Fig. 1 – Positioning of Group 4’s model on Verganti’s matrix
This report believes Group 4’s business model to sit left of the middle on Verganti’s matrix, with changes made essentially being radical in nature. The main drivers that influence the innovation process are a technology push and the needs of a particular niche market. As we have chosen to compete in a fictional environment where governments are encouraging the uptake of new technologically superior cars across Europe, our model is trying to be a more fitting rewrite of a car renting model, one which aims to adapt to this new world of robot cars.
One could expected that some of the similar services existing today, like Zipcar, Enterprise, Hertz, etc. would be able to keep up, seeing that they are already established businesses. This is why our model is based on the belief that there is a niche market of senior citizens who previously may have lacked access to such services or were hesitant to take advantage of them. And as some people do not buy products, but meanings (Verganti, 2009), we have tried to focus on the user experience of this segment. By providing convenient and accessible mobility to the front doors of elderly citizens, we are essentially addressing a potential need for independence. The model is based on the idea that some senior citizens don’t want to possess a car of their own as it is expensive. What they do want, however, is to be given a sense of freedom, a feeling that they are able to go out and do what they want without having to rely on help from relatives or friends. Even though we offer booking through our website or mobile apps, we recognize the fact that a significant number of elderly people are not familiar or don’t use the internet at all (Appendix F). This is why we also have phone bookings and customer representatives to help bridge the transition. What our service is trying to say to senior citizens is: “The future is friendly” and “Don’t be afraid to let us help you make the next step”.
To summarise, our innovation has focused on two strategies: utilising breakthrough technology and offering an improved service enabled by better analysis of senior citizens’ needs.
A comparison between our group process and the business model innovation reveals some discrepancies, which have logical explanations. Even though this report has already stated that the business model introduces radical changes, a closer look at our group’s VIEW psychometrics reveals a strong inclination towards the Developer style. This directly relates to orientation to change and should have
influenced the direction of our decision making. Typically, developers are likely to make incremental changes, placing an emphasis on improvement, possibly of something already existing. This practical side of developers does not seemingly fit with the final result of our model. However, the radical change within our concept is mainly driven by new technology which we have not created, i.e. it is an external factor that we as designers are complying with. We are merely adopters of this new technology, more concerned with how to fortify the link between it and the niche market of senior citizens.
Another critical relationship is that between our results as a group and our personal preferences for deciding. Being almost unanimously task oriented, the common concerns were always related to pushing the process forward. Even though discouraging at times, especially when good ideas were being turned down, this approach gave life to what became our business model for car renting of robot cars. This is hardly surprising, as Tristan and David who have the highest scores for task-oriented deciding were the ones to come up with the idea for robot cars. From my point of view, this predisposition of theirs made them unconsciously guard their idea, pushing to achieve outcomes in what they already established to be our common goal. On a few occasions during our discussions we were on the precipice of turning our work on its head, but the stagnancy of a few of our members who had high Developer scores did not allow for exciting changes. Consequently, it is or common task orientation that kept us digging into a model which is already in place and finding ways to put it into a futuristic context.
Fig. 2 – Systems diagram of Group 4’s business model
(Critical success factors highlighted in green)
The aim of this section is to analyse the coherence of the model in delivering the value proposition, as well as to evaluate its ability to execute the critical success factors necessary. The analysis will cover the key elements provided below.
Value proposition:
To start off, the business model is coherent in terms of its positioning in accordance to key trends, one of the four main areas of the environment as described by Osterwalder and Pigneur (2010). Aiming the service at senior citizens is a logical choice of customer segment, as it’s a niche market showing significant growth opportunities. According to official projections, between 2004 and 2050, the number of young persons aged 0-14 in the EU will drop by 18%, the working-age population (15-64) will fall by 16%, whereas the elderly population aged 65+ will rise sharply by 77% (Carone and Costello, 2006). Consequently, our model is sound in regards to compliance with regulatory and technological trends – the futuristic scenario on which it is based calls for a rethinking of mobility, as governments are encouraging the uptake of robot technology within the industry.
However, there are some questionable sections within the business model which might challenge initial suggestions of low rental charges. As stated in our business concept summary, our cost structure is between cost and value driven. This would not make sense, as the former focuses on minimizing costs wherever possible, maintaining a lean cost structure, whereas the latter is indicative of an approach
where value creation is sought regardless of cost implications (Osterwalder and Pigneur, 2010). On closer inspection of the relationship between our profit formula, as well as the key processes and resources we have to deliver our value proposition (Fig. 3), one could find a closer resemblance to what Hagel and Singer (1999) describe as an unbundling model. Having several conflicting cultures in a single entity and striving to develop each on our own could result in considerable trade-offs.
By aiming to deliver all it has set out to achieve, the model would incur expenditure which would largely prevent it from implementing a low-cost element within its cost structure.
Fig. 3 – Relationships affecting the Value Proposition and conflicting cultures within the business model
On the other hand, having a variety of booking channels is a suitable and coherent part of the business model, as it actually helps deliver the value proposition. As already mentioned in this report, some senior citizens are not familiar or don’t have the internet, so providing them with the opportunity to book over the phone or have a customer representative help them is a necessity for the service to function properly.
The model also has steps in place to ensure the successful distribution of vehicles to the doorsteps of customers. The inventory of fleet vehicles eliminates intermediaries in distribution, while the customer database allows for keeping an accurate profile of users and for storing their information.
To summarise, this report believes that the model is coherent in that it would likely be able to execute the critical success factors necessary to attract customers and provide them the service it intends to, however, delivering the low-cost aspect of the value proposition does not seem feasible at this stage (Fig. 3).
This report will now explore a few ways in which competitors might respond to Group 4’s business model. This would be done through the use of Porter’s four-part framework for predicting competitor behaviour (Fig. 4), as well as his more famous five forces analysis in order to establish what shapes competition within the industry (Appendix G).Due to the limitations of this report, Zipcar would be the main focus of the models used within this section, though references would be made to other companies and the potential reaction of participants in the market.
Fig. 4 – Porter’s framework for competitor analysis applied to Zipcar
Model as seen in Grant (2010); Modified by author.
In terms of competitive scope, rivals could either focus on a single segment (in this case senior citizens) or aim for industry-wide competitive advantage through cost leadership or differentiation (Porter, 1980). In the case of the former, a copying of Group 4’s model is a likely response, at least for those not having participated in this niche market specifically. In terms of industry-wide competition, this report has listed a few predictions below.
Cost based competition – Membership model to raise switching costs:
Barriers to entry for car sharing are extremely low and over time the technology that enables customers to book, locate and access vehicles has become commoditised. With nearly anyone being able to acquire vehicles, parking spots and insurance, competing on the basis of price is a viable option for competitors.
Our model, for example, has a joining fee as well as rental charges. Competing companies might eliminate their joining/annual fees and instead price hourly rentals aggressively. Another approach would be to implement a membership model as opposed to the transaction-driven one, typical of traditional car rental businesses. This could involve enrolling through an application process in order to become part of a larger network of users, forcing customers to familiarise themselves with the company’s policies and culture. This would create a structural tie, making dissatisfied customers less likely to seek alternatives in the short term and would thus slightly raise switching costs (Hooley et al., 2012).This is because even though car enthusiasts may be willing to sign up for more than one service, the regular customer is less likely to maintain a number of memberships simultaneously.
Differentiation – Network effect:
Competitors could also attempt to sidestep one big issue – buying and maintaining cars which users may not want to rent frequently. In the ideal scenario for Group 4’s business model, vehicles are almost all booked, yet there is still always some available because of people coming and going. This is only possible with a large membership base.
However, a radically different approach could be to eliminate the cost of having company owned cars by building a network between people who own this new type of robot vehicles and those who want to rent them. Essentially an intermediary function, this would shift the cost from maintaining a fleet of cars to screening the driving histories of customers and matching them to other users, as well as providing insurance, a competitive response similar to the current strategies of Relayrides (Relayrides, 2013) and Getaround (Getaround, 2013).
Concluding thoughts on competition:
The analysis of this section points to a few ways in which key players in the car sharing industry compete. Some like Zipcar simply leverage technology and lower transaction costs, making renting a viable alternative to asset acquisition. Others, such as Relayrides and Getaround, are dramatically expanding through the use of information technology, creating a sort of peer-to-peer car sharing approach.
However, the ongoing consumerisation of digital technologies calls for a reengineering of consumption. Competitors would be able to easily copy Group 4’s business model and recreate the technology to be able to dispatch cars to peoples’ homes. Sensible competitors would realise at an early stage that using technology to speed up existing ways of doing things is not as profitable as using it as an enabler for fundamental reinvention of old processes.
As already stated in the evaluation section earlier, the business model has the necessary components to execute its critical success factors and function adequately. However, further changes would need to be made in order for the model to be sustainable in the long run – with the growth of the industry the requirements for critical success factors shift as well (Angwin et al., 2011).
Research by Frost & Sullivan (2010) gives predictions for the future of the car sharing market which point to an acquisition of car sharing organisations by rental companies to enter new markets and support larger target bases. Additionally, smaller car sharing organizations are likely to face acquisition by national operators to cater to rural areas. It is possible for Group 4’s business model to adapt to such forecasts through co-operation with other small companies in order to increase the size of its value pie ahead of time (Brandenburger and Nalebuff, 1996) This is likely to make the model more sustainable, as evidenced by the increase in membership numbers that Zipcar experienced after its acquisition by Avis (BBC, 2013).
With the industry being in its growth stage, a convergence of the dominant set of service features is soon to follow. It is difficult to establish at this point whether the model will be flexible to change, but its ability to achieve competitive advantage would be further constrained by the dynamics of the industry as it strides towards the next stage of the industry cycle (Angwin et al., 2011).
Appendix A: Assessment 1 – Group Work
Our industry of choice will be the automotive industry in the EU. We will be concentrating on advancing technology in this market. Our scenarios will have a focal time horizon of 20 years. The variables used for the construction of our scenarios are ‘will robot technology be taken up’ and ‘affordability of car ownership’.
“How will car ownership change within the next 20 years?”
Cross-Impact Matrix:
· Will robot technology be taken up
· Affordability of car ownership · Governmental response to diminishing commodities
|
High |
· Road taxes / duties
· Competition & employment laws · Ageing population · Pollution levels |
· Technological advances
· New entrants to manufacturing market · Emissions requirements · Availability of self-drive technology · Import/export taxes & regulations · Legislation regarding CO2 emissions · Government pushing public transport · Excess capacity & price pressure |
Degree of Uncertainty |
Low |
High |
Low |
Level of Impact |
Scenario Matrix:
Collision |
Carpocalypse |
Affordability of car ownership |
High |
Low |
High |
Low |
Will robot technology be taken up? |
The Grid |
Sharing’s Caring |
Scenarios:
Sharing’s Caring
Due to the rising costs associated with owning your own vehicle, the car sharing market becomes a more economically viable option for the average person. Governments encourage the uptake of robot technology within the industry to reduce accidents and congestion through speed and route monitoring and control.
The Grid
An intricate web of electronic pathways replaces conventional roads to accommodate the influx of futuristic self-driving cars. Intelligent highways puppeteer cars which are also able to communicate with each other and monitor road conditions, thus preventing any collisions and allowing for more efficient journeys.
Carpocalypse
The new technology that self-driven cars present does not appeal to the general public despite governmental attempts to encourage its adoption. The governments is
forced to retract subsidies for self-driven cars due to the economic depression, whilst running costs for regular cars increase to extortionate levels.
Collision
In a thriving economy where technological advancements are rapid, a series of high-profile crashes cause the public to rethink the safety of self-driven cars, making the place of such a technology in society questionable. Plummeting sales force manufacturers to revert back to driver-controlled vehicles as safety becomes consumers’ top priority.
PESTLE Analysis:
Political:
Economic:
Socio-Cultural:
Technological:
Environmental:
Legal:
Appendix B: Contribution Confirmation Statement
We can confirm that everyone in the group has contributed adequately to this assignment:
Yulian Parmakov (10015799)
Marika Hemming (10062032)
Tristan Hensel-Coe (10063997)
Dom Booth (11023172)
Viktor Rachev (10015905)
David Gaynor (10037654)
Appendix C: Summary of Business Model Concept and Value Proposition
A niche market, low cost car rental service which aims to provide convenient and accessible mobility by robot transport for senior citizens, through the ability to order cars to your front door and partnerships with places of interest.
In an environment where rising costs associated with owning your own vehicle have soared, the car sharing market has become a more economically viable option for the average person. New cars are technologically superior to those we knew in 2013, with robot technology taking a front seat. Governments are encouraging its uptake across Europe, as speeds and routes are controlled, reducing accidents and congestion.
Our business model will focus on the needs of senior citizens in particular, who may have previously lacked access to the market. We will provide a low cost rental service for robot cars that can be ordered to your front door or picked up from a local point of interest. Booking is made easy through the phone, website or an app, with a personal customer representative on standby to help with any part of the process. Customers can have personal online profiles with previous journeys recorded and favourite locations stored.
Partnerships with points of interest such as supermarkets, hospitals, post offices, retail outlets, doctors’ surgeries and town centres provide us with car-parking spaces where robot cars can be charged at and picked up from, whilst we return the favour with advertising space inside the cars. We will raise awareness of our service by distributing leaflets and putting adverts in local newspapers, on the TV and radio, and also through our partnerships. An after-sale service will be provided through our own sales team over the phone.
Our most important resources will be the robot cars themselves, our partnerships, our customer representatives and our brand. Our main sources of revenue will derive from joining and rental fees; whilst our main costs will be our fleet of cars, their running costs, and salaries and rent.
Cost Structure
– Between cost-drive and value-driven – Fixed: buildings, rent, salaries – Variable: marketing, fleet of cars, electricity (for running cars) |
Key Partners
– Strategic alliances with points of interest – Car suppliers |
Key Activities
– Mobility – Delivering – Marketing – Partnership management |
Value Proposition
– Convenience – Accessibility – Low price
|
Channels
– Leaflets, newspapers, TV & radio advertising – Partner channels – Own sales force – App store – Online platform |
Customer Segments
– Niche market – Senior citizens |
Key Resources
– Cars, spaces, charging points, depot, headquarters, support centre – Partnerships, databases, brand – Human resources |
Revenue Streams
– Fixed joining fees – Fixed rental fees |
Customer Relationships
– Self-service booking – Personal assistance – Online platform |
Appendix D: Business Model Canvas
Appendix E: Individual Learning Log
Group Assignment:
Business model workshop:
Appendix F: Internet users and non-users by age group (years), Q1 2013
(Source: Office for National Statistics, 2013)
Appendix G: Porter’s Five Forces applied to the car sharing industry
Model as seen in Grant (2010); Modified by author.
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