)

Referencingtheresourcebasedview,Eisenhardt&Martin(2000)explainstheenhancement

of“blendingits(RBV)usualpath-dependentstrategiclogicofleveragewithapath-breaking

strategiclogicofchange”(page1118),referencingthelogicbehindambidexterity.

Raisch&Birkinshaw(2008)hasdefinedorganizationalambidexterityas“anorganization’s

abilitytobealignedandefficientinitsmanagementoftoday’sbusinessdemandswhile

simultaneouslybeingadaptivetochangesintheenvironment”(page375).AndO’Reilly&

Tushman(2013)furtherelaboratedonorganizationalambidexterityinthesenseofa

organizationsabilitytobothexploitandexplore;“tocompeteinmaturetechnologiesand

marketswhereefficiency,control,andincrementalimprovementareprizedandtoalso

competeinnewtechnologiesandmarketswhereflexibility,autonomy,andexperimentation

areneeded”(page3).

Pointbeing,thatwhatmightbecharacterizedasvaluableinlong-termmightnotbe

valuableinshort-termandviceversa(March1991;Raisch&Birkinshaw2008),hence

adoptinganambidextrousapproachtoovercomethischallenge.Thisbeingsaid,adopting

thisparadoxicalchallengecanbeverydifficult.Thisisbaggedbymultiplestudieson

adoptingexplorationandexploitationsimultaneouslyrequiressubstantiallydifferent

structures,processes,strategiesetc.topursueandmayhavedifferentimpactsonthe

adaptionandperformanceofafirm(Holmqvist2004;He&Wong2004).

Itisbelievedthatthebestcompaniesarethosewhocansimultaneouslybalanceexplorative

innovationwithexploitativeinnovationinanambidextrousapproach(Raisch&Birkinshaw

2008;Raischetal.2009;He&Wong2004),moreover,theorizingaboutadaptingan

ambidextrousapproachisarguedmostapplicablebylargeenterprises(Teece2007;Chang

43

&Hughes2012).Adoptinganambidextrousorganizationifoftenalignedwithhaving

organizationalsub-unitsanddividingunitsinexplorationandexploitation(Raisch&

Birkinshaw2008),whichcanbedifficultforSME’sduetotheirrelativelyresource-constrain

nature.However,Chang&Hughes(2012)hasarguedSME’sbeingabletoobtainan

ambidextrousapproachbybeingabletoshapetherightinternalenvironmentandadopting

bothrisk-takingandadaptabilityleadershipmethodologiestosupportbothinnovation

types.Meaning,risk-tolerancedefinedbymanagershasaneffectoftherisk-toleranceof

thefirm.Thesamegoesformanagers’adaptabilitytonewandemergingconditions.

Utilisingbothwillsignaltoemployeestheneedtoambidextrouslymanageinnovation

opportunities.Theseapproachescanthenfunctionasaprecursorforabalanceof

explorativeandexploitativeinnovation,whichinturn,mayovercomeresourcelimitations

andgeneratesuperiorperformance(Chang&Hughes2012).

5.5.2Userdrivencommunity

Oneaspect,ishowtoorganizeinnovationthroughanambidextrousorganization,whichwas

presentedin5.5.1.Anotheraspect,isthefosteringofideasfortheinnovationdevelopment.

Inthemodernworld,ideascanoriginateanddevelopfromanywhere(Pisano&Verganti

2008;Baldwinetal.2006).Ideagenerationtowardsproductinnovationusedtobean

exclusivedomainformarketers,engineers,and/ordesigners(Poetz&Schreier2012).Point

being,thatfirm’sprofessionals,unlikeusers,possessedtheexperienceandexpertise

requiredtocreatenovelideasthatadditionallywouldbeappealingtoabroaderpartofa

market.Theseideaswouldreflecttheproductdevelopmentmadebyprofessionalstooften

becharacterizedbymaintaininginnovationrentsandreliabilitybecauseoftheirexpertize.

Whichwould,again,referencelocalsearchasabasisforcreatingideasthatpossesstherisk

ofinternalexpertiseblockingthepotentialoffindingmorealternativeandpotentiallymore

successfulsolutions(March1991;Poetz&Schreier2012).Fundamentally,userswouldnot

possessthiskindofbias.Andcontrary,ideacontributorsthathavedirectandeffectiveuser

experiencemakebettercontributionsthandoequallyqualifiedindividualswithoutsuch

experience(Hienerthetal.2007).Theunderlyingaspectistherefore,thatItshouldnever

beexpectedforuserstocompetewithprofessionals,however,thenotionofuserspossibly

feedingideasforinnovationisinevitable(Poetz&Schreier2012).Additionally,forobtaining

44

usefuluserideaswouldmosthighlybedependedontheunderlyingindustry,product

categoryorthenatureofthespecificproblem.

5.5.4Summationofstepfour

Throughoutstepfourithasbeenpresentedhowsolely

performingincrementalorradicalinnovationcanpotentially

makefirmsvulnerable.Thereby,adoptingexploitationand

explorationcoherentcanhelpmitigatethesevulnerabilities.

Theoretically,thebenefitsaremanyonadoptingan

ambidextrousorganizationwithinthefirm,whichincentivises

thestudyofhow/ifthecompanycanincreasethisapproach.

Additionally,atechnologybasedcompanythatfocuseshighondevelopmentofthe

platformshouldfurtherfocushighontheideagenerationsintermsofbetterunderstanding

“whattodonext”.

5.6Aframeworkforgrowingaplatformwhileadaptingthe

industryphase

Chapterfour&fivehasnowpresentedthebiggestchallengestowardsgrowingaplatform

businesswhileadaptingtheindustryphase.Andanswerstothefirsttwosub-questionshas

beenprovided.Beneathwillshowasummationoftheanswersandanoverviewonthe

frameworkwillbeprovided.

1. What are the challenges to growing a platform business? 2. What additional challenges does the industry phase create for growing

a platform business?

ThefirstquestionsarelargelyansweredbyusingEvans&Schmalensee’s(2007)catalyst

frameworkasastructurewiththeassistanceandcombiningofrelevanttheorists.The

challengesarebyfarconsistingwithunderstandingthemarketlandscapeandits

competitors.Combinedwiththeunderstandingofhowtonavigatewithintheindustryboth

intermsofcollaboration,innovationdevelopmentsaswellastheunderstandingoffirm

4. Innovation Development

• Controlgrowth• Exploitationvs.exploration

• Ambidexterity• Ideageneration• Planforwhatisnext

45

resources.Inparticular,toplatformbusiness,elementsinformofadoptionprocess,single-

vs.multihomingandnetworkeffectserves,inaddition,ofhighrelevance.

ThesecondquestionsarelargelyansweredbyusingAfuah&Utterback(1997)research

theoriesontechnologicalevolution.Inaddition,theansweringhasbeenassistedbys-curve

theoryanddominantdesign.Thechallengeshere,areunderstandingthetechnological

evolutiontheplatformissituatedwithin,asdifferentstrategiesarerequiredfordifferent

phases,whichbythat,caneffectthefirmstrategyinmostdoings.Theimportanceis

amplifiedbytheplatformfundamentalexistenceontechnology,whichservesthereasoning

forunderstandingthecontext.

Thesefindingshaveresultedinatheoreticalframeworkforgrowingaplatformbusiness

whileadaptingtheindustry.Itshouldbeunderpinnedthatthestrategicelementsarelargely

adaptedonsomewhatestablishedplatforms.

Frameworkforplatformbusinessadaptingtheindustryphase.(Authorsown)

1. Understand the market landscape • Industryhistory

• Analyseindustryanditsdrivers(portersfiveforces)

• Specifyfirmresources

• Aligningactivitiesincompany

4. Innovation development







• Single-vsmulti-homing

• Identifyoptimalpricestructure


2. Industry phase

• Analyseindustryphase

• Understandthedominantdesign



Figure7-Detailedtheoreticalframework(Authorsown)

46

PART TWO

47

PART TWO

Partoneofthisthesishascoveredthetheoreticalbackgroundformyresearch,andresulted

inamergingaframeworkforexpandingplatformbusinesseswithafocusonindustryphase,

whichessentiallyprovidedanswerstothefirsttosub-questions.Parttwoofthisthesis,will

investigatethemainobjectiveoftheresearchbyultimatelyprovideanswerstotheoverall

researchquestionofthethesis:


Inordertoprovideanin-depthanswertothisquestionitwillrequiretheanswersforthe

twolattersub-questions,whichwillbeinvestigatedinthefollowingchapter.Here,Iwill

adapttheframeworkconstructedinchapterfive,andtherebyanalyzeBilly’scurrentmarket

situation.Theempiricalfindingsextractedfromthedatacollectionprocess,willthusserve

asfoundationtoprovideanswerstothethirdsub-question:

3. Howdothechallengeseffectthecasecompany?

Theanswerstothethirdsub-questionofthisthesiswillleadmetoadiscussionofcurrent

challenges,whichessentiallywillprovideanswersforthefourthsub-question


Withprovidedanswersforallfoursub-questionsaconclusionforthethesiscanbe

generated,whichwillhelpanswerthemainresearchquestion.

CHAPTER 6: ANALYSIS

AsillustratedthroughoutPartOne(Chapterfourandfive),amergedframeworkon

platform-andindustryphasetheorywasneededinordertosufficientlycovertheresearch

focusinthisthesis.Theframeworkhascombinedimportantandrelevantaspectsfromthe

twofieldsofknowledge,inordertoanalyzethegrowingofaplatformbusinesswhile

48

adaptingtheindustryphase.Theframeworkwillinthefollowing,beappliedtothe

empiricalfindings,whichwillthroughtheanalysisgiveanswerstothethirdsub-question:


Thischapterwillfollowthestructureoftheframeworkdevelopedinchapter5.Eachpartof

theframeworkwillbeanalysedwithBillyascase.Thestrategicdecisionsandlogicsbehind

themwillservetounderstandthereasoningbehindBillyandtheframeworkwillserveas

theanalyticalstructure.

Thischapterwillstartwithanalysingthemarketlandscapeandmarketcompetitionofthe

accountingindustryinDenmark.Next,thephaseoftheindustrywillbestudiedtobetter

understandthecontextforwhichBillyoperateswithin,andbythat,howtoadapt

accordingly.Third,anunderstandingofthedifferentaspectsandparametersofcompeting

strategicallywithaplatformintheaccountingindustrywillbeanalysed.ThiscanhelpBilly

tobetterpositionthemselveswithintheindustryandtowardstheirowncustomers.And

finally,ananalysingofBilly’sinnovationprocesswithfocusonunitingtheunderstanding

betweenend-usersandspecialistswillbeoutlaid.

6.1Marketlandscapeoftheaccountingindustry

WhenBillyapproachedtheaccountingindustry,theyentered

acompetitivelandscape,thatmoreover,possessedvery

establishedplayers,henceE-conomic(Sørensen,(b)2011).

StartingoutBillydevelopedtheirsystemasaCloud-based

SaaSprogramanddifferentiatedthemselveswithanintuitive

interfacetailoredtowardstheend-usersoftheprogram-a

similarapproachtheirmostdirectcompetitor(Bil1,2016;Bil

2,2016;Bil3,2016)Dineroused(Finans2014;Wittorff,

2011;Jensen,2013).Iwillfurtherelaborateonthe

competitivelandscapein6.1.2,butpriortothat,andaspresentedinsection5.2,Iwill

outlaythefoundationofthebasicunderstandingofhistoricaltechnicalevolutionthe

accountingindustryhasundergonethelastfifteentotwentyyears,asthisgivesvaluable

1. Market landscape


• Specifyfirmresources• Aligningactivitiesincompany

49

insightintotheindustry.Inaddition,itgivesinsightsintotheformertechnologicalevolution

andindustryphases,whichwillbeelaboratedin6.2.

6.1.1Industryhistoryonaccountingsystems

Theaccountingindustryhasthelasttwentyyearsbeenimpactedbytechnologicalshiftsin

thedevelopmentofaccountingsystems.Withinthesedifferenttechnologicalfoundation,it

canbearguedthatdifferentcompanieshavebeenpioneeringtheerasrespectively.Iwill

elaborateonthecurrentdominantdesignin6.2.

Eraofstationaryaccountingsystems

Throughoutthe90’sandbeginningofthe00’sC5wastheaccountingsystemintheDanish

industrywiththemostsuccess(Jensen,D.(a)2008).Itwasacustomizablestationary

system,andMicrosoftwaspioneeringthistechnology.However,itwasbuildonacomplex

system,whichmeantbuyingcostlycoursesinordertolearnhowtousethesystem

(Mediawatch(a)2003;Mediawatch(b)2003;).Additionalcostwasreflectedinthecostof

consultancyfirms,installingcosts,costlyupdatesandtheconstantfurthereducationfor

everytimeanewupdatepatchwaspushedout(Mediawatch2004;Andersen,2004).

InsteadofsellingSaaS,Microsoft’swholebusinessmodelwasbuildonsellingsoftware+

service,meaningMircosoft’sestablishedpartnernetworkwouldmakemoneyonsales,

serviceandoninstallations(service),whileMicrosoftwouldservethemaintenanceonthe

softwarepart(software)(Jensen,(b)2008).

Eraofcloud-basedaccountingsystems

Theinternetmadethenexttechnologicalshiftpossible.E-conomicpioneeredthis

technology,andchangedtheaccountingsystemandbusinessmodeltoafullcloud-based

systemwithalowcostsubscriptionbasedrevenuemodel(Bertelsen,2006;Børsen2008).

Thecloud-basedapproachmadethesystemmuchmoreflexible(Svarre,(a)2001).

Additionally,thelearningcurveonthefunctionalityofE-conomicwasfarlesscostly,asE-

conomicuploadedfreeexplainervideosoneveryfunctionalityetc.onYoutube.From

hereon,E-conomicexperiencedrapidlygrowth(Svarre,(a)2009)andsoon,every

accountingsystemwouldmakesuretofollow,makingsuretobecloud-based(Sørensen,(a)

2011;Christensen,2013;Mygind,(a)2008;Mygind,(b)2008).

50

Shiftinfocustowardsend-usersinsteadofspecialists

Thecombinationofaccountingsystemsmigratingtocloud-basedsolutions,andtherapidly

developmentthesystemshasundergone,hasopenedupfornewdifferentiated

perspectives(Christensen,2013).NewcomerslikeDineroandBillyhasdifferentiated

themselveswithanintuitiveinterfacetailoredtowardstheend-usersoftheprogram

(Finans2014;Wittorff,2011;Jensen,2013;Rasmussen,2013).Asmentioned,endusers

wouldpreviouslyhavehadtopayforcostlycoursesjusttounderstandthesystem.The

approachnow,however,isthatwhatwasoncesolelyunderstandableforspecialistsshould

nowbesointuitivelydeveloped,thatanormalpersonwithnounderstandingofaccounting

canhandleit.MartinThorborg(founder&CEOofDinero)statedthat“iftheyhadtomakea

video,explainingthefunctionalityofafeature(anE-conomicapproach),hewouldseeit,as

theyfailedbigtime”(3business,2016).Bycombiningmoderntechnologyandanintuitive

approach,thepresentgoalisthereforetomakethespecialistsredundant(Moses,(b)2013;

Simonsen,2016).

51

Figure8-Historicoverviewindominantdesignofaccountingsystems

6.1.2Theindustryofaccountingsystemsanditsdrivers(porterfiveforces)

Aspreviouslyindicated,theaccountingindustryof

cloud-basedsystemsinDenmarkhasexperiencedhigh

completionintermsofthemanyplayersonthe

market,bothveryestablishedonesaswellas

relativelynewcomers.Ascenariolikethisoften

possessamarketwheredifferentiationthatarehighly

basedonincrementalapproaches,meaning

differencesbetweencompetitorsareoftenfewer

Shiftinfocus:Billy/DineroPioneer:Economic

Lessfocus Highfocus Highfocus

Dominantdesign:StationaryMicrosoftC5Pro’s

• Madeitpossible• Fullycustomizable• Buildonfoundationof

specialists(specialists/certifiedpartnership)

Con’s• Expensivefirstbuy• Expensiveupdates• Expensivelearning

coursesorconsultantadvisory

Pioneer:MicrosoftC5

End-users

HighfocusLessfocus

End-users End-users Specialists

Lessfocus

Dominantdesign:Cloud-basedEconomicPro’s

• Subscriptionbasedwithfreeupdates

• Easyaccessible(Cloudbased)

• Possibletoself-learnforfree(Youtube)

• Buildonfoundationofspecialists

• Optimizingworkprocessesforspecialist

Con’s• Onlyunderstandablefor

specialists• Manypriceadd-ons

makingthepricingstrategyintransparent

Dominantdesign:CloudbasedNewshiftinfocus:Billy/DineroPro’s

• Firstaccountingcompanieswithfullattentiontoend-users

• Freemiummodel• Intuitiveinterface• Nofinancialterms• Buildwithoutneedfor

specialistsCon’s

• Devaluatingthevalueofspecialists

• Lowfunctionality–meaningonlycompanieswithlowneedcanuseit

Specialists Specialists

Stationary Cloudbased Cloudbased

90’sdominantdesign 00’sdominantdesign 10’sdominantdesign

Figure9-Portersfiveforces

52

thantheirsimilarities,alsoreferredtoaseraofincrementalchanges(Anderson&Tushman

1990).Understandingthemarketlandscapeisimportantasitultimatelyservesthe'relating

acompanytoitsenvironment’(Teeceetal.1997,page511).Iwilltherebyanalysethe

currentmarketlandscape,andtogetafullcomprehensionIwilluseportersfiveforcesto

structureit.Thefollowinganalysisisextractedfromtheempiricaldatacollectionconducted

inthisthesis.

Threatofnewentrants

Technologyhasmadeitaloteasiertostartacompanyandgetgoing.Thethreatisbest

described,asmanyentriesarelowinthesenseofenteringthemarket,butconcerningthe

complexityofaccountitismuchmoredifficulttogetasustainedfootholdandbeareal

threattowardsthemoreestablishedcompaniesinthemarket.(Spec1,2016;Spec2,2016;

Spec5,2016;Bil1,2016;Bil2,2016).

Inadditiontothecomplexityofaccountingtheend-userneedstomaintainmanyrulesand

laws,wherehighfeeswillbeattributedtheend-customeriftheyfailtodothat

(Skatteministeriet2004;Smvportalen2012;Skat2011;Fsr2014;Skat(b)2016).Thismeans,

thateveryaccountingsystemfaceshavingahighcredibilityandassuranceinfacingthose

obstacles.Andbecauseofthecommonlyusedsubscriptionbasedmodel,oftenbasedona

freemiummodel(Spec1,2016;Spec2,2016),economiesofscalewillevidentlybeafactor

forexperiencingsuccess,whichfurthercontributestowhythethreatofnewentrantsare

low.

Threatofsubstitutes

Fromtheend-usersideithas,becauseofthehighrivalryandmoderntechnology,becomea

loteasiertoreplaceyouroldaccountingsystem(Regnskabsguiden2014;

Forretningsøkonomi2014).Accountingsystemshasevenofferedtomakethetransferfor

free(Bengtson,C.2016;Billyyoutube2015).However,thesefreetransfersdonotaccount

forthehistoryofpostingsinyourformeraccountingsystem,astheyonlytransferprimo

postings.Somakingaproperswitchofaccountingsystemisstillverycostly(Spec1,2016;

Spec6,2016),aswellastheunknowingofwhetherthesamefunctionalitiesoftheold

systemscanbeupholdinthenewone(Spec3,2016;Spec5,2016;Spec7,2016).For

53

specificsituations,switchingcostmightbelow,whichtherebyraisesthethreatof

substitutes,butthatisonlysubstantiatedbyend-usershavingnointerestsintheir

accountingsituationandarehavingitoutsourcedcompletelytoaspecialist(Spec1,2016;

Spec2,2016;Spec3,2016;Spec6,2016;Spec7,2016;Spec8,2016).Andasthisisonlya

smallpart,thethreatofsubstitutescanthereforbedescribedaslow.Thisviewpointis

furtherbaggedbythefactthatBillydoesnotexperiencealotofend-usersswitchingto

othersystems,nordoesBillystealalotofcompetitors’end-users(Bil1,2016;Bil2,2016)

Forthespecialists’sidesubstitutesplaysawholeotherrole.Bigaccountingfirmslike

Deloitte,Pwcetc.mightuseaspecificaccountingsystemwithintheirorganisationstoserve

theirclients.Buteventhem,andtherestofthemarketofspecialisthasbeengettingused

tomulti-home(Spec1,2016;Spec2,2016;Spec3,2016;Spec4,2016;Spec5,2016;Spec6,

2016;Spec7,2016;Spec8,2016).Specialisthasbecomemoreusedtothefact,thatthe

end-customerhasamuchmorecertainopinioninusingaspecificaccountingsystem(Spec

2,2016;Spec3,2016;Spec5,2016;Spec6,2016;Spec7,2016).

Bargainingpowerofsuppliers

Thecloud-basedaccountingsystemsaretoalargedegreenotaffectedbythepowerof

suppliers,whichthereby,canbedescribedaslow.Thebusinessmodelofcloud-based

accountingsystemsisfarmorebuildondevelopingthesystem,andbythat,theirsuppliers

canbearguedtobetheirgreatemployers(coders)oftheirdevelopmentdepartment.

Cloud-basedaccountingsystemssuppliersarebestdescribedasthesystemstheyusefor

developing.

Bargainingpowerofbuyers

Thepowerofbuyersisalsolow,asswitchingcostsarehigh,thebuyer(end-user)isoften

uneducatedabouttheproduct(accountingsystem)(Spec2,2016;Spec3,2016;Spec5,

2016;Spec6,2016)andeverybuyerpurchasecomprisesasmallportionofsellersales(Bil2,

2016).However,thisscenariocouldchangeovertimes.First,bythereducedlegalaudit

assessmentSME’snowhastothrough(Fsr(b)2013).Thismeansforstart-ups,theycan

becomepricesensitive,astheydonotneedasbigasolutionasprevious,andtherefore,are

morelikelytotryoutaccountingsystemswithfreemiummodelsorcontactaspecialistona

54

laterstage.Whichleadstosecond,contactingaspecialistatalaterstageservestominimize

theimpactaspecialistopinioncouldposeinchoosingaspecificaccountingsystem.Instead,

itcanservebuyerstobecomemuchmoreeducatedwhenchoosinganaccountingsystem–

ultimatelyincreasingtheirbuyerpower.Thisscenarioisalreadyhappeningtosomeextent,

inthesense,thateventhoughend-usersmightbeuneducated,theyhaveobtainedabigger

opinioninthechoosingofanaccountingsystem(Spec2,2016;Spec3,2016;Spec6,2016;

Spec7,2016).

Rivalryamongexistingcompetitors

Incontrarytoalloftheotherfactorsofportersfiveforces,therivalryamongcompetitorsis

consideredhigh.Mainlybecauseofnumerouscompetitors,productsareundifferentiated,

brandloyaltyisinsignificant,thebigplayersinthemarkethaverelativeequalsizeand

marketshare,andtheindustrygrowthisslow.

Figure10-Marketsharebymostsignificantaccountingsystems(DineroVideo(2016);BillyPresentation,2016;E-conmicandMicrosoft:Rasch,H.(c)(2014);Visma:Jensen,D.2015)

ThepollofcompetitorsshownbyFigure10canbearguedtosomewhatbiased.Thisis

becauseMicrosoftandE-conomic’systemscanserveaccountingswithmuchhigher

complexity,andthussupportamuchwiderrangeofcompanies.However,anddespite

MicrosoftandE-conomicshighercomplexity(Spec1,2016;Spec2,2016;Spec3,2016;Spec

6,2016;Bil2,2016),accountingsystemslikeBillyandDinerohavetakenmarketsharefrom

them(Rasch,(b)2014).Itismyassessment,thatpublicityhasmadesuretocoverthe

intenserivalrywherenooneisneglected.Relativelysmallcompetitorstakeonlargerones

55

andvisaversa,andtheyareallfightingforthebestpositionintheSMEmarket(Riis,2014;

Rasch,(a)2014;Rasch,(c)2014;Moses,(a)2013;Sørensen,(b)2011).

Referencingthenewentrants,themarketdoesposesmanynewaccountingsystemswith

freemiummodels.Theseaccountingsystemshaslittleaccountinginsight,andareoften

buildonasomewhatextendedMicrosoftExcelmodel.Theydonotgetmuchtractioninthe

market,butdoescreatealotofmuddlingfortheend-usersperspective.(Spec1,2016;Spec

2,2016).Furthermore,Billydoesnotseetheseasathreat(Bil1,2016;Bil2,2016).

Eventhoughtheaccountingsystemsalldifferincomplexityandtheunderlyingaspectof

verydiversecustomerperspectives(end-usersandspecialists),therivalryisstillintensified

bythechaseforthepositionofbeing“besttoolfortheend-users”(tryingtoposition

themselvesinthe“toolforend-users”&“lowcomplexity”area).

Elaboratingonfigure11,itcanbeassumed,thatastheaccountingsystemswithlow

complexityexperiencegrowth,thenthecomplexitywillfollow–thatitwillbealinearcurve.

ThisassumptionisbasedonthehistoricalperspectiveofhowE-conomichasgrown,aswell

astheassumptionofwhentheend-usersofthesimpleaccountingsystemsgrowtheywill

VismaeAccounting

Toolforend-users

Toolforspecialists

HighComplexity(functionality)

LowComplexity(functionality)

VismaSummaSummarum

“othersmallaccountingsystems”

Figure11-Mappingofrivalryinthecloud-basedaccountingindustry

56

needmorecomplexsolutions.Sothisstrategyisfollowedinordertoavoidpotential

customersswitchingsysteminthefuturebecauseofout-growingthesystem,aswellas

increasingthecomplexitywillmeanaccommodatingalargercustomersegment(Bil2,

2016).Noaccountingsystemthusattemptstobetheliaisonofequallyservingtheend-user

andspecialist,inordertobeboththeirpreferredsystem,asseeninFigure11.This

opportunitywillbeelaborateoninsection7.1,andwillbediscussedbythealigningof

activitiesinBillyinordertoservebothsides.

Lastly,anadditionalopportunityexistsinthemarketasitisarguedthat30-40%ofsmall

enterpriseshastheiraccountingsysteminaMicrosoftExcelsheet(Bil1,2016;Bil2,2016).

Billyseesthisasadecreasingoftherivalry,asthecompetitionisnotsomuchaboutstealing

customersfromeachother,butmoreaboutconvincingahighmarketshareofshiftingtoa

realaccountingsystem.Itshouldbementionedhere,thataconvincingeffortappliesto

boththeend-userandthespecialists,astheseactorscanhavetheirneedfulfilledbyan

Excelsolution(Spec1,2016;Spec8,2016).

6.1.3FirmresourcesofBilly

Intermsofinnovationwithintheaccountingindustry,alotishappening,anditishappening

fast(Spec1,2016;Spec4,2016;Spec5,2016;Spec8).Billy’sapproachofbeinguser-centric

(Bil1,2016;Bil2,2016;Bil3,2016)serveswellforadaptingthemarketneeds.Combiningit

withsimultaneouslybeingonpointtowardsindustrytrendsaswellascompetitorsandtheir

innovations,canfurtherhelpBillyinpositioningthemselvesbetterinthemarket.Billy’s

capabilitiesarewhatstrengthentheminnavigatingthemarket.Theuser-centricapproach

hashelpedBillyinavoidinggutbaseddecisions,andeventhoughtheirprocessesarevery

simplified(Bil1,2016;Bil2,2016;Bil3,2016),thesecapabilitiesofshortandsimplefirm

processeshasgivenBillytheabilitytoadaptandactfastonmarketneeds/trends.

Billy’scompetenciesaretoalargeextenttiedtoBilly’sCEO,ashiswayofnavigatingand

understandingthemarkettrendsarewhatdrivesBilly’s’wayofdifferentiatingand

innovatingwithintheindustry(Bil1,2016;Bil2,2016).Asidefromauser-centricapproach,

Billydoesinnovatemore“original”ideas,asBillyunderstands,thatend-usersmightnot

understandwhatmoderntechnologyiscapableof(Bil1,2016;Bil2,2016).Iwillinsection

6.4elaborateonthedistinctionbetweentheinnovationsmade;user-centricvs.“original”

57

innovations.Thepointbeingmadehereis,innovationnotgeneratedfromtheuser-centic

approachismoreorlesssolelybasedontheCEOofBilly,whichultimately,makesBilly

vulnerable.

6.2Thephaseoftheaccountingindustry

ForatechnologicalplatformbusinesslikeBilly,

understandingthephaseoftheindustryanditstechnological

evolutionisimportant,asitshouldreflecttheirstrategic

decisionstowardsdifferentiatingthemwiththeir

competitors.Understandingtheparticularphaseshould

furtherhelptheanticipationofadaptingorstrategizing

towardsachievingthebestpossibleoutcomeforthenext

phase(s)tocome.

6.2.1Identifyingthephase

Thepresenceofcloud-basedtechnologyusedforaccountingsystemsasadominantdesign

wasclear(Mygind,(b)2008;Spec2,2016;Spec3,2016;Spec4,2016;Spec5,2016;Spec6,

2016).IthasforcedanestablishedsystemlikeMicrosoftC5tofollowacloud-based

structure(Rasch,(b)2014)andultimately,evolvedabetterfoundationfornetwork

externalities,availabilityofcomplementarygoodsandlearningeffectstoarise(Spec2,

2016;Spec3,2016;Spec6,2016).Theeraofincrementalchanges(Anderson&Tushman

1990;Uusitalo2014)arepresentasmostinnovationsaresimplifyingormakingdifferent

processesautomated(Spec3,2016;Spec4,2016;Spec5,2016),withcloud-based

accountingsystemscopyingfromeachother(Spec5,2016).Theindustryforaccounting

systemscanthereforebearguedtohaveitspresenceinthespecificphase.Andreferencing

thespecificphaseintensifiestheunderstandingofpreparingforthephaseofdiscontinuity

thatistocome,asthisphasehasshowedtopotentiallydisruptthecurrentdominant

design.

Becauseofthehighswitchingcostsandtheoutsourcingofcompaniesaccounting,itisnot

rareforcompaniestostillhaveanoldnon-cloud-basedaccountingsystem(Spec2,2016;

Spec3,2016;Spec7,2016;Spec8,2016).Theshiftinusingmoreintuitivebasedaccounting

2. Industry phase

• Analyseindustryphase• Understandthedominantdesign



58

systemismostsignificantintheyoungersegment(Bil1,2016;Bil2,2016)oronnewstart-

upswithsocalledMac-brains(Spec2,2016),referringthefactthatApplefanslovesthe

intuitiveapproach.

Thisfact,servestheunderstandingofhowdevelopedthespecificphaseseemstobe.

Fundamentally,thecloud-basedtechnologyisverydeveloped,andhasundergoneerasof

incrementalchangesforalongperiod,butbecauseofthelongtransitionforcompaniesto

switchaccountingsystems,theshiftinphaseseemstopossiblybedeferred.Thisisfurther

supportedbythecomplexityanaccountingsystemhas/canhave,asmostinnovative

developmentsseenintheindustryoriginatesfromnewandsimpleaccountingsystems

(Spec4,2016;Spec5,2016).Meaningthedevelopmentofthesesimpleaccountingsystems

canbecomemuchmorecomplex,whichseemstogivetheunderstandingofthephase

longevity.

Specialistsasasurroundingmarket

Thedividingofcloud-basedaccountingsystemsandspecialistisbasedon;newaccounting

systemsapproachofseparatingthemselvestowardsspecialists(Moses,(b)2013;Simonsen,

2016),andthefactthat,innovationsmadeincloud-basedaccountingsystemsare

significantlyoptimizingandtherebychangingtheworkprocessesofspecialist(Spec3,2016;

Spec4,2016;Spec6,2016).Theworkprocesschangeisseenintheautomationand

simplificationofaccountingforcingspecialiststofocusmoreoncounsellingthanroutine-

based-accountancy-typing.Thereby,itcanbeargued,withthesetwoconcurrentindustries,

thatinnovationmadeinthecloud-basedaccountingsystemshasahigherimpactonthe

marketofspecialistscomparedtothemarketofcloud-basedaccountingsystemsitself.And

bythat,theradicalchangeorshiftinphaseseemsmorenearthespecialiststhancloud-

basedaccountingsystems.

Eventhoughsomespecialistswelcomethisshift(Spec1,2016;Spec2,2016;Spec6,2016;

Spec8,2016),acontradicting,butlogicalcouplingseemstoarise,whenanentireindustry

ofspecialistthathasbeenusedtospendtheirtimeonroutine-based-accountancy-typing.

Thecouplingisseenwhenanentireindustryhastomakethetransitiontowardsspending

theirtimecounsellingithastoeffectthemacroeconomicconditions.Thisriskwasalsoseen

59

throughmyinterviewsasmanydidnotchargeforcounsellingorathighest,onlycharged

twentypercentoftheirtimeforit(Spec3,2016;Spec4,2016;Spec5,2016;Spec7,2016).

Billyasacatalyst

Apotentialdownsideoftheoversimplificationofsystemsisleadingpeople,who

fundamentallydonotunderstandaccounting,tonotunderstandwhentheymakemistakes.

Thesemistakescanevolveintocostlyaffairs,wherespecialistsareneededinordertosolve

problemsproperly,whichwillendupcostingmorethanifspecialistswerecontacted

beforehand.(Spec2,2016;Spec5,2016;Spec6,2016;Spec8,2016).

Billy’schallengeliesinwhethertheybelieveintheirtechnologyandsystemcandowithout

specialists.Ifnot,thefoundationislaidfor,Billyasacatalyst,tohelpspecialiststransition

fromroutine-based-accountancy-typingtoahigherdegreeofcounselling,whichinturn,will

furthermaximizethetransaction-valueBillycancreatebyconnectingspecialistwithend-

users.IwillelaborateonthischallengeforBillyinthediscussionchapter(7.2).

6.2.2Planningfornextphase&surroundingmarkets

Asformerimpliedin6.2.1,theargumentforashiftinindustryphaseinBilly’sindustryis

arguablypresent.Therivalryintheindustryismorefocusedontheconstantdevelopingof

therespectiveaccountingsystem(Spec1,2016;Spec6,2016;Bil1,2016;Bil2,2016).Billy,

moreover,seemtoputmostoftheireffortincombiningexistingtechnologytowards

betteringtheirservicetotheirendcustomers,andhasincreasedtheirfocusoninnovating

forthespecialistsaswell(Bil1,2016;Bil2,2016).Billyarenotafraidofchangingcourseor

adopttechnologywithinthecloud-basedsegment,butletstheirfocusbedefinedbythe

marketcompetition,bothwithpricingandinnovation.Thisfocusonhead-oncompetition

onpioneeringinnovationsinthemarketatasimilarprice-structuretowardstheir

competitors(Spec2,2016),ultimatelyincreasestherivalry.Thisdescriptionishighly

characterizedbyeraofincrementalchanges,whichtheoretically,leadsBillytobevulnerable

towardsoutsidersapproachingtheirindustrywithradicaltechnology.Adiscontinuityphase

isoftencharacterizedbytrulyradicalinnovation,whichoftenareintroducedbya

competitorfromoutsidetheestablishedindustry(Afuah&Utterback1997).Moreover,

impactsofadiscontinuityphasewillfurtherbedefinedbythedestroyingoffirmspecific

60

assets(Afuah&Utterback1997;Teeceetal.1997).Theoreticallyspeaking,thecloud-based

accountingindustryisinavulnerablesituationoffacingapotentialdiscontinuity.Andthe

factthatthecloud-basedaccountingsystemindustryhasundergoneeraofincremental

changesforalongtimestrengthenstheargumentforaphaseshift,whichshouldintensify

thecloudbasedaccountingsystemsprecaution.

However,anexactoriginofadiscontinuityphasecanbesomewhatdifficulttoforesee.

Additionally,itshouldalsobeconsidered,thatbehistoricallyspeakingwithinaccounting

systems,highswitchingcostmighthelpBillythroughsuchimpact,oratminimalgivethem

extratimetoadaptorchangecourse.IwillelaborateonBillyinnovationprocessin(6.4).

Inaddition,anindicationofaplatformshiftseemsmoreurgent(Spec2,2016),referringthe

developmentofthetechnologytoshiftfromaninternetbrowsertoanapplicationonyour

phone.Theshiftisfromtheend-users’perspective,andhasalreadybegunasmost

accountingsystemsalreadyhaveone,butcombiningtheapplicationwithnewOCR

technologycouldpotentiallyfulfilcustomersneedintermsofnotneedingacomputer(Bil2,

2016;Bil3,2016;Dineroyoutube2016).IwillfurtherelaborateontheOCRinnovationin

section6.4.1

6.3Strategicdecisions

Asalreadyestablished,Billyoperatesinamarketwithhigh

rivalryandhassurroundingmarketsthatpotentiallyfacesa

shiftinindustryphase,whichtheoretically,canbecritical.

Thereby,understandinghowtocompetestrategicallyand

positionthemselvesinthemarketisessential,asthis

strengthensBillytowardsdifferentiatingthemagainsttheir

competitors.

6.3.1Platformadoption

Competingstrategicallyinplatformbasedmarketsserves

manyfacets.Onthetopicofcompetingagainstcompetitors

forBilly,withasubscriptionbasedbusinessmodel,







61

understandingandenhancingtheiradoptionprocessisessential.

Pricingdecisions

Findingtheoptimalpricingstructurecanelevatetheplatformadoptionandcanbeusedas

atoolforeachsidetogrowtheadoptionrate,respectively.Subsidizingcanbeusedinorder

toattractaspecificside,whichBillyaredoingtoattractspecialists(Bil2,2016).However,

thisisdonebasedon,whatthe“industrialstandard”is(Bil2,2016),again,referencingthe

rivalryamongtheaccountingsystems.TherivalryfurtherforcesBillytofollowthemarkets

pricingstructure,bothwithafreemiummodel,butalsowhencompetitorsareraisingtheir

prices(Bil2,2016).Therivalryamongsimpleaccountingsystemscombinedwiththeir

storytellingof“end-userbeingabletodosomething,theythoughttheycouldnot”atalow

pricecreatesanintransparentmarketwithdifficultiesinraisingtheprice(Spec1,2016;

Spec2,2016).

Multi-homing

Concerningend-users,single-homingisreallytheonlyviableoption,asusingmultiple

systemsfordoingyouraccountingwouldequaldoubleamountofwork.

Forspecialists,however,multi-homingisverycommonandissomethingtheyoughttodoin

ordertoservetheirclientsbestpossible(Spec2,2016;Spec3,2016;Spec4,2016;Spec5,

2016;Spec6,2016;Spec7,2016;Spec8,2016).Notonly,istheaccountingsystems

positioneddifferentinthemarketintermsofcomplexity,butthecustomershavealso

gainedahigherknowledge/opiniononwhatsystemtheywanttouse(Spec3,2016;Spec5,

2016;Spec6,2016).Thishasbasicallybeeninflicteduponend-usersaspartsofthe

accounting,whichwaspreviouslyoutsourced,isnowbeinggivenbacktotheend-user,

ultimatelylettingtheend-usercommitthemselvesdeepertoaparticularsystem.And

referencingthissimpleeraofaccountingsystems,thisthenleadstosimplefactorssuchas

lookandfeelofthesystemhasnowmorethaneverbeenfactorstoconsiderinorderfor

adoption(Bil1,2016;Spec2,2016).Soinsteadofmasteringonesystems,specialisthas

turnedtobeinggood,oratbest,masteringmultiplesystemsinordertoservetheirmarket

bestpossible(Spec2,2016;Spec3,2016;Spec4,2016;Spec8,2016).Andbecauseofthis,

thechallengeforBillyisontherivalryamongspecialistschoosingBilly’ssystemovertheir

62

competitors.Themostsignificantdifferencetowardstherivalryinwinningoverend-users,

isspecialistshasmuchhigherdemandsinfunctionalitycombinedwithmuchlower

switchingcostsanddifferentpricingstructures.Iwillfurtherelaborateonthischallengein

Chapter7.3.

Complementaryproducts

ForBilly,usingcomplementaryproducts“makesitsowe(Billy)canexpandourfunctionality

withouthavingtobuilditourselves...andifwedidn’tdoit(usecomplementaryproducts),

wewouldbereallydisadvantaged(towardscompetitors),sofirstly,itisanecessity...”(Bil3,

2016,Q22).Henrikisnotonlyreferringthepresenceoffinancialswitchingcost,butisalso

emphasizingtheuseofcomplementaryproductsasashortcuttoaddedvalueforBilly.This

valueisfurtherextended,asoneofBilly’sbiggestchallengerightnow,isfindingdevelopers

(Bil1,2016;Bil2,2016)inordertokeepupwiththespeedoftheirdevelopment.Billy’suse

ofcomplementaryproductaremostlybasedonadd-onmoduleordatainterface,whichare

theeasiesttoimplement(Nambisan2002)andhasbecomeatrendwithinthecloud-based

accountingindustry(Bil1,2016;Bil3,2016;Spec3,2016;Spec4,2016;Spec5,2016;Spec

6,2016;Spec7,2016).

Billytriestodifferentiatethemselvesamongthemanyintegrationsbydevelopingamore

thoroughexternalpartnership(Bil1,2016;Bil2,2016).Anexampleishowtheintegration

withBluegarden(asalarysystem)extendsbeyonddataexchangingwithcollaborationin

differentaspects(Bil1,2016),ultimatelycreatinglargerexposuretowardsend-customers

(Bil3,2016).

AchallengeforBillyisfindingafitforacomplementaryproductthatdoesstockcontrol(Bil

1,2016;Bil2,2016).ThisneedisbasedonBilly’suser-centricapproachinobtaining

knowledgeonwhattodevelopnext(Bil2,2016).Andcombinedwiththehighneedfora

featurelikethis,anddifficultiesinfindingasolutiononthemarket,Billywantstodevelopa

solutionthemselves(Bil1,2016;Bil2,2016).DevelopingthisfeaturerequiresBillytogo

againsttheirapproachof“doingwhattheydobest”(Boye,K.2014;Bil1,2016),and

increasethecomplexityoftheirsystem.Iwillfurtherelaborateontheuser-centricapproach

insection6.4,andfurtherelaborateonthechallengeinsection7.3.

63

6.3.2Networkeffects

Theoretically,ithasbeenexplainedhowavalueenhancementnetworkeffectcanhaveon

platforms.Asreferenced,whenBillylaunchedtheytriedtomakethespecialistredundant

(Moses,(b)2013;Spec2,2016),whereasDinerohasrecentlydonethesame(Simonsen,

2016),therebyopposingthepotentialvalueeffectthatliesinconnectingend-userswith

specialists.Ithasalmostbecomeatrendforthesesimpleaccountingsystemstobrand

themselveswiththemessagethatspecialisthasbecomedispensable(Spec22016;Spec5

2016;Spec62016;Spec82016).Contrarytothisviewpointisthatthemarkethasthe

potentialofnetworkgoods,ifanend-usercanimproveitscompanybybeingconnected

withaspecialistsutilizingtheirknowledge.Thisobviouslyalreadyhappens,howeverthe

greaterpartusesspecialistbecauseoflawsandtherequirementofaccounting(Spec2

2016;Spec52016;Spec62016;Spec82016;Bil1,2016).

Throughout2016Billyhaschangedcourse,whichisevidentintheirinnovation

developmentthatistailoredspecificallytowardsspecialists(Bil1,2016;Bil2,2016;Bil3,

2016;Spec2,2016).Billy’ssystemhaslargelybeendefinedbytheend-users’viewpoint,but

byaccedingtomorespecialist’sfocuseddemands,thefoundationforfosteringnetwork

effectshasbeenrefined.Thisstrategicviewpointisfurtherevidentinthedeeper

partnershipwithspecialistthatBillyhasrecentlyformed(Bil2,2016).Thesepartnerships

arebasedonthedemandofend-users,andbasedonexpectationoffuturegrowth.

Meaning,Billyfocusesonpartneringwithspecialistswhoarefocusingongrowingtheirown

businessaswell(Bil2,2016).In-direct(cross-side)networkeffectcanbeclarifiedbythefact

thatBillydoesnotneedalotofspecialiststoservethedemandofend-users,asspecialist

potentiallycanservenumerousactorssimultaneously,whileend-usersonlyneedone

specialist.ThechallengeforBillylaysinfindingspecialistswhomdeliverhighvalueworkand

whomdoesnothavealimitonobtainingextraworkfromextraend-users.Iwillelaborate

onthischallengein7.3.ThepotentialIn-direct(cross-side)networkeffectisfurther

strengthenedbymoderntechnology(cloud-basedaccounting),bycuttingoffwhatcould

havebeengeographicalissues.

Billy’smostdirectcompetitor,Dinero,(Bil1,2016;Bil2,2016;Bil3,2016)haswithMarin

Thorborg(founder&CEOofDinero)createdaverywellpositionedplatformforobtaining

64

end-usersintheSMEmarket(Krabbe,2014;Bil2,2016).MartinThorborgisnotonlya

public-faceandgreatspeakerforentrepreneurialminds,butalsofounderandownerofthe

Amino-platform,whichisanonlineportalforentrepreneurs.Thispositioninthemarket

createsagreatfoundationforleadgenerationforDineroandmoreover,servesincredibly

wellfordirect(same-side)networkeffect.Billyknowsthatgoinghead-to-headinthisarea

theywillmostlikelyendupassecondplace(Bil2,2016),whichiswhyBilly’sfocuson

deepeningtheirpartnershipswithcomplementaryproductisastrategicmoveinorderto

carveoutnichefocusstrategiesinthemarket.Touseanexample,Billy’sopportunityliesin

beingthebestaccountingsystemforcraftsmen.Andbypartneringupwithcomplementary

productthatservethisparticularlymarketBillythenpositionsthemselvesstrongerinthis

area,whichmoreover,haspotentialtodevelopdirect(same-side)networkeffects.

6.4DevelopingtheBillyplatform

Billyoperatesinamarketwherethespeedofdevelopmentis

incrediblyfast(Spec1,2016;Spec5,2016;Spec6,2016;Spec

8,2016),whichisconsistentwithBillychallengeindeveloping

theirsystemsfastenoughandkeepinginpacewiththeir

competitors(Bil1,2016;Bil2,2016;Bil3,2016).Abig

resourcechallengeforBillyisfindingdevelopers(Bil2,2016).

Thedevelopmentofthesystemisfurtherunderpressurebytheplatformtwo-sidedusers,

whofundamentally,hasverydiverseneedsandviewpointsonwhatisimportant(Bil1,

2016;Bil2,2016;BillyPresentation,Slide27&28).Theseneedscanbecharactarizedas

incrementalinnovation.Thecombinationofdiversityinneedsofdevelopementandthelack

ofressourcetocarryitoutthenservesasastructuralchallengeforBilly.

6.4.1User-centricvs.“original”basedinnovations

Before,Billyinnovatedbasedonthefoundersinherentandintuitiveneed.Nowthishas

shiftedtoahighlyuser-centricfocus(Bil1,2016;Bil2,2016).Theyusesocialmediaand

theirsupportfunctiontocaptureandorganizenewideasforinnovationdevelopment.On

socialmedia,theypreferablytrytodivideend-userstouseFacebookandspecialiststouse

LinkedInbecauseoftheirdifferentperspectivesandneeds(Bil2,2016).Moreover,thisway




65

ofoperatingserveasacommunicationtool,meaningusersarebeingheardandhasasaying

inthefuturedevelopmentoftheBillyplatform(Bil2,2016).Theideasaremany,soBilly

differentiatesbyapollandbetweenend-usersandspecialists(BillyPresentation,Slide27&

28,2016;Bil2,2016).Thesedevelopmentsaremostcharacterizedbyexploitative

innovations,asBillysays;thattheirusersneitherhastheunderstandingofcapabilityof

technologynorthecapacitytocomeupwithmoreoriginalideas(Bil1,2016;Bil2,2016).

Inadditiontodividinginnovationsbetweenend-userandspecialists,Billymoreoverdivides

theirinnovationonagenerallevel;theuser-centricandthemorevisionary/original

innovation(Bil1,2016;Bil2,2016).TheOCRtechnologyserveasanexampleofmore

originalbasedideas,andwillsurelychangecurrentprocessestowardsusersoftheBilly

platform.Theprocesschangewillbebyeliminatingtypingofreceiptsinaccounting,whichis

verytimeconsuming.OCRfunctionsas;takingaphoto(preferablywithyourphone)ofyour

receipt,andafterwardsthetechnologyrecognizeseverynumberandtext,thencategorizes

itcorrectly,sotheuseronlyhastoverifybyaccepting,hence“one-clickaccountancy”(Bil1,

2016;Bil2,2016).Dependingonthetechnologiesstabilityandaccuracyitwillhavethe

possibilityofradicallychangingtheworkingprocessesofspecialists–referencingspecialists

shiftfromroutine-basedworktocounselling(Spec3,2016;Spec6,2016;Spec8,2016).This

technologyisalreadyseeninothermarkets,sotheideainperspectivesofBillyisnotvery

radical,asitismoreaknowntrendthatiscomingamongthemoreinnovativeaccounting

systems(Bil2,2016).Whichagain,locksBillyinthehighrivalrymarket,wherefactorsfor

succeedingwillbeonwhodeliversfastest,pricingand/orthebestsolution.But,the

distinctionoftheinnovationimpactbetweenBillyandspecialists,isimportant,wherean

exploitativeinnovationmadebyBillycanhavearadicaleffectonspecialists(Spec5,2016;

Bil3,2016).TheimportancelieswithinBillywantingahighercommitmentfromspecialists

whilesimultaneousincreasingspecialists’redundancythroughtechnologydevelopment.I

willelaborateonthisparadoxicalchallengeinsection7.4.

6.4.2Managingthreatsandopportunities

Theoretically,theadvantageofobtaininganambidextrousorganizationhasbeenpresented.

Although,theambidextrousapproachismostsuitableforlargeenterprises,obtaining

aspectsofitinSMEorganizationscanbedone(Chang&Hughes2012)andshouldtherefore

66

beconsidered.MostofBilly’sinnovationsareexploitative;bothpresentuser-needsand

non-userideasarebasedoncurrenttechnology,markettrendandhighcertaintyinmost

aspectsoftheinnovationdevelopment(Bil1,2016;Bil2,2016;Bil3,2016).WhenBillyis

neglectingexplorationtheyultimatelybecomemorevulnerablefromexternaltechnologies

potentiallyimpactingtheirindustry.However,andtheoretically,consideringthesizeofBilly

shouldhelpthemintheabilitytoadaptfasterifimpactedbyothertechnologies(Anderson

&Tushman1986).Moreover,thehighswitchingcostthatBilly’sindustrypossess,should

furtherhelpstrengthenthetimeaspectforadaptingaccordingly.

Theselectionprocessofthemoreoriginalbasedideasshouldalsobementioned,asthis

processislargelydonebyJonas,theCEO(Bil1,2016;Bil2,2016;Bil3,2016).Billy

understandthisvulnerabilityandareworkingonstructuringit(Bil1,2016;Bil2,2016;Bil3,

2016).However,presentlythissetsthefoundationforBilly’svulnerability,asitcanbe

argued,thatBillytosomeextentareboundbytheCEO’swilfulness.Thevulnerabilitywould

furtherincrease,ifBillyshouldobtainamoreexplorativeapproach.Pointbeingmade,that

eventhoughtheCEOwouldgetinputfromtheorganization,Billywoulddependonone

person’sinterpretationoftheindustryandBilly’scapabilities.Meaning,theirinnovation

approachwouldbeincreasedbyhigheramountofuncertainties.

Onthecontraryandwiththepresentedpossibility,in6.2.2,ofanindustryphaseshift

towardsadiscontinuityconsiderablystrengthenstheapproachorobtainingmore

exploration.Thiswillbeelaboratedin7.2.

6.5Summaryofanalysis

Thischapterwherestructuredbyadaptingthetheoreticalframework.Thechallengesfaced

with‘growingaplatformwhileadaptingtheindustryphase’hasthroughoutthischapter

beenpresented,withBillyasfocalpoint.Billy’scurrentstateandtheirstrategicdecisions

andthoughtsbehindhasthenbeenanalysed,whichalltogether,hasprovideda

comprehensiveanswertothethirdsub-question.


67

CHAPTER 7: DISCUSSION

Chaptersevenwill,aswasalsoseeninchaptersix,usethetheoreticalframeworkfor

structuringthecourseofaction.Giventhat,thediscoveredandpresentedchallengescanbe

interrelated.However,theframeworkwilladapttothepresentfactorsinordertobetter

shapeacoherence.Thisisalldoneinordertoreachananswertothefourthsub-question,

wherefocuswilllieonthecontinuationoftheunsolvedchallengesfoundinchaptersix.


Inordertopresenttheadaptedframework,theidentifiedchallengesthroughoutchaptersix

willbesummarizedinthefollowing.

Summationofchallenges

Asillustratedintheanalysis,Billyoperatesinahighrivalrymarket,whichforplatform

adoptionandnewconsumerstolookat,seemsveryintransparent.Thishasforcedthe

rivalrytocompeteonpricepoints,whichaffectsthecompanies’abilitytodistributetheir

realvaluepropositions.

Otherfindingspointedaterasofincrementalchangehasbeenongoingforalongperiodin

thecloud-basedaccountingindustry.Combiningthesefindingswiththehighrivalrywith

difficultiesinexpressingdifferentiationaspectsseemedtounderpinthelongevityofcurrent

industryphase.Thechallengesarethenintensifiedbycategorizingthecurrentphaseasthe

specificphase,astheoretically,thephaseofadiscontinuitywilloccurafterwards.Moreover,

thetechnologicalevolutionwithintheindustryofcloud-basedaccountingsystemsseemsto

havealargerimpactonthesomewhatconcurrentindustryofspecialiststhanthemselves.

Partsofthecloud-basedindustryattempttomakethespecialistsredundant(Simonsen,

2016;Moses,(b)2013;Spec6,2016;Spec8,2016).Thetechnologicalevolutionaspects

havetobefathomedbyBillyinordertostrategizeandpositionthemselvesaccordingly.

Billyhasrecentlymadeinnovationstailoredspecificallytowardsspecialists(Bil2,2016;Billy

presentation,2016).Thechallengesherearetheadoptingprocessofspecialistsandtheir

definingstructuresoflowswitchingcosts,lowpricing,multi-homingandtheirdifferent

68

perspectiveonaccountingsystems.Successfullyadoptingspecialistswillbedefinedby

specialiststhatarecapableofdeliveringhigh-valuework,arealignedwithBilly’svisionand

arecapableofexpandingasBillygrows(Bil2,2016).Meaning,thedepthofpartnership

towardsspecialistswillbemoreinterestingthanquantityforBilly.

Billy’schangeininnovatingtowardsspecialistshashelpedthemshapebetterpartnerships

withspecialists.However,theparadoxicalchallengehasonlybeenintensified,asBillynow

wantsahighercommitmentfromspecialistsandarestillinnovatingwitheffectsof

increasingspecialists’redundancy.ThischallengeisimportantforBillytoovercome,asthis

contextonlyseemtoenhancewithfuturedevelopments(Spec5,2016;Spec6,2016;Spec

8,2016).

ThesespecificchallengesforBillywerediscoveredthroughcombiningempiricalfindings

withthetheoreticalframeworkfor‘growingaplatformbusinesswhileadaptingtheindustry

phase’.Billyhadalreadybeenactingonmostoftheprovidedguidancegivenbythe

framework.Thus,thechallengesforBilly,withreferencetothetheoreticalframework,are

highlightedinbeneathfigure12.Inaddition,thebeneaththeoreticalframeworkwill

functionasastructureforthefollowingsections,butwilladaptaccordinglyinorderto

bettershapeacoherence.

1. Understand the market landscape













2. Industry phase





Figure12-AuthorstheoreticalframeworkwithBillychallengeshighlighted

69

7.1Competinginahighrivalrymarket

Bystudyingaccountingsystemsfroma

historicalindustryperspective,itwasshown

howtwo-sidedplatformsseemedtobe

definedbyone-sideandmoreorless

neglectingtheothersideinsome

perspectives(Spec2,2016;Spec3,2016;Spec

5,2016;Spec6,2016;Spec8,2016;Bil2,

2016).Thecontextforthisseemstolieinthe

complexityanaccountingsystempossesses

combinedwiththerealityofatwo-sideddiversityinknowledgeandunderstandingof

accountingitself.

Theoretically,Porter’sfivesforcesshowthepotentialdriversforBillytotakeadvantageof.

ThemaindriverthathampersBilly’spositioningwithintheindustryisthehighrivalry(Riis,

2014;Rasch,(a)2014;Rasch,(c)2014;Moses,(a)2013;Sørensen,(b)2011).Combiningthe

highrivalrywiththeindustry

history,italsoshowedthe

diversityinaccounting

systemspositioningtowardsa

specificuser-sideoftheir

platform.Anelaborationof

figure11isseeninfigure13

totheright.Theclarification

isshowingthepotentialfora

betterpositioningwithinthe

industry.The“whitespace”infigure13isthereflectionofthebetterpositioningandthe

potentialadvantagetogaintowardstheircompetitors.Giventhecomplexitycurveservesas

alinearcurvewithx-variablesasplatformdevelopmentandtimeandy-variablesas

complexity,the“whitespace”isdefinedbymergingend-userandspecialists’viewpointor

1. Understand the market landscape • Industryhistory

• Analyseindustryanditsdrivers(portersfiveforces)









“Whitespace”

VismaeAccounting

Toolforend-users

Toolforspecialist

HighComplexity(functionality)

LowComplexity(functionality)

VismaSummaSummarum

“othersmallaccountingsystems”

Figure13-Potentialinmarketrivalryofcloud-basedaccountingsystems

70

perspectivesequally,hencefigure13.Obviously,obtainingthispositionwhileequally

mergingsuchdifferentviewpoints,isverydifficult.Thisisseeninmostaspects,i.e.

specialists(Spec6,2016;Spec7,2016;Spec8,2016)ofBilly’scurrentseparationof

innovationamongend-usersandspecialists(Bil2,2016;Billypresentation,Slide27&28,

2016).Thebiggestimpactsonspecialists,ithasbeenconcluded,istheaccountingsystems

innovationsincreatingmoreautomationofprocesses.Hence,thetechnologicalevolutionis

changingtheworkofspecialistsfromaroutine-basedjobtomoreofacounselingrole(Spec

2,2016;Spec3,2016;Spec6,2016;Spec7,2016;Spec8,2016;Bil2,2016).Acounseling

aspect,thatcurrentlypossessestwentypercenttasktimeatthemost,ismorecommonly

givenasanadded-inservice(Spec4,2016;Spec5,2016;Spec7,2016).Onagenerallevel,

specialistschargebythehourwithpricedifferentiationdefinedbythevalue/complexity

given,whichisthendefinedbyroutine-basedworkorcounseling.ThecurrentvisionofBilly

is“weoptimizetheadministrativeprocess”(Billypresentation,Slide7,2016),whichis

perfectlyinlinewiththefocusonend-usersanddevaluingtheroutine-basedworkof

specialists.Forend-users,theroutine-basedworkisassociatedwith“easeofmind”where

counselingisassociatedwithwheretherealvaluecreationisdelivered(Spec1,2016;Spec

6,2016;spec8,2016).

Combiningfigure13&14,thedifferentiationopportunitiesforBillylieinassistingspecialists

withthecounsellingaspectoftheirjob.Thereasoningisseeninthegapofmergingend-

usersandspecialists’perspectives,andcombiningitwiththecounselingaspect,which

seemstobethemostvaluableforend-users.Moreover,thisisthefuturefocuspointfor

specialists.Theopportunityisfurtherbaggedbyspecialists’receptivenesstowardstheshift

End-user Billy Specialists

Effect:“easeofmind”

Routinebasedwork“Connecting”

Effect:Valuecreating Counselling“Notconnecting”

Figure14-Billydifferentiationopportunity

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towardsamorecounsellingfocusedrole(Spec1,2016;Spec2,2016;Spec6,2016;Spec8,

2016).Inotherwords,andhencefigure14,Billy’saccountingsystemcurrentlyfunctionsas

atoolforroutine-basedwork,buthasthepotentialtocreatemuchhighervalueby

additionallyfunctioningasatoolforcounselling.

However,theautomationofaccountingstillhasplentyofspacetoinnovate(Bil1,2016,Bil

2,2016,Bil3,2016).GiventherealityofBilly’srelativelyuncomplicatedaccountingsystem

(Spec2,2016;Bil1,2016),Bil2,2016),theproposedfocusoncounselingcanendupbeinga

resourceproblem.Withtheresourceproblemaside,thecurrentvisionofoptimizingthe

administrativeprocessissomewhatshort-termedandlocksBillyintothehighrivalry

market.Along-termgoalcouldbeforBillytoactasacatalystforend-usersandspecialists

withcounsellingasanadditionalconnection.Billywouldthenserveontheoveralllevelasa

value-creatingfactoralongsidethespecialist.Inthisaspect,Billycouldpotentiallybemore

importanttotheend-userthanthespecificspecialist.Anexampleofactingonacounselling

level,couldbebenchmarkingend-users’businesseswithotherend-usersinthesame

industry,saying;“yourhairdressingbusinessisamongthebottom20%inyourindustry

basedonprofits”.Andbythat,Billycouldservetostrengthen,withhelpofspecialists,the

particularbusinesstoadvancethegivenparameters.ThisaspectwouldhelpBillystrengthen

theirpositioninginmanyaspectssuchasnetworkeffects,multi-homingbyspecialistsand

pricingdifferentiation.

Specialistpartners

TheabovefindingsfitwellwiththecontinuationofBilly’schallengeinfindingspecialists

thatarealignedwiththeBillyvision,candeliverhighqualityworkandaresuitableof

growingwithBilly.Currently,Billyismostlylinkedwithspecialistsoperatingasone-man

businesses(Bil1,2016)orwhatisoftenreferredtoasthe“bicycle-accountants”(Bil2,

2016).However,theydohavefocusonlinkingwithlargerspecialists’firms(Bil1,2016;Bil2,

2016).Combiningtheabove-mentionedgapoffocusingmoreoncounsellinginlarger

companiesofspecialists,couldpotentiallyserveasthefoundationforconnectingdeeper

withspecialists.Itis,therefore,myassessment,thatBillycouldthriveonconnecting

specialistswithend-usersonavalue-creatinglevel.Alevelthatwouldhelpspecialists

transitionfromroutine-basedtocounsellingthroughtechnology.Notonlywouldthe

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specialistsfunctionasambassadors(Riis,2014;Spec5,2016;Spec7,2016;Spec8,2016)for

Billy,butthecounsellingfocuswouldultimatelybemorevaluabletotheend-userinthe

end.Thefoundationforincreasingnetworkeffectwouldthenalsobeintensified.

ReferencingspecialiststhatarealignedwiththeBillyvision,theviewpointshouldresultin

thepossibilitytofreeupmoretimetohandlemoreclientsand/orfocusmoreon

counselling.Defininghowtoinnovateonavalue-creatinglevelincreasesthecomplexity,

whichiswhytheunderstandingofhowaspecialistoperatesshouldbeintensifiedalongside

thedeepeningofpartnerships.Andbyinnovatingonthatlevel,itcouldbewithspecialists

concurrentlyhelpingtodefinethepathonahigherlevelthansolelyincremental–withBilly

translatingspecialists’challengesthroughtechnology.

7.2Theuncertaintiesininnovation

Billyiscurrentlysituatedinanindustrywhere

technologicalevolutionhasundergoneaneraof

incrementalchangesforarelativelylongperiodof

time,whichcanbeseeninthecloud-based

technology(Mygind,(b)2008;Rasmussen,2013).

Theoretically,thisputstheindustryinthe

vulnerablesituationoffacingapotential

discontinuity,whichcanbeexplainedbyapoint

whereatechnologyisreplacedbyanother(Uusitalo

2014).Theimpactofthediscontinuityphasewill

furtherbedefinedbythedestroyingoffirmspecificassets(Afuah&Utterback1997;Teece

etal.1997),whichobviouslycanbedifficulttoforecast.Thefactthatthetechnology

evolutionofcloud-basedaccountingsystemishavingalargerimpactontheconcurrent

industryofspecialiststhanthemselveshintsthepresenceofchange.Theoretically,these

findingsputBillyinasituationwheretheanticipationofapotentialriskofdiscontinuity

shouldbepresent.However,Billydoesnotseemtoexpectsuchchange(Bil1,2016;Bil2,

2016).Thisislargelybecauseoftheinherentneedfromtheiruserstofurtherdevelopthe

Billyplatform,andmoreover,Billy’sperceptionofindustryrivalryisnotbasedonstealing


2. Industry phase







73

eachotherusers,referringtothemarketopportunityof30-40%usersstillhavingtheir

accountinginanExcelsheet.Billybelievesthatdespitethehighrivalrywithintheirindustry

andthefastpaceofdevelopment,thatthereisplentyofroomforthemtogrowand

develop(Bil1,2016;Bil2,2016).Thisviewpoint,isdisallowingBillytopotentiallyforesee

impactsofradicaltechnologies,asBillyareavoidingexplorationcombinedwiththecurrent

phaseoftechnology.EventhoughBillyarerelativelysmallandtherebysuitablefor

adaptationandmoreoverpossesshighswitchingcost,theimpactofadiscontinuityin

technologyaredifficulttoforecast.

Thepreparationforadiscontinuityisthensomewhatdifficult,however,theoretically

obtaininganambidextrousorganizationcanincentivizethedecreasingofthetransitionrisk

thatliesahead.Pointbeing,thatforecastingadiscontinuity’sexactoriginisdifficult.

However,itsrenunciationispotentiallyofhighrisk.ConcerningthecaseofBilly,who

previouslyhavebeenbasedonanintuitivebasedinnovationprocessandcurrentlyare

doingalltheycantodevelopahigherorganizationalstructure(Bil2,2016),itcanbedifficult

tosimultaneouslybalanceexploitationandexploration.ReasonedbythesizeofBillyandthe

characteristicsofexplorationswithsearch,experimentingandrisksoftenwithoutcomes

thatareuncertain,distant,oroftennegative.However,thefoundationofexplorationis

theoreticallybasedontheoutcomesofuncertainties.Meaning,itwouldbepossibleforBilly

toadoptahigherpercentageofexplorationwhilemaintainingtheorganizationalstructure.

Thissomewhatparadoxicalchallengecanbedifficult,butfoundedinthetheoreticaland

empiricalfindings,itshouldneverthelessatleastservethecomprehensionforBillyto

understandthecontextofwhichtheyaresituatedin.

7.3Summaryofdiscussion

ThechallengesfacingBillyhasbeendiscussedthroughouttheformertwosections.Thiswas

doneinordertoreachananswertothelastandfourthsub-question:


Andasmentioned,theformertheoreticalframeworkneededmodificationinorderto

explainandbetterservethecaseofBilly.Referringtotheanalysisanddiscussionofthe

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frameworkledtorepeatingcentraltopicsoncertaintyanduncertainty.MostofBilly’sdoing

issituatedwithinthehighrivalry,whichforBilly,doesnotfosteradesiretonavigateaway

from.Infact,Billybelievestheyknowhowtomanoeuvrewithinandthatthereisenough

spacetogrowastherivalryisnotbasedonstealingeachotherusers(Bil1,2016;Bil2,

2016).Thecompetingislargelydefinedbycalculateddecisionsandmoreoverbycertaintyin

succeedingoninnovations,partnershipsandexpandingtheirservices.Theuncertainties

werefoundinanalysingthemarketinatheoreticalcontext.Theriskforaforthcoming

industryphaseshifttowardsthediscontinuityphasewaspresented.AnelementBillydidnot

seemtobeawareof,norhadfocuson.ThemainfocusforBillyiscreatingstructured

decision-makingcentredoncertainty(Bil2,2016).Thesefindingsresultedinanadapted

theoreticalframework,whichisshownbeneathinfigure15.

Figure15-Adaptedtheoreticalframework(Authorsown)

Theaspectsinfigure15areobviouslyinterrelatedinsomeaspects.Examplesofthisare

seenintheplatformsfoundationontechnology.Herewillstrategicchoicesperformedby

Billy’splatformoftenbebasedoninnovation,whichcanhaveoutlinesofbothcertainties

anduncertainties.However,theanalysinganddiscussionkeptrevolvingtopicson

certaintiesanduncertainties,respectively,withfundamentalthreatsandopportunitiesfor

Billytonavigatethrough.Inreferencetofigure15,thechallengesforBillytoimposeoften

endedineachside,respectively.

Thesecertaintiesanduncertaintieswasthendiscussedthroughoutchapterseven,whichall

together,providedacomprehensiveanswertothefourthsub-question.

UncertaintiesCertainties

1.Marketlandscape+

3.Competingstrategically

2.Industryphase+

4.Innovationdevelopment

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CHAPTER 8: MAIN CONCLUSION

Thepurposeofthisresearchwasdevelopingrelevancetowardsgrowingtheplatformof

Billy,acloud-basedaccountingsystem.TheparticularcaseofBillywasthenfurther

complicatedbytheplatform’stwo-sides,whoincomparisonhaveadiverseunderstanding

towardsthesubjectofaccounting.Additionally,aninnovationaspectfurtherraisedthe

complexitywiththeparadoxicalchallengesofBillyneedingthesideofspecialistandatthe

sametimeincreasingtheirredundancywithinnovationdevelopmentsmadebyBilly.Hence,

thethesisthendeployedthefollowingresearchquestioninordertoresearchandanalyse:


Thethesisthendevelopedatheoreticalframeworkwithmergingtheoriesofplatform

theoryandindustryphase.ThiswasdoneinordertohelpBillyinatheoreticallycontext,

whichadditionallysetthestructureforthefollowinganalysis.Combiningtheorywiththe

caseofBillythenrequiredthetheoreticalframeworktoevolveinordertobestserveBilly

andthecontexttheyoperatewithin.

Thereby,asillustratedinfigure14,itwasshownhowBilly’stwo-sidedplatformwiththeir

users’engagementcouldbecategorisedontwo-levels–alevelofroutine-basedworkanda

levelofcounselling.Atpresent,Billyarethroughinnovationincreasingspecialists’

redundancyonaroutine-basedworkand“easeofmind”level.Theyhaveopportunitiesto

facilitatetheuser-connectiononacounsellingand“value-creating”level.Obtainingthis

leapwouldobviouslyincreasethecomplexity,whichthenincentivisestheinvestigatingon

howtodothis.TheoutcomeswouldraiseBilly’svaluecreationtowardstheirusersonboth

sides,raiseswitchingcostsandincentivisespecialiststomulti-homeless.

Themostinterestingfindingsseemedtorevolvearoundcertaintiesanduncertainties.The

certaintiesinBillybeinglockedwithinthehighrivalryofthecloud-basedaccountingsystem

industry.AfactthatwasfurtherevidentinBilly’sfocusonshort-sightedgoalson

incrementalinnovations.Specificallyknownincrementalinnovationsthatwillbeofvalue

towardsBillyusers,andbythat,earnsthereasoningfordevelopingthem.Moreover,these

76

developmentsarealsoneededinthecontextofthedevelopmentswithintheindustryof

accounting,inordertosimplykeepupwiththepaceinindustryinnovations.

Otherfindingsseemedtoillustratethelongevityofincrementalinnovationwithinthecloud-

basedtechnologyandaccounting,whichplacedtheindustryinthespecificphase.

Theoretically,thisposestheimplicationofapotentiallyupcomingdiscontinuityphase.This

isfurtherintensifiedbythechangingofworkprocessesseenintheconcurrentindustryof

specialists.AdiscontinuityBillydoesnotseemtoexpectorhaveinmindto‘explore’.

ReasoningbehindthismightbefoundinBilly’salreadyknownresourceproblemandtheir

highfocusonkeepingpacewiththehighrivalry.Obviously,forecastingadiscontinuity’s

exactoriginisdifficult.However,itsrenunciationispotentiallyofhighrisk.Nevertheless,

therealitymightbethattheseuncertaintiesdemandamuchlargerreceptivenesstowards

exploration,whichinBilly’scurrentsituationcanbedifficulttoobtainoraccommodate.

Furtherinvestigation

Irecognizethatthisthesiscanopenadditionalareasofresearchinordertodevelopamore

nuancedunderstandingofgrowinganaccountingplatform.Reflectingonmyresearch

process,Ihaveinevitablymadechoicesthathasnarrowedtheresearchfieldandhas

focusedtheaimofthestudy.

Thisthesisisfoundedinmyprofessionalbackgroundintheaccountingindustry,which

inevitablyhasshapedthisresearchfordevelopingthisstudy.Aninterestingaspectfor

furtherresearchcouldbeanin-depthinvestigationofthetransactionbetweenend-users

andspecialistswithlessfocusonthetechnologicalevolutionandlargerfocusontheend-

user.

Additionally,acknowledgingthelimitationofasinglecasestudy,asdiscussedinthisthesis,

itwouldbeofinterestandrelevancetoconductmultiplein-depthcasestudies.

Lastly,aninvestigationofthepossiblediscontinuityphasewouldbeaninterestingareaof

research.Thisismainlyduetothefindingsbythisthesis.Afocuscouldbeonanin-depth

investigationonthefuturetechnology,andwhatcouldmakethistransition.

growing a platform business while adapting the industry phase

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