AARHUS UNIVERSITY, SCHOOL OF BUSINESS AND SOCIAL SCIENCES

BACHELOR THESIS

Externally Driven Business Model Innovation

The Case of Danske Spil

May 2014

AuthorChristian Jantzen (303104)

BSc in Economics and Business Administration

Academic SupervisorPeter Kesting

Associate ProfessorDepartment of Marketing and Organisation

Characters including tables and figures, excluding blanks: 93.105

Abstract

The purpose of this paper is to investigate how Danske Spil changed their business model to overcome the changes following the market liberalisation of 2012. The paper chooses to mainly feature the subsidiary company DLI (Danske Licens Spil), which is the part of the group operating on the free market. Through the appliance of Ostenwalder and Pigneurs (2010) framework the Business Model Canvas, the entities of Danske Spil’s business model are analysed before and after the external changes. Furthermore, the framework of Cavalvante et al. (2011) is applied to determine the nature of the changes. The analysis finds that change has occurred in all areas of the business model. The main changes occurred in the fundamental activities, shifting the focus of the company to be entirely profit-oriented, which in turn influenced the changes in all other areas, thus following the trend of business model revision. The analysis further concludes that the main reasons for a successful transition was the abilities of leaders and the structural changes made prior to the liberalisation. Following the changes a series of challenges also occurred. Here the main challenge were the gap between two groups of employees, where one group is operating on the free market, and the other in a monopoly. Using the findings in the analysis the paper discusses the theoretical fit and prospects for future research in the area. It finds that some theory fit better than other and that researchers in turn should focus on creating literature and theory that can be used to generalise case, thus creating a mean for comparison.

Key words: Business models, business model innovation, business model change, market liberalisation, business model canvas, change management, business model revision, challenges of change.

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Table of Contents

1. INTRODUCTION 4

1.1 BACKGROUND 5

2. THEORY 6

2.1 WHAT IS A BUSINESS MODEL? 72.2 BUSINESS MODELS, INNOVATION AND CHANGE 102.2.1 BUSINESS MODEL DESIGN 102.2.2 BUSINESS MODEL RECONFIGURATION (BMR) 112.2.3 VISUALIZING BUSINESS MODEL INNOVATION 152.3 CONCEPTUALIZING AND ILLUSTRATING THE BUSINESS MODEL 172.3.1 THE BUSINESS MODEL CANVAS 21

3. DATA & METHOD 22

3.1 METHODS 233.2 LITERATURE 243.3 DATA 24

4. FINDINGS 27

4.1 THE BM CANVAS PRIOR TO THE LIBERALISATION 274.2 THE BM CANVAS AFTER THE LIBERALISATION 294.3 ANALYSING THE CANVASSES 32

5. DISCUSSION 42

5.1 DISCUSSION OF THE FINDINGS 425.2 THE THEORETICAL FIT 44

6. CONCLUSION 46

6.1 LIMITATIONS OF THE STUDY 476.2 SUGGESTIONS FOR FURTHER RESEARCH 486.3 ACKNOWLEDGEMENTS 48

7. REFERENCES 49

8. APPENDICES 56

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1. Introduction Change is inevitable. This is the reality that all companies are faced with at

certain points of their existence. Whether the change is of a radical or milder

nature differs, but one thing is for sure; change is inevitable. It is in dealing with

these changes that companies show their true character and survival instinct.

Because failing to deal with changes in the right way, can ultimately cause a

company to fail. Therefore, the process of change is a rather interesting matter,

which will be investigated further in this paper.

The paper will revolve around the case of Danske Spil, a Danish sports betting

and online casino carrier, who is mostly owned by the Danish state. In 2012 they

faced radical changes in their market; however, still they managed to maintain a

leading position in their core areas and expand the company to serve a new range

of customer demands. The paper will thus be asking the question: How has

Danske Spil changed their business model to cope with the changes from 2012? The

paper aims to answer this through an investigation of how these changes have

influenced the business model (shortened BM from here on) of Danske Spil

(shortened DS from here on). Through the appliance of relevant theory the paper

will analyse the BM prior to the changes thus creating ground for comparison

with the BM today, in order to analyse how external changes has led to internal

changes. Through an analysis of both fundamental processes and micro-activities

the end product of the research will be an in-depth analysis of what was changed

inside the company, what were the challenges, and what was important in the

process of change. Furthermore, the paper aims to discuss the theory developed

in the area of BM and the change process, through a discussion of how the theory

held up through the actual findings of the case.

This case is particularly interesting to study due to a range of factors. It is the

story of a small state-owned company which has historically operated as a

monopoly in more than 60 years with a strong identity of donating their profits

to charity and local associations. Without any real experience of competition and

competitors their market is all of a sudden opened up to a big group billion-dollar

cooperation hungry to take over the new market, since it is no longer protected

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by monopoly. The interesting part is now following how the company deals with

these radical changes and what consequences this have had inside the company.

It may thus paint a picture of what it takes to survive a transition from a

monopoly-company to a perfectly competitive company, operating on equal

terms with the market competitors.

1.1 Background

Following the years after WW2, DS was formed in 1949 by the Danish

government. Back then the company was named Dansk Tipstjeneste, and all their

profits where donated to local society, such as sport clubs etc. The company has

had a strong corporate identity as a company whose existence was purely for

doing good, manifested in their slogan “For joy and benefit”. Up until 2012 DS had

a monopoly in the Danish market, and their main activities was to run the

national lottery as well as related games such as sports betting and lottery

coupons. This meant that no other carriers had access to the market, and they

could not market or sell their products in the market. All this changed when the

Danish government decided to liberalise part of the market on 01.01.2012. This

now means that every company who buys a license in the Danish market can

compete on equal grounds, upon paying a state fee of 16% of their revenue. The

liberalisation concerned part of the market, such as sports betting and online

casinos whereas the national lottery is still protected by a monopoly. DS

responded to the liberalisation by dividing the group into three companies; Elite

Gaming which is a company operating on the market of physical gaming

machines, Danske Lotteri Spil (DLO) which is the part of the company still

operating on the monopoly protected part of the market - here all profits are

donated to local associations, and Danske Licens Spil (DLI) representing the last

part of the group. DLI is the company that will be dealt with in this paper; they

operate on the liberalised part of the market. The liberalisation is an opportunity

for DS since their competitors used to have an advantage with lower taxes (Danes

could still access their products online), whereas now they compete more

equally. However, it also means that other companies now can market and

promote themselves in the Danish market, meaning that they can actively

compete for market share with DS (Lind Nielsen).

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2. Theory This part of the paper will be presenting the existing relevant literature inside the

field of business models and business model change. It will introduce the concept

of business models itself, and present different views upon what a business

model is. The paper will then take a deeper look at models used to describe and

analyse a BM, and argue why some are preferred over others. I am also going to

be dealing with the notion of BM change to see what parts of literature can be

applied to the specific case of Danske Spil. Since the field is still quite small and

emerging it should be possible to paint a rather complete picture of the existing

research conducted.

2.1 What is a Business Model?

In terms of academic interest the term Business Model can be said to be a very

recent phenomena. In the period up until 1995 there were virtually no articles

published on the matter. But searching for articles published after 1995 will

show that the interest in BM’s has exploded over the last 20 years time (C. Zott,

Amit, & Massa, 2011). I decided to test this claim myself, using EBSCO Business

Source Complete, and this confirmed previous results. Using the key word

“Business Model”, but limiting publication years to 1994 and before gave me

1,588 results. From 1995 to present EBSCO presented me with 30,672

publications and therefore it is safe to say that the interest in this research area

has exploded during the last 20 years.

Although popularized around 1995, Teece (2010) points out that BM’s have been

a part of economic behaviour since pre-classical terms, thus arguing that it is not

necessarily a new term. In relation to this it is argued by Massa & Tucci (2013)

that up until the mid 1990s firms operated with a much more industrial view in

mind. They acknowledge that firms have always operated after a BM and even

though some have been innovative, it is only since the mid 1990s that BM

innovation has moved with such a pace, that it has the power to transform

industries and thus attract the interest of scholars and practitioners. Today, BM’s

actually create means for competition and companies create and deliver value

through a strong and unique BM as seen in for instance Apple and Amazon.

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One of the earliest authors to define a BM is Timmers (1998) who argues; The

business model is “an architecture of the product, service and information flows,

including a description of the various business actors and their roles; a

description of the potential benefits for the various business actors; a description

of the sources of revenues” (p. 2). The definition clearly strives to perceive all

elements of what a BM contains, however, the definition can be hard to work

with due to the predefined nature of it. Although Amit & Zott’s (2001) definition

focuses on the value creation through business opportunities, it has certain

similarities with the definition by Timmers through the emphasis on structure

and content. They argue that a BM is “a set of structure, content and governance

of transactions that is created to help businesses exploit opportunities” (p. 511).

Chesbrough & Rosenbloom (Chesbrough & Rosenbloom, 2002) link the technical

potential to the realization of economic value. They argue that the two are

connected by a heuristic logic and it is this that defines the BM. Although

acknowledging the importance of value creation, they do not point to specific

factors that are included in the BM like Timmers for instance. Magretta (2002),

takes a somewhat different and more abstract stance when presenting his paper

“Why business models matter”. In here, he states that a BM should answer Peter

Druckner’s four questions: “1) Who is the customer? 2) And what does the

customer value? 3) How do we make money in this business? 4) What is the

underlying economic logic that explains how we can deliver value to customers at

an appropriate cost?”(p. 4). Again no specific factors are mentioned. The next two

definitions can be said to be very specific in addressing what factors are included

in a BM, and they can thus be said to eliminate some of the abstraction created in

the two definitions above. Morris et al. (Morris, Schindehutte, & Allen, 2005) do

this through a description of the BM as how a set of decision variables is dealt

with in order to create a competitive advantage. They address six fundamental

components: Value proposition, customer, internal processes/competencies,

external positioning, economic model, and personal/investor factors. Johnson,

Christensen & Kagermann (2008) also mention specific factors that create a BM.

Their definition involves “4 interlocking elements, which when taken together

creates and delivers value” (p. 52). These are customer value proposition, profit

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formula, key resources, and key processes. It is through defining the different

factors included in a BM that research is moving closer to a practical appliance of

BM theory, such that practitioners have real-life tools that can be applied to their

companies and the context which they operate within.

Looking at more recent definitions of the BM (2010 and onwards), Casadesus-

Masanell & Ricart (2010) are short and concise, when describing a BM as: “a

reflection of a firm’s realized strategy”. Along the line with Magretta their

definition is somewhat more abstract and less applicable for businesses as a

single tool, but can be used in coherence with other theoretical frameworks.

Finally going back to Teece (2010) who argues that a BM articulates different

factors such as the logic and the data that make up a value proposition for the

customer, but also represents a cost and revenue structure of the company that

delivers this value to the customer. The definition thus links the notion of value

proposition with internal processes of a company, thus emphasising that the

ultimate focus should be the customer.

Since the paper will be revolving around the term BM, it is very appropriate to

pick out one definition that will describe what is meant upon using the term. This

is done in order to avoid ambiguity about what is meant with the term. As shown

above defining a BM is not a simple task. Although there seems to be an overall

coherence between the definitions, some of the definitions are different in their

meaning and focus points, and it is therefore important to pick one that can

create coherence and meaning with the rest of the theoretical framework. This

paper will not be using any of the definitions above, however, it will use a

definition evolved from the theory above.

Zott and Amit (2010) evolved their 2001 definition off a BM and it is this

definition that will be used as a point of reference inside this paper. Their

definition of a BM is: “a system of interdependent activities that transcends the

focal firm and spans its boundaries” (2010: 216). The reason for choosing this

definition is two-fold; First of all, it acknowledges that a BM is not just a single

system that should be seen upon as a whole. The emphasis on interdependent

activities will help create coherence with the rest of the theory used for this

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framework. Secondly, it is still a rather open definition. It does not try to define

the specific entities thus maintaining an open scope open for individual

interpretation.

Some of the other definitions would have fitted the somewhat same needs

however; they lack the complete two-sided focus. For instance, Teece (2010),

Morris et al. (2005) & Johnson et al. (2008) all put an emphasis on the fact that

business models have different entities that make up a whole, but it is when

trying to define these that they fall through. Upon doing this, they close down the

scope and the openness thus limiting the definition. This would damage the

coherence with the rest of the theoretical framework and is therefore not ideal

for this paper. Others, like Magretta (2002) and Casadesus-Masanell & Ricart

(2010) have a definition which is simply too open thus failing to be accurate

about what a BM actually is and therefore again lacking coherence with the

theoretical framework of this paper.

2.2 Business Models, Innovation and Change

The term innovation has been used to describe many different phenomena and

has been popularized a lot during the last years. Therefore, it is necessary to

specify what is meant when using the definition in this relation, different angles

on the term inside the field and in general present the existing theory already

made in the field. Massa & Tucci have to be acknowledged for their 2013 work on

a literature review which sums up the literature created, very clearly and in a

brilliant way.

Like mentioned above the term innovation can lead us on to many pathways

inside the field. Mainly the term can be said to describe two different phenomena;

1) the entrepreneurial novel BM in which a BM is developed from the start of a

setup or 2) when changing an existing BM to fit either new challenges or to gain

competitive advantages (Massa & Tucci, 2013). Since this case is dealing with DS

who is an established company that already had a BM up and running, the main

focus of this theoretical review will lay on the second term. Massa & Tucci (2013)

distinguish between the concepts by using the terms business model design

(BMD) and business model reconfiguration (BMR), which are terms this paper

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will also be using for convenience. BMD refers to novel start-up BM’s and BMR

refers to changing existing BM’s.

2.2.1 Business Model Design

The reason for still briefly including BMD is that there may be some relevance for

the case to collect from this particular framework. We will thus look at some of

the most significant definitions and proposals. Amit & Zott (Amit, R., & Zott, C.,

2001) describes BMD as an entrepreneurial activity in which you design the

content, structure and governance of the interaction and the transactions that a

firm performs together with its exchange partners, and it is through this that

value is created. BMD is concerned with more classical entrepreneurial activities

like creating an organisation, internal/external recognition of opportunities and

connecting with the market (Bhave, 1994). In a later article Zott & Amit (2007)

argue that the ladder is an important part in connection with BMD in that “a BM

elucidates how an organization is linked to external stakeholders, and how it

engages in economic exchanges with them to create value for all exchange

partners” (p.181). Furthermore, McGrath (McGrath, 2010) elaborates on this by

arguing that BMD is mostly concerned with classical entrepreneurial choices such

as organizational design however, it is also about designing a boundary system,

so that a product or service can be offered to a market. Both authors thus argue

that BMD can mostly be seen as an entrepreneurial activity, establishing new

companies.

An important factor in BMD is the uncertainty associated with the development

of a new business model. Therefore, more scientists have been proposing a

discovery driven approach that puts a significant emphasis on prototyping,

experimentation and testing ideas (Sosna, Trevinyo-Rodriguez, & Velamuri,

2010) and (McGrath, 2010). Prior to this, Hayashi (2009) notes that a lot of

companies have had innovative and original BM’s that still did not create success.

He argues that it should not necessarily be seen as a failure if the companies can

switch to a “plan B”, which through experimentation and “what-if” questions

should challenge the initial assumptions from managers and entrepreneurs, thus

ensuring that they will find the right BM. As an extension of this argument it can

be said that most novel BM’s have a natural experimentation phase, since

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entrepreneurs often can be interested in finding new radical ways of doing

things, that can forever alternate and disrupt an industry (Ireland, Hitt, Camp, &

Sexton, 2001). Designing your BM should thus be done through experimenting

with your assumptions and beliefs, and entrepreneurs should strive to be

adventures in their designs.

2.2.2 Business Model Reconfiguration (BMR)

Changing your BM can be key to both success and survival if done in the right

way. In can be extremely hurting or even deadly for companies who fail to change

their BM in time to overcome challenges (e.g. the case of Blockbuster). The

increasing popular notion that business model innovation is a crucial key to a

company’s performance has brought an increasing amount of scholars working in

field of BM’s, to dig into changing, renewing and innovating your current BM

(Massa & Tucci, 2013). This has left us with a wide theoretical background when

trying to dissect how businesses can change their setup and the very fundament

of how they create economic value. The paper will review some of the relevant

theories, and clarify which theories will specifically be applied to this case study.

Chesbrough and Rosenbloom’s study (2002) of the Xerox Corporation already

pointed out some of the potential issues and pitfalls when it comes to BMR. In

their study they find that incumbent, successful companies are not considering

changes since these are filtered out of their mental map (The authors view the

BM as an heuristic logic which might act as a mental map in which ideas are

filtered, as reviewed earlier in the paper). The theory builds upon the notion of a

dominant logic. It represents the prevailing wisdom of how things are done inside

a firm and it can lead managers and other decision makers to be blindsided and

not acknowledge opportunity when they see it (Prahalad & Bettis, 1986). This is

further discussed by Chesbrough (2003), who describes the phenomenon as a

firm being drawn into what he describes as the dominant logic trap. Similar to

that notion Bouchiki and Kimberly (2003) have developed a concept, which they

have called the identity trap. They argue that the identity of the organization can

become a trap in which it is constraining itself to deal with changes, because it is

too caught up in maintaining its already established identity. Changes that do not

match the existing identity are therefore bound to fail, they argue. Both sets of

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authors thus mention existing cognitive notions inside an organization as a

barrier to change.

Further elaborating on barriers to change, Chesbrough (2010) is suggesting that

there are two types of barriers to BMR in existing firms. The first is a structural

barrier, which is related to physical limitations such as reconfiguration of assets

and operations. The second is the cognitive barrier, which is simply that

managers have been used to operating within a certain frame, and therefore can

have a hard time relating to potential that lies outside their current BM (very

related to the dominant logic trap and the identity trap). In the same paper

Chesbrough suggests three tools for overcoming these barriers. 1) A company

can map out its BM in order to better understand how processes can be moved

and reconfigured to deal with challenges. 2) The organizational hierarchy can be

manipulated in order to avoid decision makers to be “frozen” in their cognition of

the BM. 3) is the earlier mentioned experimentation in which the company

explores new paths. It is conceptualized as a process in which a company gains

cumulative learning through (perhaps) series of failures, before they finally

discover a more viable and/or innovative BM. The phenomenon is also described

as trial-and-error learning by Sosna et al. (2010) in their case study of

Naturhouse.

Looking at specific proposals on how a company can change it’s BM (Giesen,

Berman, Bell, & Blitz, 2007) suggests that BMR inside already established firms

can be divided in to three different groups which all differ in the way that they

are innovative. The first is Industry model innovation which implies altering the

way things are done inside the industry, for example by changing the value chain

through moving in to new industries or redefining the existing industry. The

second suggestion is innovating your revenue model. This is representing new

pricing strategies or redefining the product-service proposition. Their third

proposal is called enterprise model innovation and means changing your firms’

role inside the value chain thus altering your networks with employees,

suppliers, customers and configuration of your assets. They further elaborate on

their theory by pointing out two key findings 1) that all of the different ways of

innovation can generate success and 2) innovating your enterprise model

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through external partnerships is particularly effective in older companies

compared to younger ones. The suggestion of specific ways of changing a

company’s BM thus provide managers with a practical way of looking upon

changes. On a similar note Amit and Zott (2012) also point out three ways that

managers can innovate business models. Upon researching the field for a decade

they developed the following ways to innovate your BM: 1) by adding new

activities, 2) link activities in new ways and 3) change who performs activities.

Their theory on BMR builds upon their definition of the BM, seeing it as a system

of boundary spanning interdependent activities, which has been used earlier on

in this paper (Zott & Amit, 2010). Whether or not their theories are case-

applicable will be tested and discussed later in this paper.

Shifting the focus of where changes originate, Doz and Kosonen (2010) see BMR

from a leadership perspective, thus suggesting a leadership agenda that can help

firms innovate their BM’s. They argue that the key is to make companies more

agile and flexible, and they have developed three ways of achieving this through

the following meta-capabilities: strategic sensitivity, leadership-unity and being

flexible with resources. They further argue that it is the responsibility of top

management to take on the risk of venturing in to innovation of BM’s and leave

old ones behind. This should be done through achieving a collective commitment

towards risk taking and experimenting with new opportunities. The proposal of

the leadership gives managers and leaders perhaps even more specific tools to

manage their company with. However, Santos, Spector, and Van Der Heyden

(2009) have a somewhat different view on how companies best can innovate

their business model. They suggest that incumbent companies try to lay

emphasis on the behavioral aspects such as mutual engagement and creating

organizational justice. They argue that BM’s can and should be innovated through

also focusing on organizational dynamics, and not only take the structural

aspects of the organization into account. They thus challenge the views of the

theories developed by Zott & Amit and Geisen and colleagues, shifting their focus

towards a broadening of the developed theory on the matter. Furthermore, Bock,

Opsahl & George (2010) create a linkage between the field of business models

and the concept of strategic flexibility (Shimizu & Hitt, 2004). They propose that

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companies should engage themselves in business model innovation in order for

their organization to stay flexible and deal with an ever-changing external

environment. Their proposals are somewhat coherent with Doz and Kosonen

(2010) through the emphasis on the creation of an organization that is flexible in

order to overcome changes.

As shown in the literature presented in this paper defining what BMR is and how

it is done can be a very complex task. The field is still relatively young and new

concepts and theories will continue to see the surface every year. There is no

doubt that BMR is a very complex art and Johnson et al. (2008) notice that even

though many major innovations have happened during the last decade or so, only

very few of these has happened inside or can be related to the area of business

models. That BMs is a complex art is also noted by Teece (2007) who states that

it requires “creativity, insight and a good deal of customer-competitor and

supplier information and intelligence” (p. 1330). The fact that managers already

have existing capabilities and beliefs, only increases the complexity of BMR, since

this can blind them and hinder them from seeing new opportunities, thus failing

to act upon these (Pisano, 2006). The rather complex and abstract nature of the

field will probably scare off a good deal of scientists, however, for the ones who

decide to discover and experiment inside the field it is clear that there are some

truly value-creating and groundbreaking discoveries to be made. A lot of theories

have been evolved during the last decade and it will be interesting to follow for

the next decade.

2.2.3 Visualizing Business Model Innovation

In order to ease up the process of dealing with the complexity of BMR it can be

preferable to work with a visualized model. This will help create overview and

for some limit the amount of abstract thinking needed comprehend the ideas

associated with innovating and developing your business model. Models can be

said to create linkage between complex-thinking scholars and more practical

thinking practitioners. This paper will be applying the model developed by

Cavalcante, Kesting and Ulhøi (2011), since it provides links between different

branches of the existing theory and sums of much of the literature described

previously in this paper. Argumentation for the choice of model will be

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elaborated on later on in the paper, however, the model will first be introduced

and briefly explained.

When looking at and putting this model into practice, it is important to note that

inside established firms there are two blocks named II. The first block represents

the current state of the business model whereas the other represents a process.

The model proposes that we can distinguish between four different types of

business model change:

(1) Business model creation (block I); the creation of novel BM’s through the

entrepreneurial act of establishing a new business.

(2) Business model extension (block II (+); adding new activities or extending

already existing core activities.

(3) Business model revision (block II (+)/(-); the act of revision implies

terminating old activities and replacing these with new ones.

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(4) Business model termination (block (-); abandoning existing areas of your BM.

The slashed arrow means that other activities will still be developed.

One of the main reasons for choosing to work with this particular model is that it

does not necessarily rule out the rest of the theory. It merely creates a framework

in which the rest of the theory can be applied. In other words, the model is not

offering specific suggestions on how to change a business model; it is rather

presenting the different ways in which we can categorize our other theoretical

tools. This creates coherence with the rest of our theoretical framework since it is

assuring us that we can work with a broader scope than if we had settled on a

somewhat narrower framework. Using the model thus helps us create an

overview of BMR even though the complexity of the topic is still highly

acknowledged. This also implies that when working with theory further on in the

paper other theories will not be neglected, but rather used in connection with the

model. This will ensure that a complex and nuanced analysis is carried out inside

a clear and visualized framework. Hopefully, the model will also be a tool that

makes it easier for practitioners to comprehend the rather abstract analysis.

2.3 Conceptualizing and illustrating the business model

Capturing the notion of what a business model is can be a complex task. Trying to

visualize it may therefore be an even more difficult manoeuvre. As the interest in

business models has grown over the last 20 some years, trying to conceptualize it

in order to practically implement it has followed the same trend. Since this paper

is working with a practical case study it is highly relevant to use a visualized BM

since this will provide the opportunity of comparing two visualized models with

each other, and thus capture the changes. This part of the paper will review

different conceptualizations of the BM and from that pick out tools that can be

used for the analytical purposes in this particular case. It will of course also argue

why the specifically chosen model is the one decided upon.

Massa and Tucci(2013) propose that the conceptualization of BM’s can be sorted

using their level of abstraction as a parameter. From this they developed a model

showing the different layers of abstraction, and what this means for the

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conceptualization of the BM. The model is illustrated below, but will not be

elaborated further on since the illustration is considered rather self-explanatory.

At the top-level of abstraction we find business models to be conceptualized as

narratives. BM narratives are key to inducing stakeholders on which direction

companies are moving, and how they might act in different situations. Narratives

can be used by both managers and entrepreneurs to help explain the company in

a more simplistic and thus less complex way (Perkmann & Spicer, 2010). A

narrative can thus be used as an overall guidance both internally and externally

inside a company, setting up the framework or the story (Magretta, 2002) of how

an enterprise works, a definition that has already earlier been touched upon in

the paper. Massa and Tucci (2013) argue that a narrative can be used as a device

for communicating, allowing companies to achieve goals like persuading external

audiences, surrounding the company with a sense of legitimacy or guiding social

action. However, it can also be said that narratives can be somewhat hard to use

for analytical purposes.

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Moving downwards in the model we find the notion of BM archetypes. This can

best be described as a pre-set description or recipe on how a business model

works. But as noted by (Baden-Fuller & Morgan, 2010) “not all cooks can make all

recipes work and different combinations (ways to make and bake the cake) can

create success” (p. 167). One example of archetype BMs are the freemium model

in which a company has a free version of a product, and charges for a premium

version (companies such as Spotify and LinkedIn has adopted this). Another

example is the model described by Zott & Amit (2010) as the razor and razor

blade model, in which Gillette sold rather cheap razors and then charged high

prices for the blades. The problem with high abstraction forms of BM

conceptualizations is that they can be somewhat difficult to use for analyzing and

comparing companies. Therefore we must go down the “abstraction-ladder” in

order to obtain specific tools that can be used and applied in a practical oriented

case study.

Earlier on, the paper touched upon definitions of what a BM is and it will return

to some of these. (Johnson et al., 2008) proposed that the BM consist of four

interdependent elements, which are customer value propositions, profit formula,

key resources, and key processes. These four interlocking elements thus make up

their framework for how a business creates value for both itself and its

customers. Similarly (Morris et al., 2005) created their framework around the

assumption that the main objective for a BM is to create a competitive advantage

for the company. They propose that this competitive advantage can be created

through six different factors, which they argue is what a business model is made

of. Their six factors are: Value proposition, customer, internal

processes/competencies, external positioning, economic model, and

personal/investor factors. Since both definitions have been used already they will

not be elaborated further. Creating a more precise and visualized model Lim

(2010) has proposed a business model framework that is based on structure,

operations, strategy and environment, the model is named ESSO. His framework

describes the three as being the interdependent components, which make up a

BM; however, they link together through knowledge management and

operational competitive priorities. His model also factors in the environment in

18

which a company is operating and mentions the PESTEL factors. The over-use of

meta-models can be problematic due to a potential loss of complexity, which is

noted by Massa & Tucci (2013) who argues that although these types of

conceptualizations recently have become popular amongst practitioners due to

their simplicity, they cannot provide analysis with the needed depth and

complexity. They argue that a main problem is that the models do not factor in

the dynamic aspect of the business model, and they can therefore have

shortcomings when they are trying to describe a company’s particular business

model. Meta-models, they argue can make up for these limitations and help giving

a more complete picture of a company’s BM, since these models can help us

understand how different business models operate in a network of other

exchange partners. The author of this paper shares their concern, however, also

acknowledges that the use of more simplistic models is necessary to create a

framework which is clear and structured.

Going a couple of steps further into the model Gordijn & Akkermans (2001) have

the approach that conceptual modelling should describe how economic value is

created inside a network of actors. They call their model “e3-value-onothology”

and it is somewhat different since it deals with a value-based view (instead of a

process or system architecture view, as previous models). The approach is

building on terms like actors, value exchanges, value activities, and value objects.

These terms or notions are thus transferred into a model network in which it is

described how companies and consumers interact, and how economic value is

created, distributed and at last consumed by the end-customers. On a somewhat

similar note (Zott, C., & Amit, R., 2010) have proposed an activity system

approach that is based on their perspective that a BM is the set of interdependent

activities. This means that in their model the firm is the center, also taking the

activities of the network surrounding the firm into account. As they describe it:

“an activity in a focal firm’s BM can be viewed as the engagement of human,

physical and/or capital resources of any party to the BM (the focal firm, end

customers, vendors, etc.) to serve a specific purpose towards the fulfillment of

the overall objective” (p. 217). The strength of the meta-models and activity-

systems is that they can be used as overall models in which you can still use more

19

specific theories to elaborate further, while still capturing the dynamics of how

business models interact in networks.

2.3.1 The Business Model Canvas

The key analytical tool used for this case study will be the model developed by

(Osterwalder & Pigneur, 2010) called the Business Model Canvas. The model will

form the ground of the entire analysis, however, it will not rule out the use of

other theories or concepts. It will be used for comparing in what areas the BM of

Danske Spil have changed after the liberalisation. It can thus be used as a tool for

seeing whether the external changes actually influenced how DS has gone about

their business. It has been prioritized over other models, since the BM canvas

gives a clear overview of the different activities within the company thus making

it easier and less abstract to create such a comparison.

The canvas proposes that a BM is made up of nine different components that all

together create an overview of businesses’ part and processes. The different

components can be viewed in the illustration above. Through an analysis of each

component we can thus dissect what changed inside the company through a

“before and after” description. The framework also gives us the opportunity to

assess which parts of the company’s BM changed the most thus making it

possible to assess which parts were most important to change in the company.

The theory can again be seen as a framework in which other theories can be used.

20

Using the BM canvas thus allows us to apply more theories to the different parts

of the BM of DS. Furthermore, there is a great coherence between the definition

of a BM created by Zott and Amit (2010) and the framework of the canvas. Their

definition describing the BM as “a system of interdependent activities that

transcends the focal firm and spans its boundaries” (2010: 216) has a great match

with the BM canvas and as mentioned earlier the coherence of the theoretical

framework is important for this paper.

The reason for choosing the BM canvas over other models is that it has more

means for comparison of BMs than other models. It would for instance be very

vague to compare two narratives or archetypes to each other, since they are not

deeply engaged inside a company, making it hard to specify concrete differences.

Therefore, they can be used for other purposes, but in this case they are not

relevant. The reason for not working with meta-models or entity-systems is that

this paper is mainly engaged in the internal processes of the company. It would

be a great perspective to have, but it could be feared that the larger scope of the

model would compromise the internal analysis of the company. It could also be

problematic not to be able to work entirely in depth with a more limited scope,

since the paper may end up becoming to broad, and thus not really be able to

point at specific conclusions. Of course there are certain pitfalls associated with

using the BM canvas. A problem could be the loss of complexity. Since the paper

will be using particular models, which can only capture part of the real world, we

could end up loosing part of the holistic perspective. Hopefully, this can be made

partly up for by using as much supporting literature as possible to carry out the

analysis, as long as there is coherence with other literature being used.

21

3. Data & Method This part of the paper will describe how the framework around this study was

created. It will be described how the literature supporting the study was found,

how the data has been collected and contain a thorough description of what

methods have been used for creating the study. Part of this section will also be

augmenting as to why the choices of data and method are relevant and why these

have been chosen.

3.1 Methods

The study will be set as a single case study only investigating the particular case

of DS. It is designed as an intensive case study, striving to create a holistic

understanding of the case and not create generalizable theory that can be used

for general cases. The reason for this, is the belief that in order for this to be done,

the study must be designed either more longitudinal or with multiple cases, in

order for larger amount of empirical data to base theory upon. The time frame of

the study is approximately 3 months from February to May 2014. The references

used for the study will almost exclusively be based on scientific research as well

as most data will be primary data gathered inside the company to ensure high

quality. The paper will take an abductive approach to the findings since it will be

mixing the approaches of both deduction and induction. The deductive elements

are the theory that changes have occurred due to the changes, and it is thus this

that the paper hopes to prove. The inductive part comes from the desire to

theorise what it takes to successfully overcome radical changes in the external

environment. It can thus be said that the study is based on exploratory research

which will be approached circularly and can be ever-changing in the process. But

mostly the study will be designed in such a way that the findings will be open and

it cannot in any way be predicted what sort of outcome the study will have. It is a

key factor that the interviewees will be influenced as little as possible, while still

sticking to the agenda, which is researching the BM. In order to reach the findings

the paper will be applying existing developed theories to the case. Practically, the

Business Model Canvas will be applied to the BM of Danske Spil both before and

after the events in 2012. Upon looking at the results after using the BM canvas, it

will then be decided what research can be applied to the newly obtained results.

22

This should ensure a flow in the research in which it develops as the data is

analysed, promoting a flexible research design rather than rigid research.

The practical implications of the above will include the following; prior to actual

research background knowledge must be obtained. This is done through an

analysis of company materials such as income statements and economical

figures. Furthermore, this will include retrieving recent data from newspapers

and other online sources, creating a knowledge-framework through

understanding the company and its situation. It is important that this framework

is set prior to moving on. Following this, three interviews will be conducted.

These are elaborated further in the data section. From the interviews the analysis

will be carried out, a relevant theory will be applied to the case. It is the author’s

belief that this method should ensure high quality research and create a realistic

and nuanced picture of the case.

3.2 Literature

The main source for finding scientific literature has been through the EBSCO

business source complete database. Here key words have been “business model”,

“business model innovation” and “business model development”. The search has

mainly been limited to include articles from 2000 and onwards since the field has

been under a vast development, and it has been desired to have recent theories

and thoughts since this is when the field has really fallen in the interest of

scholars. This does, however, not imply that no literature prior to that year has

been used. From the database search, two recent literature reviews have been

used for inspiration as to what literature to include in the theoretical section of

the paper. These two papers have also functioned as catalysts into further

research. From the research four papers where picked out to create the overall

theoretical framework for the paper and these have each been described

thoroughly in the theory section above. These are: Business Model Dynamics and

Innovation: (re)establishing the missing linkages (Cavalcante et al., 2011),

Business Model Innovation (Massa & Tucci, 2013), Business Model Generation

(Ostenwalder & Pigneur, 2010) and The Business Model: Recent Developments

and Future Research (Zott et al., 2011)

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3.3 Data

The collection of data will be based on three main sources: company documents,

articles and through in-depth interviews. The company documents will mostly be

used to create overview with regards to the company’s history (thus creating a

historical context), their financial performance and key economic figures before

and after 2012 and their general data. This type of information will not be used

directly in the paper, but it has functioned to create a basic understanding of the

type of company that has been dealt with in the exact study. The articles will

serve the same purpose. Although they may not be used directly in the paper,

they will be used to create a basis for understanding before going into more

direct data collection through the interviews. This should ensure basic

knowledge prior to further investigation, thus ensuring the quality of the

questions and research. Furthermore, DS themselves created a BM canvas that

will be used in the paper. In the data collection that is directly related to the

findings, and what these are based upon three main interviews have been set up:

1st interview w. Project Leader in the department of Business Development, Lotte

Lind Nielsen, on Thursday the 20th of March 2014:

The main focus of this interview will be to get information about what the BM

canvas has been looking like before and after the market changes. It is thus not

subject to many individual thoughts and ideas but will be very structured and

with a tight agenda. The reason for this is that the information is vital for creating

a foundation for the analysis, and it can thus be seen as the building blocks on

which the findings rely.

2nd interview w. CEO in DLI, Niels Erik Folmann, on Wednesday the 2nd of April 2014:

This interview will be concerned with what the changes has been looking like

from the top. This interview will be focusing on how the CEO has felt the changes

and what challenges has been associated with implementing changes in the BM. It

will thus represent the management part of the findings focussing on the role of

management with questions regarding challenges, essential changes and revenue

and cost changes. The interview will have a semi-structured design, thus allowing

it to develop through what sort of answers is obtained. Since no prior knowledge

exists at this moment, it is essential that the personal perception of what has

24

been essential is used to investigate key changes, and this is best obtained

through a semi-structured interview.

3rd interview w. Head of Business Development Ditte-Maria Heide Kristensen, on the

25th of April 2014:

The last interview will be rather process oriented, investigating how the process

has affected the organisation and where most changes has been done. The main

purpose of this interview is to obtain knowledge about how the process have

behaved with regards to other theories, and questions should mainly seek

information going beyond the content of the BM canvas. Questions will mainly

involve identity, barriers, organisational flexibility and general organisational

behaviour. This interview will have a somewhat tighter structure than the 2nd

interview, but can still be categorized as a semi-structured interview, since it will

take into account what is emphasized by Ditte-Maria, but have more questions

the 2nd meaning that a tighter structure is needed to obtain all the information

required from the interview.

The three interviews will create a foundation for carrying out the analysis. They

will serve different purposes when presenting the findings, as the interviews

made with Niels and Ditte-Maria will not be directly related to the BM canvas, but

will rather be used to analyse how the changes have been seen and felt from

above. Three interviews are considered to be sufficient in creating a foundation

for the analysis since the data obtained can only be delivered by a few people.

With the rather strong defined structure of the paper, it is rather clear what

information needs to be obtained and therefore, it is rather straightforward what

questions need to be asked. However, the structure of the interviews also allows

for unexpected information and findings which can be key to creating a holistic

paper with findings as close to reality as possible.

25

4. Findings This section of the paper will be presenting the findings made in the study. It can

be broken down into three different sub-sections; presenting the BM-Canvas

before and after the changes, comparing and discussing the canvasses, and

investigating how the process of change has been seen from the management's

perspective. It will be based on interviews with managers and employees as well

as internal documents.

4.1 The BM Canvas prior to the liberalisation

The following work has been done through interviewing employee Lotte Lind

Nielsen who is the project leader inside the department of business development

in DS. She has been a big part of developing the BM and she thus has a deep level

of knowledge about what the BM has looked like before 2012.

Key partners: The gambling authorities were seen as key partners since they were

the ones authorizing and licensing the games that DS was offering. In extension to

this, the politicians were mentioned since DS was striving to maintain good

relationships with the ministries. The shops selling games for DS and marketing

companies were partners on the marketing side. Lastly, upon integrating an

online product, DS became more dependent on IT-companies creating online

platforms for their customers.

Key activities: The aim for DS before 2012 was not necessarily to make the

biggest possible profit. The goal was of course to sell as many games as possible,

but also to take into account that games had to be sold with responsibility, and

they did not want to be too aggressive in their marketing. "We were there to

make the Danes happy" Lotte states. She further notes that back then time was

never really an issue when it came to launching new products, "since there was

no competition it didn't matter whether it took 5 years to develop new games or

not" she says.

Key resources: The main resource was the employees and that they had the

necessary competencies, especially in the departments of marketing and IT. It

was mentioned that there was a strong culture inside the company and

26

employees were proud to be working in the company. Proper IT-systems were

also a key element for DS since it was key that there was trust from the

population that odds were set fairly and that there was truly a safety that the

lottery numbers had not been manipulated.

Value propositions: Before 2012 all profits made by DS went directly to local

sports-clubs and associations. This was a huge value proposition. DS has always

been a part of the Danish culture and providing the Danish people with dreams of

winning the lottery is mentioned to be a key proposition offered. The fact that

they were the only legal supplier of games created a sense of security around the

company and people were never in doubt of whether their money would be paid

out or not.

Customer relationships: The general relationship with costumers was less

commercial and part of the main task was to create a good relationship through

trust in the company. DS mentions that their relationships were very influenced

by their monopoly, meaning that they had a predefined loyalty since people have

nowhere else to go. Being part of the culture meant that creating trust and

security were the main drivers.

Channels: The main channel used was the online platform at Danskespil.dk. Since

the Internet offered more possibilities, DS became more aware of using the online

platform to market and offer different games. However, the more classical

channels like gas stations, supermarkets and kiosks are also emphasized as being

main channels, even some bars gave people the opportunity to buy the games

offered by DS.

Customer segments: DS has always been very aware of who their customers were,

and from this they developed five different customer segments on whom they

have focussed; thrill seekers, casual players, social players, the new winner and

impulsive players (Guldberg Andersen, 2010). Back then Lotte mentions "they

were not as associated with particular games, but used as an overall picture of

our customers".

27

What can mainly be inferred from the interviews is that the organisation as such

has operated more casually prior to the liberalisation. Since there was no

competition and customers who were loyal and had trust in the company (and

nowhere else to go), things where moving more slowly inside DS since there was

less external pressure demanding the company to perform. Like mentioned by

Lotte they were still trying to make money, but in a different way than today

where the organisation's ultimate key performance indicator is how big a profit

they can generate. Since the company is now divided in such a way that a part of

the company is profit based (DLI) and another still donates profits to local

associations, it is mentioned that there has been created a bigger gap between

employees, and even though the culture is still internally strong there is not the

same sense of coherence between employees. CEO Niels Erik Folmann also notes

this phenomenon, describing it as a clash between two cultures from before and

after the liberalisation and that this has been a challenge to manage (This will be

elaborated further in the coming sections).

4.2 The BM Canvas after the liberalisation

DS and their employees have purely done the following work. Upon starting the

research for this paper, I was informed that DS internally already had developed

their own BM Canvas prior to me starting my work, however, it was in no way

related to the research project. I find that their work is ideal to use since it has

been developed by a large group of employees and should hopefully represent a

rather complete picture of their BM (see appendix for the full canvas illustration).

After presenting their work I will comment and elaborate on it, since it has also

been discussed through the interviews.

Key partners: Partners are still mentioned to be shops, it-companies, authorities

and politicians. However, a list of new partners is emphasized. For instance co-

creation with customers is now key. Today there is a wide range of software and

game developers involved, prior to before when there were only two external

companies providing everything. An international network is important, since

the market now operates with a different scale, meaning that DS has become

more outwards seeking for software suppliers, also internationally.

28

Key activities: In the activities we see a somewhat different picture than pre-

liberalisation. DS now sees their key activities as product innovation and acting

as the market leader. They now see interaction with customers as a focus point

and they are determined to create entertainment for their customers. They also

work closer with their partners, in trying to create collaborate goals in order to

stay on top of the market. Trend spotting is also mentioned. Perhaps the biggest

difference is that now the emphasis is on operations. Operations are now seen as

the foundation for the company and it is probably the most key of all activities

after the liberalisation.

Key resources: The resources are still somewhat focused on the employees and

their competencies. Collaboration across the organisation is emphasised as being

a big resource for DS along with a good culture. As more rigid assets they

mention liquidity as a key factor, as well as the IT-systems that are used to

provide their online platform and all of their games.

Value propositions: The company is creating value through excitement,

entertainment and the creation of dreams. They put emphasis on the fact that

they are a Danish provider of games, and that they are linked to the state. The

money earned either goes to charity or directly to the state. A high-level of

service is now provided and their identity is well known by most people in the

country. Another big emphasis is put on having a large product range available to

the customers, and making sure that product development is always competing

with the main competitors in the market.

Customer relationships: DS is striving to have a close bond to their customers.

Knowing that they now have a wider range of suppliers to choose from, this is

becoming more of a key factor. They want their games to be both appealing and

interactive thus making them entertaining and not only seen as games played

with the sole purpose of either winning or losing money. However, DS also seeks

to inform their customers about the potential dangers of gambling. DS wants

their customers to absolutely certain that their money is safe and that their

earnings will be paid out.

29

Channels: Today DS is using a wide array of channels to market their products.

They are now operating through more platforms such as a mobile app, emails,

and social medias like Facebook. The main channel is the company website from

which all games and activities are operated. DS is still as the only company in

Denmark supplied through local shops, and this is not yet a market that any

competitors have tried to penetrate. Marketing wise, DS has started to use

sponsorships that are related to their business on for instance football stadiums

and local sports clubs.

Customer segments: DS has not changed the specific customer segments with

which they are operating. However, today they are allocating customer segments

more specifically to particular products, for instance such that online poker is

targeting thrill seekers. Also they now give customers the opportunity to become

"VIPs" targeting the big players spending a lot of money. Furthermore, DS has

created a strategy for future segments to target in which they focus on women

and younger players, since today their target audience and cliental are very

dominated by older players (35+).

Watching the organisation as a whole it is rather clear that the radical external

change has caused just as radical changes on the inside of the company.

Commenting and comparing the specific changes will be the domain of the next

section, so this will be analysed later in the paper. Seen as a whole it can be said

that the company has become more professional and competitive. Today the

company operates with the same parameters as most of their competitors, and

terms like high level of service, liquidity and focus on operations have all of a

sudden become the essentials of the company. Later in the paper I will be looking

at some of the challenges of this transition, and how the mentality inside the

company has been altered. As described earlier this has also created a gap

between some employees and changed the organizational culture. There is no

doubt that the transition into becoming a profit oriented company has required

some internal sacrifices, but it could be argued that this may have been necessary

to compete in the new and different market. The next sections will analyse this

further.

30

4.3 Analysing the canvasses

The following section will compare the findings from the previous section and

analyse specifically what has changed in DS's BM. This section will thus be

elaborating further on the previous findings, compare and comment on the

differences in the two BMs. It will move from more specific observations inside

the different components of the BM canvas framework out into dealing with

larger and more abstract aspects to avoid the loss of analytical complexity. It is

ultimately the goal to structure my work in such a way that the rather complex

notion of a BM becomes structured and straightforward. However, in order to

paint the most realistic and holistic picture, the paper must also incorporate

some of the more complex theories and concepts.

Most of the partners that the company are working with have remained

unchanged. Quite naturally when the company is state owned most of their public

relationships like politicians, ministries and authorities will still be key partners.

Also suppliers and distributors have more or less remained partners for DS. What

really changed were two main things; 1) the emphasis that is put on different

partners has been altered, and 2) the amount of partners to distribute the

products of DS has drastically increased. Today DS is putting a larger emphasis

on the IT companies developing their software and ultimately their products.

Previously only two companies where used (Betware and G-tech) and even

though the two are still around today, the total amount of IT developing

companies that DS is cooperating with, has drastically increased. This is merely a

product of the increased competition and the heavy demand on product

development as noted by the CEO. Since the market no longer allows any

company to fall behind on IT development, it has meant that DS not only needs

more suppliers, but they also need their suppliers to be as competitive as

possible in order to meet the high demands on the market. The expansion of

distributors can be seen in that DS now has more ways of getting their games out

into the public, which is probably related to the increased focus on sales. DS thus

obtains more flexibility through less dependency on previous suppliers, which is

important to creating success in BM innovation, towards the goal of strategic

flexibility according to Bock et al. (2009). The new games that were integrated

31

after the liberalisation were mainly casino games with a very high level of

payback percentage to the customers compared to for instance the national

lottery. This also means that DS needs to sell more games in order to earn money,

which of course leads to an increased emphasis on having a strong sales

apparatus that can overcome the challenges. This has been done through

integrating affiliate sales in which partners will share profits with DS on

customers that they provide, as well as cooperating with some supermarkets to

now provide their products. Also as noted by Lotte, “the sales department inside

the company has been heavily increased”. The partners working with DS have

been changed through BM extension, since the main change lies in the addition of

new partners in order to meet the conditions demanded by the market. Amit and

Zott (2012) also propose the addition of activities as a way of changing your BM.

When looking at their key activities several things are interesting to look at. First

and foremost it is rather clear that there is a clash between the large emphases of

profitability and the ethical aspects of people loosing their life savings on

gambling. This has been dealt with through integrating a CSR strategy as a key

activity, highlighting the responsibilities of the company which when all comes to

all is owned and operated by the Danish state. However it cannot be denied that

it is a fact that DS is now aiming to be as profitable as possible and therefore can

have a conflict of interest at this point. During our interview, the CEO noted,

"we'd rather have a million Danish people loose 10 DKK each, than have 10

people loose 1 million". The quote above somewhat sums up the conflict rather

well. He further notes that DS is the only company on the Danish market who has

these kinds of concerns. In general the key activities could be argued to the point

in which DS has seen the most changes. In extension to their conflict of interest of

course comes the fact that today operations are the foundation of all their

activities. It is somewhat unusual for a state owned company to all of a sudden

have profit generation as their number one performance indicator, and there has

been a trickle-down effect to most other areas of the company. And this of course

also influences all other activities. Evidently the changes in activities follow a

strong pattern of revision since fundamental changes have been made which has

altered how business is done in other parts of the company. Mainly the

32

fundamental change towards profit-oriented operations supports this. Even

though the main goal before the liberalisation was still to sell as many games as

possible, this was inside a completely different framework in which it was also

emphasized that the company should not be too aggressive and still keep a high

level of responsibility. The somewhat romanticised picture can thus be said to

have changed a bit. And even though it is completely safe to say that part of this

picture is still intact in the self-belief inside the company, it cannot be rejected

that the activities have been commercialised along with the profitability

measures, and all of a sudden activities like trend spotting and lobbying inside

the ministries are mentioned to be key. Another key element DS is now dealing

with is to create coherence and collaboration across the group since the company

is now divided into three. They now emphasize to have a clear vision across the

different parts and they strive to work as a strategic whole. This of course creates

new challenges to a BM, which will also be addressed later on. In terms of the

resources that DS are using to support their operations the changes have been

more modest.

Evidently the volume of resources needed for the company to sustain has

massively increased due to DLI doubling their revenue, which meant that the

assets followed the trend. However, the types of assets needed have remained

rather similar to pre-liberalisation. DS themselves point more towards human

resources. Again the strong cooperation across the group is mentioned as a key

resource, which of course differs from before when the organisation had a pre-set

definition of working as a whole. Another difference is the emphasis on liquidity

as a resource. Since today the company needs to invest heavier in product

development, they are in need of more money to follow the trends in the market.

Again it is key to notice, that since DS are competing with huge companies who

have the sufficient funds to always develop new products, DS are forced to follow

this trend and this is what the resources are focussed towards. Like with the

partners, the changes follow the trend of extension since the company mostly

have been adding to existing processes to serve the new market situation.

How DS are providing value for their customers has also been altered to a certain

degree. Although the basic value that DS are proposing such as entertainment,

33

excitement and safety has remained somewhat unchanged, it is now being

acknowledged that in order to keep customers coming back to their games other

value propositions are needed to support the basics. Therefore, the list of values

proposed has been extended and especially the development inside two

components are significant; the new found emphasis on having a high level of

customer service and having both a wide and deep product range. These are now

two important factors needed to provide value, and as mentioned earlier they can

be directly related to the increased competition in the marketplace. Perhaps the

most interesting observation is: what has always been taken as a given inside the

company, the fact that the company is Danish and deeply rooted in the people of

the country could be argued to now provide a significant amount of value to the

customers. All of a sudden customers are faced with the decision of either placing

their money with big international carriers with whom profits are placed in the

hands of the investors or DS where the money is either supporting local society

or directly to the state. This has significance for more reasons, 1) it is deeply

anchored in the Danish people and thus creates an advantage, and 2) this is a

value that no other competitor can copy (at least it seems highly unlikely that

they would even try), and it is therefore a value that will always be unique to DS,

creating a sustainable competitive advantage. It is certainly interesting that

something that has always been taken for granted all of a sudden could be argued

to be perhaps the most important provider of direct customer value and give the

company a decisive competitive advantage. In terms of the Cavalvante et al.

(2011) model this one is slightly more ambiguous, since it could be argued that

customer service and more products are additions. However, the changes have a

different nature, since the entire product range was revised to suit the new

market situation which is also why this paper will argue that the changes follows

the trend of BM revision. The example shows that it can be hard to distinguish

between the two in certain cases, which is why it is required to be specific when

analysing the BM.

As an analyst you could be suspecting that most monopoly companies would tend

to neglect their customer relationships, since the customers quite frankly have

nowhere else to go. Therefore, it is of course interesting to investigate how the

34

focus on customers has shifted once the market situation changed. DS themselves

describes this as their promises to customers and their promise is to deliver

games that are appealing, that the company is informative about potential

problems with gambling, as well as they strive to interact and create close bonds

with their customers. On top of this they promise to provide a sense of safety that

the money is secure and that winnings will be paid out. What is interesting is not

necessarily what DS decides to promise their customers, but actual act of creating

promises for their customers. As described before 2012 it was noted that the

company's customer relationship was less commercialized, but also that it was

very influenced by the monopoly situation. All of a sudden customers of DS can

enjoy the benefits of a company with a high level of service and even an emphasis

on co-creation of the company, which is also why we can clearly infer that DS has

revised customer relationships. The fundamentals have simply been changed and

today there is a completely different emphasis on this part of the BM.

When it comes to segmentation of the customers, DS has still been operating with

the same framework as prior to the liberalisation. However, there are two

significant changes to point out; the segments are now used to target specific

products to specific customer types and the integration of special benefits for

larger customers. DS has always tried to be somewhat aware of who their

customers have been, but pre-liberalisation the information has not been used

directly to sell more specific products to target customers. This has now changed,

thus again supporting the image of a more commercialised and profit oriented

relationship to customers. It also points towards the trend of a revision since it is

the way things are done that has been changed rather than an addition.

Furthermore, the linkage of activities follows on of three ways of innovating your

BM proposed by Amit and Zott (2012). The integration of large-scale benefits can

be said to be somewhat contradictory for DS, and it is a rather precise picture of

the moral issues that can be related to the changes. On one hand DS has a

responsibility not to create gambling problems and addiction, but on the other

hand they still need to be able to compete and make large profits through offering

what some players want. And no matter how it is put there is a contradiction

between the two. With regards to the channels preferred by DS the most

35

significant changes have been made through a "technological upgrade" so to

speak, through the integration of social media, mobile phones and applications.

These seem to have been necessary in order to follow the competitors in the

market, since all main competitors are providing these opportunities. As noted

earlier in the analysis, part of the channel extension has been to expand the sales

apparatus through implanting a DS outbound department responsible for direct

sales and campaign information to the customers, again building on the notions

of a more aggressive and commercialised relationship with customers. Channels

follow a clear trend of a BM extension since these have almost exclusively been

changed through the addition of more activities.

In terms of changes in revenue streams and the cost structure there are one main

change to both of them. Upon developing their canvas DS did not touch upon the

two, however through the interview with the CEO the changes were clarified. The

revenue in the liberalised part of the company has doubled after the market

liberalisation (according to the CEO), which in itself of course points towards a

change in how money is generated. Due to new amount of competitors entering

the market, the price setting was radically altered as prescribed by classical

economic theory (monopolies vs. perfect competition). The change in the

margins means that DS now has to shift their focus to increasing their sales

volume in order to generate the same profit as before, since each game will

simply generate less profit. It further proposes revenue model innovation, since

the pricing strategies have been changed in the company (Geisen et al. 2007).

This can be used to explain the change of strategy with regards to sales,

marketing and the altered customer relationship. Changing cost from fixed to

variable has been at focus in DS. Through revenue share models with some of

their game developers, they have tried to accomplish this. The vision behind this

strategy has been to minimize the risk when moving into new markets in which

the company has no know how. Since most of the competitors in market already

had a well-developed portfolio of games, a lot of product development was

needed in order to keep up. Therefore, making costs more flexible has been the

way to make ensure that the company can keep up with the demand for larger

36

investments in the market although it has the potential to influence the earnings

per game negatively.

To sum up the overall changes, a series of interesting findings were made. First

and foremost it can be concluded that the liberalisation has definitely altered the

different components in the BM of DS. The by far most influential change has

been the fact that DS' performance is now measured in pure profit. The reason

for this particular change to be highlighted is that this is ultimately the factor that

has caused most of the other changes. As a company the changes can be said to

have followed a pattern of BM revision since the overall and fundamental changes

have caused other parts to change. The emphasis on profitability has made DS

shift their focus in many parts of their BM, such that it can now compete with

other suppliers of games in the marketplace. This means that the parts that have

been changed through the extension trend have mostly been in order to serve the

main purpose of revision. The CEO, when asked what has been the most

significant change, also mentions: "today we are being controlled by KPIs from

top to bottom meaning that the group has goals which are transferred down

through the departments and even employees. This means that we not only

measure sales and income, but also the waiting time in customer service for

instance. This is very unusual for a state-owned company". And it is indeed

somewhat unusual. When entering the headquarters of the company, you do not

in anyway get the feeling that you are entering anything related to the state, but

rather that you are entering a company as anywhere else. They are now by far

the company in the entire country spending most money on ads and commercials

(Christiani & Høst, 2013), and they have even implemented a bonus system

rewarding the high performing employees and departments. There is no doubt

that inside the part of the company operating on the liberalised part of the

market it can be hard to distinguish between them and any other company

striving to make profits and keep their investors happy. However, it is also clear

that the changes have caused certain challenges especially related to the

organisational identity that DS has always been associated with. As noted by the

CEO one of the main challenges has been to manage the relationship between the

"monopoly-employees" and the more performance and competition minded

37

employees. Since the liberalisation meant a fast organic growth for the company

this also meant hiring a lot of new employees who came in with another mind-

set. It is a phenomenon like this that means we cannot neglect the management

side of dealing with BM changes, and as the CEO notes "this is not something that

can be taught in any of the theory books". It was further noted that the change of

pace in DLI due to the competitive nature of their market situation has been a

subject of conflict. Since both DLI and DLO are operating under the same

organisation but now has a different customer-supplier relationship, they have

been experiencing internal conflicts since employees in DLI seem to move at a

higher pace, demanding work assignment fulfilled faster and more effectively

than the employees of DLO.

Therefore, a vital part of the analysis is also to acknowledge that the management

plays a large role in implementing and managing changes in an organisation and

this has certainly also been the case here. The problem of the "culture-clash" as it

is described by the CEO has been dealt with through the creation of common

goals, such that employees will be working together towards the new order.

Another problem that DS was faced with was the contradiction of being a

responsible company that did not create gambling addiction and still trying to

earn as much money as possible. This issue could be somewhat more serious

since it is threatening part of the deeply rooted identity in the company saying

"we are here to benefit and make people happy". Although it may be near

impossible to overcome the problem completely due to the direct contradiction,

the management has tried implementing and emphasising a new CSR-strategy

which has an important role in the company in order to maintain as much

responsibility as possible. As mentioned earlier the right management is an

absolute key to implementing changes, and there is no doubt that the situation in

DS could have been completely different, had the management not had the

willingness and readiness to change. What was emphasised as the most

important leadership factor was the change of structure that followed the BM

changes, meaning that the organisation has become more flat, and the companies

are now operating as separate entities. As analysed below, this can be said to

have helped DS overcome a lot of the traditional barriers to change and this has

38

certainly been a valuable decision made by the leaders. According to Doz and

Kosonen (2010) it is the leaders that drive changes of a company's BM, and it is

their responsibility to create a more flexible and agile organization, as well as

taking on the risk of venturing into new areas and experiment with the BM.

Although the changes have also created more flexibility through separation and a

flatter organization there is still work to do, as noted by Ditte-Maria. She argues

that even though the company has become more flexible they are still somewhat

rigid in their it-department, which has caused frustration with suppliers since

products are hard to scale to the needs of DS. Employees also expressed

frustration, that the company is not as agile as their competitors. She further

notes however, that it is a clear goal to improve upon the flexibility of the

organization, and she expects the company to improve further over the next

couple of years. Another way of innovating a BM is through leaders creating

mutual engagement of employees as proposed by Santos et al. (2009). This has

been done by the company through giving out more responsibility to each

employee, making them feel as a bigger part of the whole. Also, the creation of

common goals has been contributing to mutual engagement. In order for the

organization to stay flexible in the future, leaders should engage in one or more

of the three meta-capabilities developed by Doz and Kosonen (2010), strategic

sensitivity, leadership-unity and being flexible with resources as well as engaging

themselves in further BM innovation, to stay flexible (bock et al. 2010).

As described by the authors the process of revising a BM does not come without

challenges. Some of the key challenges mentioned besides the uncertainty when

revising a BM are the lack of knowledge and skills and a general resistance. The

lack of knowledge became evident through the presentation of new products.

Since all of the competitors had been operating with casino games for many

years, DS fell a bit behind. However, a strong preparation a year in advance

meant that they quickly overcame this problem. They even had a competitive

advantage the first six months since competitors were not used to the market and

the regulations. The challenges of resistance and blinders go very well hand in

hand with the already mentioned notion of a "dominant logic" (Prahalad, 2004)

and as well argued by Pisano (2006) and Chesbrough (2010). In this case

39

however, DS has been able to simply overcome all potential resistance through

hiring and creating a new team of managers. In the liberalised part of the

company a new CEO was hired as well as a lot of new manager positions was

created, thus meaning that the managers have been able to come in with a rather

"fresh" view on things which could be argued to have had a significant positive

effect on the company's readiness to undergo changes. Therefore, DS seems to

have avoided classical barriers through new management, but it could also be

argued that the separation of the companies has played a significant role. Today

the part of the company operating on the liberalised market has been able to

incorporate a large amount of changes, however, you could suspect that if the

companies had not been separated as clearly, DS could have been facing some of

the problems above. The alteration of management positions is also addressed as

being an effective way of overcoming potential barriers to change, and is

mentioned as one of three tools to overcome these by Chesbrough (2010). An

interesting concept that can be linked to the case is that of an "identity trap"

which can hinder progress and change due to the fact that a company has a

strong sense of identity which it fights to stick with (Bouchiki and Kimberly,

2003). DS historically has a very strong identity as a responsible company

serving the people's interests and their slogan "for benefit and joy" somewhat

supports this picture. Therefore, naturally it could be feared that this identity

could cause a barrier to change and that part of the organization would be

resisting. What can be inferred is that again the separation of the activities into

different companies operating on different markets could have helped overcome

this barrier. Since a new branch of the group was founded, they have had time to

build their own identity and since the old monopolistic branch was separated as

well, this part of the organization does not necessarily have to associate itself

with the liberalized branch and their values. In DLI the CSR-strategy now plays a

larger role helping employees not loosing the sense that they are here to do good,

and this can also be said to have helped DS maintaining an overall identity similar

to old times, thus enabling them not to fall into the identity trap.

40

5. DiscussionThe last part of this paper will be discussing the findings made in the study as

well as a discussion of the structure of the case study. From this discussion, it will

furthermore be discussed how theory has seemed to fit with the particular case,

and whether or not there have been pitfalls and lack of theoretical framework to

use as an analytical tool in this study. Furthermore the section will round up by

drawing conclusions on the study as a whole and answer the questions proposed

in the introduction of this paper.

5.1 Discussion of the findings

Generally the biggest insecurity inside the case is the level of abstraction needed

to develop a BM framework. By this is meant that it can be a rather tough job to

develop a precise and clear framework as to what the BM actually looks like. This

has particularly caused problems with regards to mapping out what the BM

looked like prior to the liberalisation. Since it is no longer a part of the everyday

life in the company, and it is a rather complex notion it can be a hard task

determining whether or not the data put into the framework is sufficient or

reliable. Since knowledge about what your BM may look like is not written down

anywhere, we can discuss whether the picture that has been painted of the pre-

liberalisation BM is actually complete. The concern is that the employees and

managers may not entirely remember the old situation in detail and therefore,

they can miss out on important elements. In contrast the updated BM canvas has

been developed by a larger group of employees who are all engaged in the

company's processes as of right now, and can therefore go into concrete detail.

There is no doubt that this has influenced the "completeness" of the pre-

liberalised canvas, but on the other hand this is almost inevitable since we are

dealing with a complex notion that is not even recent since even if you were to

gather more data from a larger group of people, differences in perceptions of

what were important factors may have played a role, thus making the picture

more blurred. Therefore, it was chosen to have only few people describing the

canvas, and thus inserting data in the framework that could be used to actually

compare the two situations before and after the liberalisation. But no matter how

this task had been gone about, the discussion of this problem was inevitable and

41

has to be assessed by the individual researcher. It can be discussed how much

actual innovation went into developing a new BM. Since changes were forced

upon the company externally, you could argue that the innovation that went into

changing the BM were a result of this force and rather made out of necessity than

actual innovative thinking. Whether or not the changes in DS can be categorized

as true innovation can be discussed, but whether or not there have been changes

cannot. And in order to incorporate changes, it is required that some parts of the

organisation have the ability to think in new directions. Further you could argue

that even though external changes were forced upon the company, it did not

necessarily imply that DS would change things as fast and in the particular way it

did. We could thus have been dealing with the case of an old state-owned

monopoly that did not have the willingness to change and adopt to the market,

and therefore were now performing poorly and loosing market share. Therefore,

the case definitely has its relevance in terms of comparison to different case

studies, and it can be acknowledged as being the same sort of innovation as in

other cases. Although this argument justifies the use of theory developed to

analyse BM's and BM innovation, it cannot be neglected that this particular case

also has some sort of oddness to it.

Perhaps what a great deal of the findings are actually inferring is that changes a

long way down the road boil down to the abilities of managers and their

readiness to change. As shown in the analysis DS overcame a big part of the usual

barriers through simply selecting the right management structure and through

hiring the right people to implement the new structure. There is no doubt that

management decisions have highly influenced how changes have been dealt with,

but what the paper is also inferring is the inter-connectivity of changes. What we

saw was that when revising a BM, in order to change fundamental parts of a

companies' BM other changes must be made in order to actually sustain the

fundamental changes proposed. Therefore, changes cannot be seen as static

individual events but rather a chain of phenomena that are highly correlated with

each other when dealing in the domains of BM revision and the field of

innovating a companies BM.

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5.2 The theoretical fit

It can therefore be discussed whether the case was actually ever a great match

for theory. The case can be described as being quite odd since the external

changes were actually influenced by themselves. The case seems to fit some

theories better than others. For instance the frameworks like the BM canvas

seem to have a great fit, since it has been somewhat straightforward to obtain the

data needed to even make this theory say something about the company in detail.

However, part of theoretical framework does not seem to really match the case

all that well. Since most theory is designed to infer things about a variety of cases,

it causes problems in that some theory simply lacks the ability to actually work in

depth with a case. For instance a lot of the theories aiming to describe ways of

innovating your business model can be too broad to actually have the ability to

specifically analyse in detail which changes have been made. It is therefore

combinations of theories have been chosen, in order to best help analyse the case

of DS. Since analysing change is a rather complex thing, models need to have in

mind that they may not be able to describe processes in the required detail to

actually infer anything crucial about the case. It can thus be preferred to use

broader models such as the BM canvas and Cavalcante et al. (2011) to help the

overall understanding, and from these see the process of change as a complexity

so abstract that detailed descriptions and comparison is needed to ever imply

anything about the process of change.

This paper thus implies that an over-use of meta models to describe a process

can be lacking vital perspective since these can often fail to describe the complex

process that change is. An example is the models mentioning very specific ways a

company can change its BM, simply failing to at all fit the case and even if there is

a slight fit, there is not enough detail to actually infer something significant which

can be at use. It is thus more effective to analyse changes through the connection

of events and thus investigate the "why" of the changes, instead of striving to fit

your findings into predefined models. Based on the above statement the findings

in this paper thus support viewing changes on a higher level and from that

framework analyse the specific case through this perspective. I will thus hope

that the future research and frameworks developed will be able to be applied in a

43

broader range of cases such that the process of change and innovation can be

more generalized, however, still taking into account the uniqueness of the

particular context inside a case. Since we are dealing with a very complex

process, rigid and narrow theories will not be able to serve a broad purpose.

However, this do not suggest that specific theories on change is never useful.

Specific theory could be useful if it is somewhat related to a different sub-

category of cases or has significant similarities with the case. For instance the

experimentation approach from the Naturhouse study (Sosna et al., 2010), can be

very useful, however, it implies that there is an actual case in which the theory is

applicable. The same goes for theories developed by Geisen et. al. (2007) and

Amit and Zott (2012) since they are definitely applicable and relevant but need a

specific case fit to ever infer much about the actual case. Theories that have a

greater fit for the purpose of our case are for instance Santos et al. (2009)

proposing a dynamic view on change through organizational dynamics. Theories

like these are more applicable to the DS case since they work as broad

frameworks, in which you can insert data specific to the particular case. Other

examples of theories fulfilling these characteristics are Doz and Kosonen (2010)

and Bock, Opsahl & George (2010) (besides already mentioned Cavalcante et al.

(2011) and Ostenwalder & Pigneur (2010)). Through the emphasis on theoretical

tools like these a case study can be conducted without the loss of context, and

thus the practical applications.

To sum up the discussion it can be argued that the case shows us that

generalizing particular ways of changing a company's BM can be dangerous since

trying to fit the process into already developed framework can blindside us as

researchers. The case further implies that with the right mind-set from the

management, barriers of change can be overcome, however, it requires

awareness of the issue and a structural setup that can carry the process of change

without falling apart. Although the odds seemed to be against DS when their

monopoly days came to a hold they had the willingness to adapt to the new

situation rapidly, and have been very successful in implementing the first wave of

changes to follow the market. Whether or not this readiness for constant

alteration will stick is going to be interesting to follow. It is likely to be needed.

44

6. ConclusionThe paper began by asking how Danske Spil had changed their business model to

cope with the market liberalisation. It is this question that the paper has tried to

provide a thorough answer to, and through the analysis of the findings, the paper

can now conclude:

First, that DS did in fact have to change their BM to deal with the changes. These

changes included altering the business processes in nearly all areas, although

some more drastically than others. The changes spanned from adding activities

to changing already existing processes. The changes can be said to have been

rather fundamental and radical since the main focus of the company shifted into

being purely profit oriented, inside the part of the company operating on the

newly liberalised market. The main changes occurred in the key activities and the

value propositions of the BM

Secondly, the kind of changes implemented followed a pattern of BM revision.

The changes consisted of changing core processes, which pointed to the

conclusion of BM revision, although a lot of the changes were made through

adding new activities to the BM. This paper has contributed with research on

what elements can play a role when companies are seeking to change their

business models through revision

Third, the changes can be described as a "chain-phenomena" in which overall

fundamental changes worked as a catalyst for changes on the micro level. This is

thus the overall description of how changes have behaved in this case, and the

paper further argues that the changes cannot be seen as static entities since they

do not necessarily behave in a specific way or order. This is truly a highlight that

should be taken from this paper if ever used in further research.

Fourth, the paper found that management played a large role in overcoming the

potential pitfalls and barriers associated with the process of changing a firms BM.

It was through a structural change in how management were put together and an

overall change of the company's structure, which led to the breaking down of the

potential barriers and avoiding resistance from the organization.

45

Fifth and last, the paper has contributed to the discussion of what sort of theory

should be developed in further research, in order to serve the demand of future

case studies and to be applicable to practitioners. It is argued in the paper that

scientists should avoid the trap of fitting their findings into too many specific and

predefined models. They should instead seek to use broader theoretical literature

and from this derive specific knowledge about the case through comparison and

discussion thus avoiding the loss of context.

The author of this paper hopes that the research presented can further

contribute to the field with research inside the field of BM innovation and the

change process. Nevertheless, the paper has provided research contributing to

the process towards creating a stronger theory-based approach in the future.

Hopefully, the paper has also eliminated some of the abstract thinking

surrounding part of the field and presented findings in a clear and direct enough

way such that not only abstract-thinking scholars will be able to benefit from the

research conducted.

6.1 Limitations of the study

Since this study has been done as a bachelor’s dissertation there are some

limitations worth mentioning. The main limitation has been the time-constraint.

Since the timeframe for the research has been limited to three months it has not

been possible to follow the process over a longer period, thus ruling out the

opportunity of doing a longitudinal study. Another limitation has been a limited

amount of characters available for use in the paper. Although it has helped

narrow the subject down it has also implied that the full scope of the paper has

been narrowed a bit, meaning that certain possible focus points and perspectives

have been ruled out in advance, due to the constraint regarding space. The

limitations of this study also make it relevant to address some further research

that can be done with regards to this case and hopefully this paper will have laid

the groundwork for such potential studies.

46

6.2 Suggestions for further research

Since it is the author's belief that we are truly dealing with an interesting case it

is the hope that researchers may conduct further studies. An interesting angle

could be on the cognitive aspects such as the loss of an old identity or looking

further into the behaviour of employees after the changes. This is interesting

since DS historically has had a strong identity, and this paper found some

evidence that there may have been a barrier here although it is far from a

conclusion. Another perspective could be a study purely focussing of how the

management has acted to implement changes and their general role in the

innovation process. As the study finds, good management has played a vital role

for the changes to be successful, and a further analysis in the area of change-

management may provide more thorough and in-depth results. In less related

fields it could be interesting to investigate how consumer perceptions have

changed due to the BM change, or inside the field of economics where the

transition from monopoly to perfect competition could be looked upon.

6.3 Acknowledgements

First and foremost, a big thanks to Danske Spil and especially Ditte-Maria Heide

Kristensen who has acted as my contact person during the research period.

Without their openness and large engagement the results in this paper may not

have been as concise and, conclusive. Secondly, a big thanks to professor Peter

Kesting for his supervision and general sparring on this paper. Without his

knowledge and guidance this research had not been possible. Last but not least, a

thanks to my co-students with whom ideas and thoughts has been tossed around.

47

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8. Appendices

The original inter BM Canvas developed by the employees of Danske Spil.

Source: Danske Spil A/S

55

Financial figures from years 2009 to 2013.

Source: Danske Spil A/S

Interviews can be found on the USB handed in with the paper.

56