Added Value-based Approach to Analyze Electronic Commerce and Mobile Commerce Business Models

In this contribution we propose to apply the theory of informational added values (IAV) on electronic commerce (EC) and mobile commerce (MC). We state that for the success of electronic and mobile offers it is not sufficient to merely make a conventional offer available with new media. Instead, the use of electronic and mobile communication technology is only remunerative if it results in obtaining distinct supplementary IAV. This depends on the exploitation of certain faculties of the used technology. For EC, we call these the four electronic added values (EAV): reduction of temporal and certain spatial limitations, reduction of technical limitations, multi-mediality of access and egalitarian access. For MC, we call these the four mobile added values (MAV): ubiquity, contextsensitivity, identifying functions and command and control functions. We can find EAV and MAV as typical properties of EC or MC applications. EAV are the basis for the superiority of Internet applications compared with offline solutions. The relationship between the separate EAV and IAV will be explained and analyzed. Proceeding analogously for mobile applications, we analyze the relationship between MAV and resulting IAV. The outcome is an extension of the theory of informational added values with the concept of electronic and mobile added values. This allows for an application of the theory to both EC and MC in order to analyze and qualitatively evaluate any given business model. For determining its crucial added value we have to identify the EAV/MAV which are capitalized and can deduce the IAV resulting for each party involved. The concept put forward is a suggestion to approach business models, with the focus on typical evaluation criteria for Internet/mobile business models. It is also suitable to compare different business models and to put their added value for the involved parties in a context. In this way, objective criteria are established reducing subjectivity and allowing to make certain predictions. The paper ends with a critical review and the perspective for further research. 1 Extending the theory of informational added values to EC and MC The examination of electronic commerce shows that the success of an electronic offer is not an inevitable consequence only of its existence. Particularly, it is not sufficient to simply make a conventional (non-electronic) offer available through a web site. Compared to the conventional offer, added values are necessary which give 1 University of Augsburg, Chair of Business Information Systems (Wirtschaftsinformatik II), Universitaetsstrasse 16, 86135 Augsburg, Germany e-mail: {key.pousttchi | klaus.turowski | moritz.weizmann}@wiwi.uni-augsburg.de Pousttchi, K.; Turowski, K.; Weizmann, M.: Added Value-based Approach to Analyze Electronic Commerce and Mobile Commerce Business Models. In: Andrade, R.A.E.; Gómez, J.M.; Rautenstrauch, C.; Rios, R.G.: International Conference of Management and Technology in the New Enterprise. La Habana 2003. (pp.414–423) every party a reason for accessing an offer. To determine and classify these gains, the theory of informational added values of Kuhlen [1996] is suitable. We introduce the concept of informational added values (IAV) in section 2. For purposes of this paper, the terms electronic commerce (EC) and mobile commerce (MC) are used in their original, broader sense. We define EC as any kind of business transaction in the course of which transaction partners employ electronic means of communication, may it be for initiation, arrangement or realization of performance (cf. ECOM [1998]). We define MC as a subset, on condition that at least one side uses mobile communication techniques (associated with mobile devices). Gonzalez [2001] states that “Taking an application wireless involves much more than simply porting an existing Internet site to a browser-enabled phone. Mobile applications differ greatly from ones created for personal computers and laptops because their users have a different set of needs and expectations.” For moving from EC to mobile markets, values have to be added to make this step successful. Opposed to this, mobile applications are often still only transformations of conventional Internet applications or EC business models on mobile devices. As an analogy, we can analyze the transition from a conventional offer to an electronic one. Business models can only be rewarding if they provide reasons for substituting present offers with online offers, just the same as there have to be reasons for the transition from electronic applications to mobile ones. From this fate we conclude that the theory of informational added values can be transferred on the transitions to EC and to MC. As Kuhlen [1996] articulates, “both sides, supplier and customer (...) expect from participating in information markets a gain, often measurable in economic categories.” We apply the theory of informational added values as an integrating theory making it possible to evaluate the range of added values required for the transition from conventional offers over EC to MC. Some authors have dedicated research to this aspect. To give related works, we refer to Hansen [1996], Oesterle [1999], Mahadevan [2000] or the Compass approach put forward by Amberg [2003]. Putting their focus on other aspects, they do not contain a clear-cut separation of gains of Internet technology from gains of mobile technology. In turns, Zobel [2001] discusses business models in MC without an explicit consideration of advantages already existent through Internet. The theory of informational added values allows reflecting on supplementary IAV in either step. It is therefore a model facilitating and structuring the qualitative analysis of business models. We have to adapt the qualitative dimension of the theory and complement them with suitable dimensions. For this purpose in section 3 we identify the typical advantages which stem from the use of Internet technology and separately, those originating from mobile technology. These are characterized by their ability to trigger possible IAV. The characteristics rooting in Internet technology are categorized and will be termed as electronic added values (EAV). They are properties that are an expression of the technical superiority of the Internet compared to conventional, offline solutions. We will identify and describe EAV in section 4. Similarly, we identify the typical advantages of the use of mobile communication technology and mobile devices compared to the use of Internet technology with Pousttchi, K.; Turowski, K.; Weizmann, M.: Added Value-based Approach to Analyze Electronic Commerce and Mobile Commerce Business Models. In: Andrade, R.A.E.; Gómez, J.M.; Rautenstrauch, C.; Rios, R.G.: International Conference of Management and Technology in the New Enterprise. La Habana 2003. (pp.414–423) fixed networks. We call these advantages mobile added values (MAV) and discuss them in section 4. The outline of the entire approach is shown in figure 1. Fig.1: Extending the theory informational added values on EC and MC. In order to make an ontological assessment for the theory of informational added values and to determine in which tradition of strategy evaluation it can be seen, we refer to the viewpoints stated in figure 2. The figure shows the most important directions of strategic management, with their respective focus on the generation of shareholder value (value based view, with Rappaport as most prominent representative, e.g. Rappaport [1986]); the requirements of customers (market based view, strongly influenced by Porter [1980]); and the competencies crucial for the strategy (resource based view, recurring to Hamel/Prahalad [1994]). Fig.2: Attribution of the concept of added values to the basic directions of strategic management The proposed extension of the theory of informational added values on EC and MC intends to assess gains for the involved parties using the IAV concept and to analyze exploitation of EAV and MAV for business models. Thus, the theory can be regarded as linking traditions of both resource based view and market based view. In addition, we can state as an intermediary result that some or all of these EAV or MAV are the cause of any supplementary IAV of an EC or MC business model. In section 5 we show the proceeding for the analysis of business models and finally, in section 6, draw conclusions and provide a critical review of our approach. MCapplication offline solution ECapplication MAV applicable IAV results in cpared with IAV results in additional cpared with EAV applicable