1.
Healthy Business Models?
Joost Rietveld, PhD
Rotterdam School of Management, Erasmus University (NL)
rietveld@rsm.nl - www.strategyguide.nl

2.
What Is A Business Model?
 Business model: The essence of a business model is in defining how a firm delivers,
captures, and creates value:
 Value creation: Created by organizational members across the value chain, only realized
when consumers’ perceived benefit exceed price
 Value capture: The redistribution of exchange value across organizational members in
the value chain
 Value delivery: Revenue models and distribution platforms (e.g., iOS, Google Play).
Affected by technological change and facilitated BMI
 BM innovation: novel reconfigurations of any or all of the above (firm level)

3.
Focal Firm
Customer (e.g. end-user,
corporate customer)
Partners (e.g. suppliers,
service providers)
Value delivery (e.g.
distribution platform,
revenue model)

4.
BM Innovation In Value Creation
 Technological change allows for novel ways to entice customer payments through
‘free’, or discovery-driven value propositions:
 PRO: Delaying or mitigating customer payments may help customers determine their use
value especially when valuation prior to consumption is ‘problematic’
 CON: More accurate valuation of perceived benefits will only lead to greater value
creation when price < Willingness-To-Pay

5.
BM Innovation In Value Capture
 Technological change facilitates business model innovation in value capture by
allowing for greater disintermediation, or disintegration, from partners in the value
chain:
 PRO: If the focal firm suffers from value chain envy. I.e. partners capture disproportionate
amount of value in perception of focal firm
 CON: May not lead to increased firm performance when partners posses (specialized)
complementary assets that help increase overall value creation

6.
A Typology of BM For Games
Disintermediation
Customer
engagement
Work-for-hire
(de-facto)
Artist-led-distribution
Multisided Freemium
High
Low
High
Low

7.
Work-For-Hire
 Low on disintermediation: Project commissioner assumes all risk but also dictates
project guidelines and deliverables (integrated model)
 Low on customer engagement: End-users cannot really try the game before
spending money; fixed price – high risk option
 Few monetization schemes (income from meeting project milestones)
 Low focus on marketing, publisher/ project commissioner does this
 Disconnect between players and developer
 Restricted creative autonomy
 Example: Most triple-A game studios
Disintermediation
Customer
engagement
Work-for-hire
(de-facto)

8.
Artist-Led-Distribution
 High on disintermediation: Total creative freedom as no longer restricted by the
demands of the financier/project commissioner
 Low on customer engagement: End-users still cannot really try the game before
spending money
 Low-high makes for a very risky value proposition – high consumer information
asymmetries, no financial safety net!!
 Few monetization schemes (income from a finished good to community of fans)
 Moderate marketing spent, do we really need it?!
 Example: Most indie game studios
Disintermediation
Customer
engagement
Artist-led-
distribution

9.
Freemium
 High on disintermediation: Developer engages directly with the end-user without
interference from corporate customer
 High on customer engagement: Consumers can, and are actually enticed, to
engage with the content for free, accelerate progress through in-game purchases
(it’s a service!)
 Many revenue streams to tap into customer heterogeneities
 Content refinement through analysis of user-behavior is paramount (A/B testing)
 Users tend to value free products less (only 5% spends money)!
 Example: Most games on social networks (e.g. Farmville, Candy Crush)
Disintermediation
Customer
engagement
Freemium

10.
Source:
http://www.mediatonicgames.com/

11.
Multisided
 Low on disintermediation: Income comes in large part from corporate customers,
after content gains traction in market
 High on customer engagement: Consumers can, and are actually enticed, to
engage with the content for free – attracts corporate customers
 Service-like value proposition, many revenue streams (e.g., ads, placements)
 High marketing spent, ramp up user acquisition to build a monetizable installed base –
common denominator
 Most complex, yet most potentially lucrative business model (create a platform).
 Very few pure examples: IAmPlayr
Disintermediation
Customer
engagement
Multisided

12.
“It is a blended business model, so we de-risk the
business with that. We have two revenue
opportunities that are –what we believe-
complementary. This puts less pressure on us to get
every penny out of our users, so we can concentrate
on user experience and retention. We are providing a
service which we keep on adding to, and we hope to
build a relationship with our users over a longer
period of time. We don’t have to push too hard,
because we have revenue from brand integrations.” –
CEO

13.
Serious Applications In Health Care
 Move away from:
 Game development blind-sided from any business vision
 Unidimensional identification of customers (players ≠ payers ≠ financiers)
 Playing = paying perspective (offer services, monetize later/other stakeholders)
 Serious health games as engagement platforms:

14.
Final Thoughts
 Choice of business model is a pre-prototype decision!
 Choosing and designing a business model is a non-trivial task:
 It is consequential for the organization of the firm and its production processes
 It impacts the revenue structure of the firm (e.g., volume, timing, and distribution)
 Clear distinction between users (players) and customers (payers)
 A business model rarely provides a source of sustained competitive advantage, it can be a
risk-mitigation tool and thus affect the firm’s chances for survival
 Achieve sustainability through oscillation and/or transition mechanisms

15.
Thank You /谢谢
rietveld@rsm.nl / www.strategyguide.nl