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Tekes Review 274/2010

Business Dynamics and Scenarios of Change Petri Ahokangas, Miikka Blomster, Lauri Haapanen, Matti Leppäniemi, Vesa Puhakka, Veikko Seppänen & Juhani Warsta

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Petri Ahokangas, Miikka Blomster, Lauri Haapanen, Matti Leppäniemi, Vesa Puhakka, Veikko Seppänen, Juhani Warsta

Business Dynamics and Scenarios of Change affecting business models and value creation within the ICT sector

OULU BUSINESS SCHOOL more value for your investment

Tekes Review 274/2010 Helsinki 2010 3

Tekes, the Finnish Funding Agency for Technology and Innovation Tekes is the main public funding organisation for research and development (R&D) in Finland. Tekes funds industrial projects as well as projects in research organisations, and especially promotes innovative, risk-intensive projects. Tekes offers partners from abroad a gateway to the key technology players in Finland. Tekes programmes – Tekes´ choices for the greatest impact of R&D funding Tekes uses programmes to allocate its financing, networking and expert services to areas that are important for business and society. Programmes are launched in areas of application and technology that are in line with the focus areas in Tekes’ strategy. Tekes programmes have been contributing to changes in the Finnish innovation environment for twenty years.

Copyright Tekes 2010. All rights reserved. This publication includes materials protected under copyright law, the copyright for which is held by Tekes or a third party. The materials appearing in publications may not be used for commercial purposes. The contents of publications are the opinion of the writers and do not represent the official position of Tekes. Tekes bears no responsibility for any possible damages arising from their use. The original source must be mentioned when quoting from the materials.

ISSN 1797-7339 ISBN 978-952-457-505-8 Cover picture: Pasi Hytti Layout: DTPage Oy

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Abstract

This document discusses the dynamics and scenarios of change within the ICT sector in five areas of the ICT business ecosystem: consultants, application software developers, infrastructure software developers, system and infrastructure integrators, infrastructure and application service providers, and hardware developers. Specifically, the focus is on the change in business models and value creation within the ICT ecosystems. Earlier work by Tekes has lead to the identification of hundreds of business drivers, limitations and challenges, that could be summarized in the form of two ICT scenarios – verticals (positions in sector-specific or segment-specific value chains) and horizontals (positions in cross-sectional value chains and customer groups). Based on this earlier work, two major areas of change were identified to affect business models and value creation. The first of these was consumers’ a) diverging media landscape, especially in the form of social media and social data, and b) the changing role of information, contributing to consumers’ attention divergence. Secondly, even with converging technologies (networks, devices) and industries, cloud computing seem to be changing the rules, business models and value creation mechanisms of the ICT businesses. Based on 21 in-depth interviews within the ICT sector, the results indicate that for consultants it is the horizontals that provide new opportunities, e.g., in packaged services and cross-industry integration. For application software developers the horizontals might provide opportunities in the form of new services utilizing advertising, context awareness, or data intensiveness. Infrastructure software developers seemed to be hoping that the business shall remain within the existing verticals by seeing mobile and fixed businesses as one. For system and infrastructure integrators the opportunities might be found in horizontals; service delivery platforms and content aggregation/access services. For infrastructure and application service providers, content or access to it appeared as an opportunity, but also diversification seemed to provide alternative opportunities, especially in the businessto-business sector. For hardware providers the new opportunities might be found in the short-cuts connecting directly verticals with not-so-apparent horizontals. As a summary, the research indicates that divergence and fragmentation of the consumers’ media landscape is overriding the consequences of convergence all over the ICT sector. Access, identification, and utilization of user data is increasingly becoming the source of value creation and competitive advantage. Social media and its phenomena change industry structures and business models in unpredictable ways, contributing to the deteriorating of purely horizontal or vertical business models and thus making ICT companies to look for value chain short-cuts, sidetracks, and opportunities across traditional segmentation strategies.

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Contents

Abstract...................................................................................................................................................5

Part 1: Introduction.......................................................................................................................9 Purpose and objectives of the research.....................................................................11 The theoretical starting points of the research....................................................11 Research methodology...........................................................................................................13

Part 2: Initial analysis...............................................................................................................16 Industry analysis...........................................................................................................................16 ICT technology convergence......................................................................................................16 Analyzing industries..........................................................................................................................17 Industry environment and structure.......................................................................................23 Conclusions from industry analysis..........................................................................................30 Business ecosystem analysis...............................................................................................31 Consultants.............................................................................................................................................31 Application software developers..............................................................................................33 Infrastructure software developers..........................................................................................35 System and infrastructure integrators....................................................................................35 Infrastructure and application service providers.............................................................36 Hardware developers........................................................................................................................37 Other types of actors........................................................................................................................38 Conclusions from the ecosystem perspective..................................................................38

Part 3: Secondary analysis. ...............................................................................................41 Network analysis: social networks in convergence...........................................41 Introduction............................................................................................................................................41 Theoretical approach: Social networking nature of business . management in the new business creation......................................................................41 Empirical results: Network action in the development of . new business under dynamic circumstances...................................................................44 Discussion................................................................................................................................................46 Resource analysis.........................................................................................................................48 The resource-based view...............................................................................................................48 Indicative results of the resource-based analysis............................................................49

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Part 4: Conclusions......................................................................................................................51 Introduction.....................................................................................................................................51 The trends themselves.............................................................................................................52 Media landscape and its connection with convergence...........................................52 Social media...........................................................................................................................................55 Some remarks regarding the trends........................................................................................56 Towards the business models of the future............................................................57 Strategies used within the ICT sector..........................................................................58 Theoretical conclusions and Implications for future research.................61 References..........................................................................................................................................62 Tekes Reviews in English........................................................................................................66

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1 Introduction Part 

Research on business organizations has started to show signs of shifting the focus from the management of existing companies more efficiently to the creation of new businesses or business models (Christensen 1997; Ghoshal, Bartlett and Moran 1999; Hamel 1998; McGahan 2004). This new line of inquiry criticizes the view of the modern time, which sees businesses to be best developed and renewed by planning and controlling existing businesses and hoping that somehow ‘ruling the game will make things click’ (e.g. Porter 1985). These studies argue that the reality of the post-modern knowledge economy is far too complex, turbulent, ambiguous and vague to be kept under control (Hamel 1999). The challenge companies, and whole economies, face today is not how to achieve a competitive equilibrium position but how to break equilibriums and to live in constant “state” of disequilibrium (Carlsson and Eliasson 2003). Starting from the above considerations, the ICT industry is not an exception of this post-modern development. The ICT sector in general is currently facing the consequences of the fast changes and maturation of the industry in all its business sectors and major markets. One of the key drivers in this development is the technological convergence taking place within the industry. The starting point to this

piece of research is within the Tekes originated GIGA – Converging Networks programme, and especially its work group number 4 activities. The Tekes/GIGA work group started a major effort to create a coherent picture of convergence and the change drivers and consequences of convergence on Finnish ICT businesses. The results of this original work can be found on the Tekes web site www.tekes.fi/giga. In this report our aim is not, however, to cover the findings and conclusions of the GIGA work group, i.e., the drivers of change and the scenarios of change for the ICT industry, but rather use these findings and conclusions as the starting point for defining the research questions and methodology set forth for this particular report. Over the past few years, the business model concept has generated growing interest among academics and practitioners. It has been particularly popular among e-businesses and with research on e-businesses (Timmers, 1998; Afuah and Tucci, 2001; Amit and Zott, 2001; Applegate, 2001; Cheng et al., 2001; Rayport and Jaworski, 2001). However, the empirical use ofthe concept has been criticized for being unclear, superficial, and not theoretically grounded (Porter, 2001). As a cursory review of the literature is likely to reveal, numerous definitions of business models have been proposed by academics

and practitioners alike. While some of these conceptualizations are similar, there is definitely a lack of consensus as to the most appropriate way in which this emerging phenomenon should be defined. This may be due to the fact that the business models are conceptualized from seemingly incongruent perspectives (e.g. e-business, strategy, technology, and information systems). Indeed, the viewpoint of each author always drives term definition; by peering through different lenses, authors are seeing different things. For a systematic study of business models, we need to define business model and distinguish business model’s critical elements, i.e. unique building blocks or components. In an attempt to help managers better understand business models, Shafer et al. (2005) conducted an extensive review of the extant literature. Overall, their literature review yielded 12 distinct definitions of business model. The authors also carried out a detailed analysis of the identified conceptualizations to identify and classify common elements and recurring themes among them. The analysis identified 42 business model elements that were classified into four primary categories: strategic choices, the value network, creating value, and capturing value (see Figure 1). Based on the review and analysis of business model elements, Shafer 9

Figure. 1. The components of a business model. (Rajala 2001)

Components of a Business Model Strategic choices

Value Network

Customer (Target Market, Scope) Value Proposition Capabilities / Compentencies Revenues / Pricing Competitors Output (Offering) Strategy Branding Differentiation Mission

Suppliers Customer Information Customer Relationship Information Flows Product / Service Flows

Capture Value Cost Financial Aspects Profit

Create Value Resources / Assets Processes / Activities

et al. (2005) proposed that the business model is best conceptualized as “a representation of a firm’s underlying core logic and strategic choices for creating and capturing value within a value network.” By the same token, Hamel (2000) defines business model as a business concept which includes 1) customer interface, 2) core strategy, 3) strategic resources, and 4) value network. Broadly speaking, common to all definitions of business models is an emphasis on how a company makes money, i.e. creating and capturing value. Thus, a fundamental issue that a business model should describe is the way in which the key business processes generate revenue. As indicated by Rajala et al. (2001) “value creation processes describe who are in it and what they do and value appropriation processes describe what’s in it for the company.” Therefore, it is important to emphasize that a business 10

model is not a strategy. While a strategy refers to an ‘‘overall plan for deploying resources to establish a favorable position’’ (Grant, 1998, p. 14), a business model does facilitate analysis, testing, and validation of a firm’s strategic choices. Stated differently, a business model is a practical action plan designed to fit into a specific market situation in order to execute strategic plans (Rajala et al., 2001). Another relevant question related to the business model is that what creates added value to a customer. Amit & Zott (2001) argue that value added emerges from novelty, efficiency, complementarities, and ties. Novelty can be measured as new business structures, new content or as new players. Efficiency results from search costs, size of the searching area, availability of information, simplicity, speed of search and scale economies. Complementarities can emerge between verticals

and horizontals, from the resources required, between technologies, and between activities. Ties between the buyer and the seller can stem from changing costs, for example due to standards, tailoring, trust or loyalty programs and from the direct or indirect network effects. As the objective of the whole research project is to clarify the business context and its effects on business models and corresponding value creation mechanisms, there is a need for a combination of compatible theoretical approaches. In this research they include 1) the business model and value creation perspective described above, 2) the dynamic resource-based perspective, 3) the network perspective, 4) the business ecosystem perspective, and 5) the industry analysis perspective. These will be discussed in a more detailed way in the following chapters.

Purpose and objectives of the research This research rests on the premise that a constant renewal process is taking place in the highly turbulent and dynamic ICT business environment. In this kind of business environment predictions and assumptions based on earlier experience or prior research do not necessarily explain or help us to understand what is going to happen in the business environment and what kind of strategies or business models should be used in the future (e.g., Sarasvathy 2001). We believe that converging networks have created a business environment where both vertical and horizontal changes are dynamic and unstable to a degree that companies are simply forced to develop new business models and ways of creating value. Based on the above argumentation, the general purpose of this research project is to describe and understand the drivers behind the development of business models and value creation in companies within the ICT sector. More specifically, the aims of the project are to study (1) the technological impacts to vertical integration needs, strategies in vertical integration, and business models in vertical integration, (2) the emergence, divergence and heterogeneity of different company strategies and business models depending on their level of horizontal integration and its impact to those, and (3) the value networks in the companies that are dealing with the converging networks. The conceptualization of the horizontal and vertical businesses adopted in this research project reflects the conceptualization adopted within earlier Tekes/ GIGA related research streams.

Based on the research purpose and objectives stated above the following questions can be placed in the core of this report: 1. What could be the core elements and perspectives that could be used to capture and explain change with the ICT companies? a. In order to answer the above question, what kind of tools, perspectives and theories we can use to explain and understand the ICT sector and the companies in it? 2. What are currently the most important drivers of change if the change scenarios developed by the GIGA work groups are used as a starting point for research? a. In order to answer the above question, what kind of consequences the identified drivers and scenarios have on the companies, their business models and value networks? 3. What are the extreme scenarios for ICT companies in practice and how we can identify their consequences for companies? a. And finally, in order to answer the above question, what kind of business models and value networks could help companies succeed in their particular businesses? To process by which we aim to answer these questions is two-fold: first, we start by an initial analysis where the focus is in the data analysis, specifically based on interviews of key informants from the ICT industry reflected against selected theoretical starting points. Secondly, we aim to conclude with a coherent view of the combined inter-

views and selected theories, and come up with conclusions emerging from the triangulation of the interviews, theoretical tools, and secondary data on the ICT sector.

The theoretical starting points of the research Due to the rather practical questions set forth for the research, the theoretical starting points of the research consist of a variety of theories and perspectives relevant in understanding and analyzing business environments and business contexts, business models, and value creation in networks. The selected theoretical starting points for this research were the following: •• Business models and value creation (e.g., Hamel, Prahalad, Hambrick & Fredrickson, Amit & Zott, Kim & Mauborgne) •• Resources and dynamic competences (e.g., Barney, Amit & Schoemaker, Peteraf, Grant) •• Networks and value creation (e.g., Axelsson & Easton, Håkansson, Snehota, Möller) •• Ecosystem view (e.g., Messer­ schmitt and Szyperski, Seppänen & Warsta) •• Industry and Industry competition (e.g., Caves & Baines, Porter, Buelling & Woerter) The above mentioned theoretical starting points enable us to approach the ICT sector form viewpoints that provide us with complementary perspectives and insight into the drivers of change and scenarios as well as business models and strategies used within the ICT sector. Our primary target is to be both practical and scientific in this 11

Figure. 2. The role of background theories in answering to the research questions.

Dynamic resourcebased theory

Network theory

Business ecosystem theory

Research question 1 Business models / value creation within convergence

Research question 3

Theories on industry development

research and we hope to contribute to both developing business as well as concepts and theories used within business research. The theoretical approaches used in the research will be briefly presented in the following chapters of the report. However, the same way as business model is at the core of this research, also the network thinking utilized in this research requires a short primer as it plays a crucial role in value creation. Strategic networks has wide variety of different definitions, but maybe the most abstract one is the Håkansson’s and Ford’s (2002, 133); “structure where a number of nodes are related to each other by specific threads”. Further, Iacobucci and Hopkins (1992, 5) have defined a business network much similarly as a “composite of a larger number of actors and the pattern of relationships that ties them together.” Thorelli (1986, 38) instead has brought out that a business network can also be seen as an intermediary or alternative form of governance between pure markets and pure hierarchies, where “two or more firms which, due to the intensity of their interaction, constitute a subset of 12

Research question 2

one (or several) market(s).” Generally the definition of the networks goes that the networks between organizations are constructed from the linked relations of the actors (Håkansson and Snehota 1995, 7-10). The importance of the research of networks comes from the point that by defining the surrounding network, the actor or the organization can recognize the other relevant actors, resources, actions, complexity, continuity and informality of the network (e.g. Håkansson and Johansson 1992, 28-30; Håkansson and Snehota 1995, 7-10). There is rich field of studies made from the business networks. Miles and Snow (1984; 1986) and Snow et al. (1992), for instance, discuss about dynamic networks that often emerge around hub or lead firms and typically rely on a core skill like manufacturing, R&D, design, assembly, or brokering. Achrol (1997), for example, has identified three different kinds of networks: 1. Vertical market networks or marketing channel networks, which correspond to the traditional suppliermanufacturer-distributor channels organized around focal organizations,

2. Inter-market or concentric networks, which are networked alliances among firms operating in a variety of industries and are characterized by their dense interconnections in resource sharing, strategic decision making, culture and identity, and collective action (e.g. the Japanese keiretsu), and 3. Opportunity networks, which are market-driven networks of organizations formed around a marketing company that specializes in collecting and disseminating market information, negotiating, coordinating projects for customers and suppliers, and regulating product standards and exchange behaviors within the network. The focus in the current study is on strategic networks. Jarillo (1988, 32) describes strategic networks as “longterm, purposeful arrangements among distinct but related for-profit organizations that allow those firms in them to gain or sustain competitive advantage vis-à-vis their competitors outside the network. “Further, a “strategic network can be described as the total pattern of

relationship within a group of actors, striving to reach a common goal” and the network “is planned, has borders and the actors are known to each other” (Klint and Sjöberg 2003, 409-410). Möller and Rajala (2007) identify seven different networks. Vertical and horizontal demand-supply networks can be regarded as established networks whereas business renewal (benchmarking) networks and customer-solution (projects and VARs) networks can be regarded as renewal networks. Demand-supply and renewal networks can be characterized as stable value-creation networks. The only type of network potentially leading to dynamic value creation is emerging networks that comprise application networks (for application development), standardization networks (such as 3GPP), and innovation networks. Järvensivu (2007, 16) has defined strategic business network as intentionally developed and managed interorganizational cooperation between three or more organizations for the pursuit of mutually beneficial strategic business goals. His definition is built largely on the ideas presented by Jarillo (Jarillo 1988), Gulati et al. (2000), Möller et al. (2005), Möller and Svahn (2003), and Klint and Sjöberg (2003). Within that definition, the present study considers the following as the key characteristics of a strategic business network: 1. A strategic network is defined by intentionality: strategic networks are intentionally created, developed, maintained, and managed (Möller and Svahn 2003). 2. The existence of a strategic network is motivated by the pursuit of strategic business goals and benefits, which means that a strategic

3.

4.

5.

6.

network exists in order for the network members to obtain a better competitive stance over competitors outside the network. The goals of the network may be more or less explicit. A strategic network exists to pursue shared business goals that are mutually beneficial – although individual network members may also pursue non-shared goals through network cooperation as long as these do not contradict the network’s shared goals. A strategic network strives to be defined by fairly clear boundaries, meaning that its members should try to gain a mutual understanding of the organizations that belong and do not belong to the network (Klint and Sjöberg 2003). Without clear boundaries, it will be hard for network members to agree on shared goals and, in general, network management will grow difficult. A strategic network often has at least one key player (i.e. “a hub”) that often takes the initiative in developing and managing the network, as well as other players that have a less visible or less powerful role in the network. Sometimes there may be several, more or less equal key players. Still, this does not necessarily mean that these “hubs” have total control of the network in terms of development and management. A strategic network usually includes several for-profit organizations. However, such a network may also include one or several non-profit organizations, such as universities, research institutions, or non-profit associations. This concludes the discussion on the concept of strategic

networks. In the next section this concept is compared with another closely related concept: strategic collective-action networks. (Järvensivu, 2007, 16-17)

Research methodology By answering these research tasks given above this research project brings about new knowledge on the dynamism and heterogeneity of converging networks and especially why, how and to what direction the development of business models and ways of creating value takes place in the selected setting. By using the results of this research project companies will be more able and ready for the creation of new kinds of business models and value propositions inside the converging networks regime. We use the resource based view, network action perspective, ecosystem approach and industry analysis perspective, outlined later in this paper, to understand how and why converging networks change the business landscape and how companies might deal with these changes. We approach these research objectives by using research methods that are practical and solution-oriented, contextually embedded, respect the process research techniques, and are empirically fact-driven. The research methods used in the research project include both qualitative and quantitative data either to be collected during the project or to be derived from earlier studies conducted within Tekes/GIGA research streams. The practical work packages, data collection and analysis methods are described in detail in the project plan of this research. 13

The data collected during 20082009 comes mainly from in-depth interviews (using a semi-structured interview questionnaire) with industry key informants representing different types of businesses, business models, value networks, positions in value networks, and business strategies. The sampling of companies was based on the ecosystem thinking; the companies identified for analysis represented technology, product, system, or service providers operating on both infrastructure and application sides of the ICT ecosystem. In totality 21 interviews were made in different companies. In addition, two panel group discussion sessions were organized (one in Helsinki, one in Oulu) to acquire more in-depth information on the emerging topics and point of views identified during the research process. Process research on organizations has grown significantly (Dooley and Van de Ven, 1999). The grounding idea of process research is that world consists of entities acting in events, which can change along time (Van de Ven and Poole, 2005). Therefore, research based on process epistemology searches for necessary causality instead of rational causality, generalization based on versatility and flexibility of explanations, temporal order of explanations, layers of causalities and discontinuations of explanations (Langley, 1999; Van de Ven and Poole, 2002; Van de Ven and Poole, 2005). The seminal article by Pettigrew (1997) requested more organization research based on processual method. He advocated for the idea that if we want to understand organizations more deeply we should acknowledge human behavior to be

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embedded in time, agency, structures, contexts, emergence and development (see also Dawson, 1997; Orton, 1997; Dubois and Gadde, 2002). This means that organizations as human, social processes involve change, shape in time and consist timeless internal identity (Van de Ven and Poole, 2005). Therefore, organizations and their business modesl are not seen in the present study as research objects that can be explained by using variance-based methods but as social constructions in continuous flux requiring longitudinal, qualitative process research (FoxWolfgramm, 1997; Sarasvathy and Dew, 2005). Further, we lean on Sarasvathy’s (2001) notion that organizations are merely means driven than goal driven and that our objective as researchers is to understand this meaning-building rather than goal achievement. Van de Ven and Poole (2005) have proposed there to exist four approaches to conduct processual organization research: (1) variance-based research where static independent variables explain change as a dependent variable, (2) variance-based research where time-dependent dynamic and complex systems of organizational processes are modeled, (3) process research where path-dependent phases of an organization along its development are described and (4) process research where the social construction of emergence and continuous re-emergence of an organization is narrated. As we define organizations ontologically made of human, social processes instead of natural things and epistemologically as events embedded in time and context instead of variables there is no alternative to a case study approach

when analyzing dynamic changes of a complex phenomenon (Dooley and Van de Ven, 1999; Langley, 1999). According to Langley (1999) good process research can take variety of routes and she presents seven generic strategies for process research. The different strategies for process research are; narrative, grounded theory, temporal bracketing, visual mapping, synthetic strategy, quantification and computer simulation. According to Langley different strategies make different kind of senses, therefore the objective of the study is the key factor affecting on which strategy is best for implementing the research though every strategy has its weaknesses. In process research there is close linkage between theory and data therefore both inductive and deductive approaches should be mobilized simultaneously when researching phenomenon processually (Langley, 1999). Case research is a particularly strong research strategy for studying change in network level processes (Borch and Arthur, 1995; Easton, 2000; Dubois and Gadde, 2002; Halinen and Törnroos, 2005). We argue for the principles of realist case research (Tsoukas, 1989; Easton, 2000) to explain the sequence of events over the development process of business models. At the level of research design realist case study means emphasis on understanding a process and search for the contingent, necessary causal mechanisms that underlie the process (Tsoukas, 1989; Easton, 2000). Through systematically gathering and analyzing empirical data from multiple sources and multiple levels and searching for the intricate details of the case under study it is

possible to create a novel understanding of the specific phenomenon. We advocate for the use of Langley’s (1999) recommendations to sense-make the complicated situation by using the narrating, the visual mapping and the temporal decomposition strategies. We claim for the narrating strategy to construct a detailed story from the raw data and to prepare a chronology of events for further analysis. The visual mapping strategy is used to build on the narrative with a view to making the changes in the behavior of the firms in the selected setting. A relevant event in the process is defined as the one relating to change in the focal net of a firm. These two strategies are used as supporting steps to a temporal

decomposition strategy. We define periods of development as having certain continuity within each period and certain discontinuity at their frontiers. This decomposition of the data allows us to examine how actions in one period lead to changes in the context, which in turn affects actions in subsequent periods. The idea is to attain a novel understanding of the studied phenomenon through systematically gathering and analyzing empirical data from multiple sources and searching for the intricate details of the case. In order to ensure reliability, validity and the overall quality of the research work, a triangulation approach is used. Due to the high degree of firmspecific contextual dependence of the

strategies and business models within the research setting, the results of this research are not expected to be directly generalized in the positivist sense. In fact, generalization was not among the purposes of this study. However, it is argued that the theoretical frameworks constructed and chosen for this research is transferable to the study of other firms in other contexts and with other research methods. Our approach is based on triangulation of the data source (respondents, times, places), the research method (interviews, surveys, panel discussions.), the data type (qualitative and quantitative), different theories or theoretical perspectives, and researchers.

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2 Initial analysis Part 

Industry analysis ICT technology convergence The current global communication network convergence is shaping the boundaries, competitive positions, and service characteristics of the information and communication technology -industry. The emergence of next generation packet-based networks using the internet protocol (IP), digitalization of the content and the availability of multi-media devices are driving vertical, independent communication networks towards horizontal network architecture (OECD 2008). In these converged networks the continuously expanding communication services can be accessed and used across different networks, regardless which radio access technology will be used. (von Hertzen et.al. 2007). Digital broadcasting is a good example of converged content – videos can be distributed and accessed through television, internet, wireless networks or mobile networks, in most cases globally. Nowadays even the contents are provided by dispersed sources with various technologies. Convergence shapes industry boundaries, ICT related services, devices, legislation, and regulation. Convergence has undoubtedly an industry-wide impact on the competitive setting. Growing and emerging markets appeal new entrants and, thus, 16

increases intra-industry competition. The possibility to deliver voice, video and data regardless the access point brings new service, application, and content providers to the markets. Convergence related rapid technological development, uncertainty regarding the dynamic business environment, and multipoint competition are leading internationalizing high technology firms to a situation, where they are unable to sustain their competitive advantage. Ahokangas and Juho (2008) suggest in their study, that this is especially the case with fast-internationalizing firms. Also, already before 2008 there has been some indications that companies – within the ICT industry – that have been able to take the lead in defining the software architecture and at the same time have been able to position themselves strategically within this architectural framework and industry, have also been the best performers (Messerschmitt and Szyperski, 2003). Convergence has also concurrent effects on the industry level. OECD’s (2008) scenario strongly anticipates that the convergence is leading to increasing horizontal integration. Keeping in mind the strong presence of big international operators, regardless the ambitious attempts of smaller companies to penetrate these markets, the services might be bundled by a few players having the needed resources,

the economics of scale and market power. Outcome might be a reduction in competition within the communications industry. In line with this discussion, the interviewed industry informants ponted our several viewpoints on convergence. Picked from the interviews. ”Niin no, mun käsitys on se, että näiden yritysten kannalta, joille verkot on jollain tavalla merkittävässä osassa liiketoimintaa, niin konvergoitumisella on tietysti paljon seurauksia. Ja toisaalta, niille, että, se varmaan avaa samanaikasesti mahdollisuuksia monille uusille palveluille ja sitä kautta uusille ansaintamalleille, mutta koska muilla toimijoilla on tämä sama mahdollisuus, niin kokonaisuutenahan kilpailu siis lisääntyy.” ”Eli, käytännön esimerkkinä: jos aatellaan jotain sellaista matkapuhelintyyppistä päätelaitetta, joka on näihin päiviin asti useimmiten ollut sidottu johonkin yksittäiseen, ja nimenomaan yhden operaattorin, verkkoon ja sitä kautta tavoitettavissa oleviin palveluihin, niin jos nyt aatellaan, että se sitte monessa tapauksessa jo tänäkin päivänä, mutta vielä enemmän tulevaisuudessa, niin, voi samanaikasesti hyödyntää sitten avoimia wlan-verkkoja, jotka on täysin operaattorien ulkopuolella, tai jotain muit verkkoteknologioita, niin toki sillon niiden verkkoja ylläpitävien ja operoivien, ja niissä palveluita tarjoavien tahojen kannaltahan on

nimenomaan kilpailu lisääntynyt, mutta samanaikaisesti tullut nimenomaan uusia mahdollisuuksia sitten palveluille, ja niiden ansaintamalleille.” ”Oli ne nyt mitä tahansa työryhmäkalenteria tai tavoitettavuuspalvelua tai muuta tällaista, niin kaikille näille, tämän tyyppisille palveluillehan konvergenssi mahdollistaa yhä enemmän toimijoita ja yhä enemmän toteutustapoja; jolloin sitten taas niitä hyödyntävien yritysten kannalta, niin, valikoima kasvaa ja hinta ehkä laskee, mutta samanaikaisesti saatetaan sitten vaatia enemmän osaamista näiden kaikkien käyttöön ja toisaalta valintaan.” ”Osittainhan konvergenssi joillekin yrityksille tarkoittaa jakelukanavien, jakeluteiden, näiden monipuolistumista. Niitä tulee lisää siis omille vähemmän fyysisille tuotteille. Sitten samalla tavallaan medioiden määrä kasvaa siis monissa muissa funktioissa kuin jakelukanavassa, elikkä vaikkapa asiakaspalvelun kannalta tai after-salesin kannalta tai markkinoinnin, medioiden kannalta.” ”… tää on ehkä yks olennainen pointti konvergenssin kannalta, et kun nyt aatellaan, että konvergenssi tarkoitti just pitkälti sitä, että käyttäjällä on uudenkarhee päätelaite, ja se juttelee erilaisten verkkojen ja palveluiden kanssa sujuvammin ku aikasemmin, niin ihan varmaan on suhteess isot haasteet nimenomaan näill palvelumuotosilla jutuilla tulla sieltä läpi, vaikka niille, niinku, teknologisessa mielessä hyvät mahdollisuudet oliskin. Eli nää kamerakännykät, paikannus, ja ehkä tulevaisuudessa NFC:kin, niin tota, nehän kaikki jollain tavall on nimenomaan menestynyt siinä mielessä, että käyttäjä käyttää niitä yksittäisinä tuotteita tai toiminnallisuuksina, mutta ei välttämättä ollenkaan samalla tavalla hyödynnä, niin, niihin liittyviä palveluita, jotka olis

nimenomaan ehkä vielä sen konvergenssin isompi hyöty.” ”… tää voi toimia toisin päinkin, että läppärillä voi tehdä asioita – vaikka nyt VoIP-puhelu esimerkkinä – jotka aikaisemmin ois meinannut sen kännykän käyttöö, et siinä mielessä mobiilipäätelaitteet, kännykällä ja näillä, on ehkä enemmän voitettavaa kuin hävittävää, koska kännykällä ei nyt oo alkuperäsesti tehty juuri muuta ku puhuttu, ja ehkä sen jälkeen lähetelty viestejä. Niin, on niin paljon voitettavaa tietokoneelta ja muilta laitteilta, nimenomaan kännyköillä, et sit taas tietokoneilla on ehkä sit taas suhteessa enemmän hävittävää, koska tietokoneilla on jo nyt kuitenkin tehty niin paljon asioita ajankäytöllisestikin.” ”Se oikeestaan mikä nyt näitten kuituverkkojen myötä tulee mahdolliseks niin tällanen et saadaan sieltä samasta töpselistä oikeesti kaikki. Et kodit teknistyy ja kaikki telkkarit, tietokoneet, puheet niin ne saadaan sielt kuidun kautta, et ei tarvi mitään kuparia enää vedellä sinne.” ”No, tavallaan se kaikki kulkee siellä IP*-putkessa, ehkä ne suurimmat haasteet on tavallaan sen asiakkuuden konvergenssissa, joka tavallaan kulminoituu siihen, että kun sulla on useita accessmetodeita, niin kuluttajalle ei tulis erillistä laskua jokaisesta kanavasta, kiinteistä puheluista, mobiilipuheluista, kodin laajakaistasta, IPTV:stä, mobiili-TV:stä, jostain lisäarvotoiminnallisuudesta, auton navigaattorista, jostain palvelusta sun niinku koti-networkissa, elikkä se konvergenssi tavallaan siellä sisällön puolella, tai sanotaan siellä tiedon välityksen puolella, niin... se vaatii sitä, että tapahtuu myös konvergenssiä taas tässä asiakkuuden hoidossa. … että kaikista palveluista sulle tulee vain yks lasku.” ”Käyttäjä ja käyttökokemus. Ihan silleen toisaalta on samantekevää, mitä

kautta se televisio-ohjelmansa saa, ei sitä kiinnosta sitä oikeesti, kunhan ne tulee sieltä. Ja kunhan ne tulee yhtä helposti kun ne tulee tänä päivänä. Et mikäli sen pitää jotain näppylöidä, tietokoneita ennen televisio-ohjelmansa näkemistä, niin se voi unohtaa. Ei kukaan semmosta rupee tekemään. Siinä pitää olla yks nappula suurin piirtein, mitä käyttää kun menee kotiin. Sekin on liikaa, että huokastaan niin sieltä pitäis tulla kuva päälle, [epäselvää] ohjelma. Mutta sitten jos, tota, se käyttöliittymä tavallaan, millä se saa palvelun sitten käyttöön, on semmonen, mitä ihmiset entisaikona on tottunut siihen, että se on helppoa, sieltä vähän näkyy jotain lumisadetta, niin ei silläkään ollut merkitystä, koska siellä jotain näkyi kuitenkin. Jos siinä pitää tehdä hirveen monia temppuja ja aina viritellä uusiksi tai tilailla jotain jostakin, niin se voi unohtaa.” ”Eikö se oo jo vanha juttu se konvergenssi*, nyt puhutaan, että NGN, next generation networks.” The viewpoints presented by the interviewed indicate that they see the consequences of convergence at different levels of strategy, and that the consequences also appear to be partly contradictory in nature.

Analyzing industries Traditionally industry analysis focuses on explaining the market structures and competitive conditions within the selected industry. Understanding the prevailing competitive conditions and market dynamics makes possible to draw some predictions of the attractiveness and future evolution of the industry. Industry analysis is the basis for strategic planning, i.e., companies can continuously analyze competitors’ 17

strategies and actions in the attempt to align their own strategies to the continuously changing market situation. Recently, in the spectrum of the business and corporate strategies, the magnitude of vertical and horizontal integration has been increasing. Industry analysis is usually divided into analysis of the macro-level factors, industry environment and intraindustry analysis. Understanding of the business environment is the prerequisite for successful corporate (in which industries to be engaged in, vertical integrations and disintegrations) and business (how to survive from the competition) strategies. Macro-level factors. Gartner’s Key Predictions include the following top 10 trends that are highlighted and considered to be the technology areas that executives and IT professionals should strongly focus on. The full impact of these trends may not appear immediately, but, according to Gartner, companies need to act now so that they can exploit the trends for their competitive advantage. (Gartner Newsroom. http://www.gartner.com/ it/page.jsp?id=593207). 1. By 2011, Apple will double its U.S. and Western Europe unit market share in Computers. Apple’s gains in computer market share reflect as much on the failures of the rest of the industry as on Apple’s success. Apple is challenging its competitors with software integration that provides ease of use and flexibility; continuous and more frequent innovation in hardware and software; and an ecosystem that focuses on interoperability across multiple devices (such as iPod and iMac cross-selling). 18

2. By 2012, 50 per cent of traveling workers will leave their notebooks at home in favour of other devices. Even though notebooks continue to shrink in size and weight, traveling workers lament the weight and inconvenience of carrying them on their trips. Vendors are developing solutions to address these concerns: new classes of Internet-centric pocketable devices at the sub-$400 level; and server and Web-based applications that can be accessed from anywhere. There is also a new class of applications: portable personality that encapsulates a user’s preferred work environment, enabling the user to recreate that environment across multiple locations or systems. 3. By 2012, 80 per cent of all commercial software will include elements of open-source technology. Many open-source technologies are mature, stable and well supported. They provide significant opportunities for vendors and users to lower their total cost of ownership and increase returns on investment. Ignoring this will put companies at a serious competitive disadvantage. Embedded open source strategies will become the minimal level of investment that most large software vendors will find necessary to maintain competitive advantages during the next five years. 4. By 2012, at least one-third of business application software spending will be as service subscription instead of as product license. With software as service (SaaS), the user organisation pays for software services in proportion to use. This is fundamentally different from the fixed-

price perpetual license of the traditional on-premises technology. Endorsed and promoted by all leading business applications vendors (Oracle, SAP, Microsoft) and many Web technology leaders (Google, Amazon), the SaaS model of deployment and distribution of software services will enjoy steady growth in mainstream use during the next five years. 5. By 2011, early technology adopters will forgo capital expenditures and instead purchase 40 per cent of their IT infrastructure as a service. Increased high-speed bandwidth makes it practical to locate infrastructure at other sites and still receive the same response times. Enterprises believe that as service oriented architecture (SOA) becomes common “cloud computing” will take off, thus untying applications from specific infrastructure. This trend to accepting commodity infrastructure could end the traditional “lock-in” with a single supplier and lower the costs of switching suppliers. It means that IT buyers should strengthen their purchasing and sourcing departments to evaluate offerings. They will have to develop and use new criteria for evaluation and selection and phase out traditional criteria. 6. By 2009, more than one third of IT organizations will have one or more environmental criteria in their top six buying criteria for IT-related goods. Initially, the motivation will come from the wish to contain costs. Enterprise data centres are struggling to keep pace with the increasing power requirements of their infrastructures. And there is

substantial potential to improve the environmental footprint, throughout the life cycle, of all IT products and services without any significant trade-offs in price or performance. In future, IT organisations will shift their focus from the power efficiency of products to asking service providers about their measures to improve energy efficiency. 7. By 2010, 75 per cent of organisations will use full life cycle energy and CO2 footprint as mandatory PC hardware buying criteria. Most technology providers have little or no knowledge of the full life cycle energy and CO2 footprint of their products. Some technology providers have started the process of life cycle assessments, or at least were asking key suppliers about carbon and energy use in 2007 and will continue in 2008. Most others using such information to differentiate their products will start in 2009 and by 2010 enterprises will be able to start using the information as a basis for purchasing decisions. Most others will stat some level of more detailed life cycle assessment in 2008. 8. By 2011, suppliers to large global enterprises will need to prove their green credentials via an audited process to retain preferred supplier status. Those organizations with strong brands are helping to forge the first wave of green sourcing policies and initiatives. These policies go well beyond minimizing direct carbon emissions or requiring suppliers to comply with local environmental regulations. For example, Timberland has launched a “Green Index” environmental rating for its shoes and boots. Home De-

pot is working on evaluation and audit criteria for assessing supplier submissions for its new EcoOptions product line. 9. By 2010, end-user preferences will decide as much as half of all software, hardware and services acquisitions made by IT. The rise of the Internet and the ubiquity of the browser interface have made computing approachable and individuals are now making decisions about technology for personal and business use. Because of this, IT organizations are addressing user concerns through planning for a global class of computing that incorporates user decisions in risk analysis and innovation of business strategy. 10. Through 2011, the number of 3-D printers in homes and businesses will grow 100-fold over 2006 levels. The technology lets users send a file of a 3-D design to a printer-like device that will carve the design out of a block of resin. A manufacturer can make scale models of new product designs without the expense of model makers. Or consumers can have models of the avatars they use online. Ultimately, manufacturers can consider making some components on demand without having an inventory of replacement parts. Printers priced less than $10,000 have been announced for 2008, opening up the personal and hobbyist markets. A Tekes study made in 2009 discusses the global megatrends. According to the study, the following six trends were highlighted (Ahola & Palkamo, 2009): 1. Consumption-related expenses will decrease as the consumers become

2. 3. 4. 5. 6.

more aware of the global production costs. Scarcity will shift the consumption. Leisure time consumption will lead the consumption’s way. New customer movements shall shape global innovations. Competences can be found in the core of economy. Technological discontinuity will bring about new technology paradigms.

Also Churchill lists top ten trends. 1. Demographics are destiny, creating opportunity. Baby boomers are an opportunity, including an “eBay for information” that exceeds the market for physical goods. This is a U.S./ Canada/U.K. trend. Baby boomers as the first Internet savvy seniors. Smart, active, group, entering AARP age. 75 million of them, half the U.S. workforce. In 2025, the entire country will look like Florida does today. Nothing will change that. Demographics are destiny. Over have of businesses and franchises are started by people in this group. At home, educated and Internet savvy. Services online will exceed market for goods online. Another market: the mental exercise market. If you are 35 or older, cognitive decline is at the same pace as 80 year olds. 2. The mobile phone will be a mainstream personal computer. With built in projector. Authentication. Credit cards on SIM cards. ID cards, passports, drivers licenses. Any information you need. 3. The rise of the “implicit” Internet. Today your permanent record exists; you create a trail of data exhaust, digital bread crumbs. Implicit da19

ta that exists in silence. Movie rentals, restaurant reservations, books purchased, Web sites visited, etc. All of this data existed in silence. No easy way until now to benefit from the data; but the silos are coming down. Google, Yahoo, Facebook, Mozilla collecting data. Trend is that big wave will come to companies that are able to novel and new ways to deliver information by crossing these silos, with implicit data on the Internet. Use social networking data to improve search. Conversion of data exhaust will create value in new and interesting ways. All of the panelists seem to agree that this is a key trend. 4. Betting on smart phones: The mobile device migration to smart phones from features phones will produce even greater disruption than PC industry moving from character mode to graphical interface. Used to be just Palm and Research in Motion. What you are really doing, is put in real software environments, with applications layer that separates network from physical device. Phones far more pervasive than PCs. Will take out Motorola. One of LG, Samsung or Sony Ericsson as well. Will be intensely disruptive. And it will hurt Microsoft. You cannot make a great consumer product with unbundled operating system. It will be incredibly disrupted. In five years, half of what we think of as phones will do something far more profound than what we think of a phone as doing. Design centers will fragment. An Amazon Kindle is a smartphone, with 3G network behind it. A life changer for people who use it. Will turn billion unit a year industry on its head. As20

sume Nokia, Apple, RIMM will do really well. 5. Water tech will replace global warming as a global priority. The world is running out of usable water and will kill millions more in our lifetime than global warming. One billion of 6 billion people do not have healthy water. We’re losing close to 1 million people a year under 5 years old due to dirty water. 6. Evolution trumps design. Many interesting unsolved problems in computer science, nanotech, and synthetic biology require construction of complex systems. Evolutionary algorithms are a powerful alternative to traditional design, blossoming first in neural networks and now in microbial engineering. Nearterm trend: year or two, components of microbial engineering products will involve some form of evolution. Design for evolution. Has been used in neural networks. In microbial work, cripple a microbe, so it can do the one thing it does better and better. To make industrial chemicals. Applied to analog circuit design. In the future, artificial intelligence. 7. Fossilizing fossil energy. Oil and coal will have trouble competing with biofuels. 99% of discussion on the topic is completely irrelevant to the topic. In 4–5 years will have production proof that can sell biofuel at well below $2 a gallon at today’s tax structure and no subsidy. Can’t imagine how big oil can stay in business if that is an alternative. Zero land needed to replace 100% of our gasoline. The other major issue is electrical power generation, which is coal and natural gas. One of his companies signed deal for

175 MW solar plant at costs below natural gas. Cheaper and less subject to commodity pricing. 8. Venture Capital 2.0. Venture capital has underwritten most of the transformative software and Internet companies over last 20 years. Changing economics will have dramatic impact on the venture capital industry, in particular for software and IT. 9. Within 5 years, everything that matters to you will be available to you on a device that fits on your belt or in your purse. Massive shift in Internet traffic from PCs to smaller devices. You should all get a Kindle, and study this thing, Roger says. Apple has it in the long run, wrong. Won’t be about watching created content, it will be about creating content. Within 10 years, more Internet traffic from your person than all other locations put together. 10. 80% of the world population will carry mobile Internet devices within 5-10 years. Dial-tone is going to be gone. By next year, people will put micro cells in your house. China Mobile has 500 million billable lines. Within 5-10 years will hit 5 billion global wireless phones. The trends listed in recent publications point our things that are commonly “known” by the ICT industry analysts and big players within the industry. Also, to some degree the above statements have been given to speed up the transformation of the industry to desired directions. The trends picked up from the interviews indicate that the informants are rather well aware of these “known facts” but they are also concerned with partly different

phenomena. But, trends are difficult to anticipate. Those that have been expected to become realized by the interviewed have taken much longer time than expected, if realized at all. ”Varmaan jotain tommosii trendei voi olla olemassa ilman, että [epäselvää] mitään niistä tietäisi, et mut ylipää... no, monet – jos nyt mobiilijuttui ylipäätänsä aattelee – niin, niissähän on ollu koko tän vuosituhannen – ainakin mää pitäny sitä rasittavana piirteenä – et monet jutut, jotka on tullu sittemmin koviksi jutuiks, ne ei oo välttämättä ollu, niinku, kovinkaan hyvin etukäteen tiedossa. … aika harvat hahmotti sen, että kännykkään tulee kamera, ja että se on yks sen tärkeimmstä ominaisuuksista. Ja paikannus GPSmuotosena, joka nyt oli sit seuraavana. Niin tota, nää molemmat on semmosia, joita ei kovin paljon etukäteen... aika harva hahmotti.” ”Niin, ja vastaavasti samanlaiset, tyyliin sosisaaliset tekijät vois osass tilanteissa toimii niinku inhibaattoreinakin.” ”Mut että eihän kukaan tässä maailmassa tiedä et mitä on interaktiiviset palvelut viiden vuoden päästä. Kuka niinkun näki jonkun Facebookin? Okei, niillä oli tiettyjä tällasii signaaleja megatrendeistä, sosiaalinen plaap.plaap.plaa, mut loppujen lopuks ne on aika pienet asiat, mitkä siihen vaikuttaa, mitkä saa sitten homman lentämään.” ”Siinä on käynyt joku hyvä säkä, että itse asiassa, kuinka helposti liiketoiminta lähtee liikkeelle … Nokia aloitti. Se möi sen ideologian aikanaan soittoäänillä. Kuluttajat rupes valikoimaan puhelimen sen mukaan, miten puhelimessa on soittoääniä. Ja se markkina oli täysin valmis sitä varten. ... Ei [epäselvää] ja kuvitelmat sen liiketoiminnan kasvamiseksi meni aika huikeaksi sitten. Että kyllähän ensimmäisen vuoden kasvukäyrät, niin

nehän oli – tai -99 kun ensimmäiset oikeesti avattiin, vuonna 2000, niin sehän yli 100-kertaistui se liikevaihto. Siihen ruvettiin sitten kautta maailman lähteen rakentaan eri näkösii oodtusarvoja, että miten tän liiketoiminnan odotettin* kasvavan. Ja sitähän se ei oo ollut, et liiketoiminta sinänsä ja se markkina-arvo on tällä hetkellä kuitenkin huikea tässä lisäarvoliiketoiminnassa, mutta ne odotusarvot, jotka sille asetettiin, niin ne ei kohdannut toisiansa.” ”… kaikki muut markkinointikanavat, niinku mediat, normaalit, niinkun sähköiset mediakanavat laskee, paitsi netti ja mobiili.” Cloud computing as a topic leads to controversial opinions. ”Ja jotenkin sen puolelta jos aatellaan, niin nyt varmaan seuraava 10-15 vuoden iso trendi on nää pilvipalvelut. Se on sellanen, se on mahdollistava teknologia, joka mahdollistaa globaalien palvelujen tekemisen silleen et se alkuinvestointi ei oo niin järkyttävä ja et palvelut viel jollaki tavalla liittyy toisiinsa.” … mutta kyllä jos esimerkiksi katsoo Microsoftia ja niitten asemaa, niin ne on aika sivuraiteilla koko tästä kehityksestä, koska ne on siinä vanhassa maailmassa, missä sulla on käyttis ja applikaatioita ja kaikkii näitä ja se on, ne ei oo niinku relevantteja … Et ei siinä ketään vois kiinnostaa mitkään Windows-käyttikset tai destktopilla tai [epäselvää] jossain Vista, XP, kaikissa näissä, ei vois vähempää kiinnostaa, koska se ei oo sen käyttäjän kannalta niin, se ei vaan kiinnosta.” The future’s device is already here. ”Sä et HD-kuvasta esimerkiks pienessä näytössä saa semmosta hyötyä, kun sä saat isossa näytössä. Et jos sä aattelet, oletetaan niinkun

normaaliresoluutioinen – mä näkisin tään, et tommonen 3,5-tuumanen näyttö tulee aika pitkään oleen standardi tässä useamman vuoden ajan, koska se on semmonen kämmenenkokonen unelma. … mut sitte bulkkiluuri tulee olemaan 3,5-tuumanen, ja tarkkuus ehkä tost vielä nousee, mut se oo oleellista, koska kun ihminen kattoo sitä näyttöö näin, niin jossain vaiheessa menee se et sillä ei oo silmälle enää mitään väliä, varsinkaan liikkuvassa kuvassa. Et sinänsä, mä sanosin näin, et meill on nyt se standardi mikä, ne kaikki standardit kasassa mitkä mahdollisti internetin räjähdyksen -90-luvun lopulla. … tää vuosi 2009 ku Nokiallakin on kosketusnäytöllinen, niinku periaatteessa koko mobiiliteollisuus on siirtynyt tämmöseen, tähän aikaan, ja sit hinnat tulee laskemaan koko ajan, ja mennään siihen 200 hintaluokkaaan, todennäköisesti jo 2009, niinku ens jouluna, kun nyt on 300 hintaluokassa, et tiputaan siihen 200, sit kun päästään alle 150, sit on niinku se viimeinen take-off*.” It is the user experience that matters. ”No ei käyttistasolla, ei loppukäyttäjää kiiinnosta se käyttis, siis se mitä sillä voi tehä tai miten sitä voi käyttää, … meillähän on koko niinku yhtenä strategiana – siis päästrategiana – on se et se on sama kokemus PC, mobiili, ja web…”. Downloadable application business is possible declining. ”… vähän poikkeus tuosta massasta … Applen UpStore on mennyt ja miten paljon siinä tulee applikaatioita ja downloadeja ja näin, mut muutenhan se trendi on pois tällaisesta tavallaan ladattavista applikaatioista, et hyvin harva asentaa mitään applikaatioita muuta ku pelejä, jos on perus-PC tai -Mac, niin aika vähän 21

sellaisia dedikoituja clientteja, ja sama juttu kännyköissä, et se on selkee trendi tuossa.” Labor towards cheaper countries. ”Tällä hetkellähän meillä on yli 6000 ihmistä pelkän Telecomin puolella, ja kyl se tehdään sisäisillä resursseilla, mut ne sisäiset resurssit on enemmän ja enemmän tuolla low costissa, Intiassa, Kiinassa, kenties Pohjois-Afrikassa tulevaisuudessa. Revenue logic first, technology follows.” ”… ennen se teknologiapuoli sai ihan itse tehdä päätöksen, että mitä ne hankki, nykyään mitään isompaa päätöstä ei tehdä ilman sitä bisnescasen laskemista, mikä on ihan oikein. … globaalilla tavallakin myynti menee sillai, että se on kaks tahoo, jolla myydään, joiden pitää kummankin ostaa, on se bisnespäättäjä ja on se teknologiapäättäjä.” ”Niin luonnollisestihan kulutustottumus, tai kuluttajathan määrää markkinat ja markkinat määrää tuotekehityksen. Täs tapauksessahan tietysti kun puhutaan digitaalisesta maailmasta, niin ihmiset on niin valtavan kiinnostuneita uusista gadgeteistä ja mahdollisista sovellutuksista ja palveluista, niin, tavallaan teknologia myös määrää valtavasti sitä markkinan muodostumista, mutta onko se sitten se teknologinen sovellutus, joka menestyy, niin se on taas sitten kuluttajan käsissä.” Digital music is a growing industry but also facing some challenges. ”No digitaalinen musiikkihan … sisältää niin PC-, Mac-, kuin sitten mobiilikanavat kaikki. … niin kaksnumeroisia kasvulukuja edelleen Suomen osalla ... 15 % kasvua edelliseen vuoteen, joka taas sitten taas tämmösenä markkina-aikana niinku on erittäin mieluisaa. Täytyy 22

tietysti muistaa, että siinä puhutaan niinku aikoinaan on lähdetty nollatilanteesta. … Valtava haaste on piratismi, joka siellä syö samaa kakkua, ja... että edelleen valtavaa kasvuu.” ”Se, mikä tulee varmasti oleen nyt seuraava steppi, niin a la carte -kaupat eivät enää ehkä tuu siinä määrin siinä määrin kasvamaan, eli tarkoitetaan sitä, että ostetaan yks yksittäinen biisi tai albumi, vaan niinku enemmän mennään siihen niinku kokonaispalvelun puolelle. Että selvästi nyt on tulossa, 2009–2010 siellä on tulossa muutama isokin kauppapaikka, jotka sit tarjoaa kaiken kuukausifeetä vastaan … kun lopettaa sen kuukausmaksun maksamisen, niin silloinhan se myös tavallaan menettää ne kaikki, mitä on kuunnellut, soittolistansa ja muut, et siinä on omat puolensa ostaa a la carte -kaupasta. Fyysinenhän, täytyy edelleen muistaa, on tän bisneksen kivijalka ja tekee sen rahan, että puhtaan digitaalisen kaupan osuudessa, niinku, rahapuolella niin, noin jostain 6 % revenueesta, jonka se jättää tohon.” ”Kyllä, kyllä, kasvaa, koska valitettavastihan fyysinen tietysti laskee ja digitaalinen kasvaa niinku noiden prosenttien varjossa, mitä sanoin äsken. Tosiaan niin, se aiheuttaa tietysti sitä, että merkitys sitten taas... markkinaosuus digitaalisella musiikilla kasvaa. Mutta siis se mikä siinä on suuri haaste jokaisella sisällöntuottajalla, niinku levy-yhtiöllä, on se, että toi keskiostoksen hintahan on romahtanut cd-ajoista, että silloin kun aikoinaan nuoriso osti kokoelma 20 euroo, niin nyt se on niinku haetaan biisi kerrallaan. … Joka on sitten taas on euro-kaks. Et onkohan keskihinta tällä hetkellä jossain kahdessa-kolmessa eurossa per kuluttaja, että musiikkiahan käytetään siis tällä hetkellä enemmän kuin koskaan. … Mutta sitten se taas

niinku loppuvalmistajan, tuottajan, artistin, niin että se päätyy sinne se tulo, niin se on se haaste tällä hetkellä ehkä eniten markkinalla.” ”Tietysti kellään ei tietysti oo sitä kristallipalloo, mutta näyttää siltä, että noin kolmen vuoden sisään digitaalinen myynti tulee oleen merkittävää. Meneeks se sitten Suomen kohdalla ohi fyysisen, sen näyttää sitten aika, … , ja osittain ollaan jo yks sukupolvi menetetty laittomille latauksille, mutta tehdään vahvasti töitä, että saatais nää vertaisverkkoajattelumalleja ja muuta, niin, niistä luotua järkeviä bisnesmalleja, jota on nyt tapahtumassa, ja hyviä esimerkkejä on tullut maailmalta, missä on onnistuttu luomaan konsepteja isojen operaattoiden kanssa. Näistä malleista henkilökohtaisesti nään, että tää ei oo enää edes tulevaisuutta, tää on tätä päivää.” Social media is the driver. ”… esimerkiksi sosiaalisten tekijöiden, niiden... niihin perustuvien palveluiden kohdalla, ... palvelu on nimenomaan ollu sellanen, joilla on jo pitempään saattanut olla mobiili-internet olemassa ja mahdollisuus sitä käyttää, niin ne ei oo sitä tehny, mutta tällanen sosiaalisen median palvelu onkin sitten yhtäkkiä muuttanut tilanteen, ja Facebookillakin voi olla yllättävän kovii ne luvut, mitä siellä näytetään prosentteina mobiilikäytöstä, ... lopputulos se, että mobiili-internettii, mobiilipäätelaitetta, ehkä jopa konvergoituneita verkkoja, käytetään enemmän ku aikasemmin, käytetään paljon, sille on selkee käyttötarkotus, mut se syy tähän ei välttämättä oo näissä mahdollistavissa tekijöissä, konvergenssissa sinänsä, tai päätelaitteen ominaisuuksissa sinänsä, vaan se on tullu sieltä sen sosiaalisen aspektin kautta. Ja se vastaa muuttuneita käyttötottumuksia.”

Industry environment and structure The purpose of the industry analysis is to predict the changes in the industry structure. These changes are related to the current changes in the products, technologies, strategies of the leading players, infrastructure and government policies. Understanding the sources of sustainable competitive advantage has been one of the major research areas in the strategic management literature. Porter’s (1980, 1985) industry analysis framework together with the concept of the competitive advantage and value chain, suggest that firm’s sustainable competitive advantage is derived from its internal strengths, at the same time taking into an account the external possibilities and threats. According to Barney (1991), company is having a competitive advantage when it is implementing a value creating strategy which is not being implemented simultaneously by its – current or potential – competitors. In real life, competition between the companies is a never ending game. One strategic move from one competitor – whether competitive or cooperative in its nature – leads to another by another player, in which the first company will react … Industry structures change and reform over the time. Understanding of the near history and current dynamics, make the estimation of the industry’s future evolution possible. Combining the industry analysis with the anticipated technological developments, some judgments and assumptions concerning the near future can be drawn. In recent discussion on both academic and managerial literature the

competitive advantage has been seen to be more likely a temporary rather than a sustainable one. Increasing competition, new entrants into the markets, companies seeking new business areas, all these are good examples of phenomena which obviously shorten the lifecycle of companies’ competitive advantages. It has been noted that resource based theories suggest that company’s resources are the crucial factor when building a sustainable competitive advantage. This, however, might not be the case anymore. This new situation means that the business and corporate strategies must be rethought accordingly. Companies are supposed to aim at achieving a sustainable competitive advantage to create profits that exceed the average profit level of the industry. From the theoretical angle, competitive advantage is a result either from the intra-industry cost or differentiation advantage. Cost advantage is reached when company is able to provide its products with a lower cost than its competitors can do, differentiation advantage could result from real physical differences to intangibles, like the brand. Prahalad and Hamel (1990) introduced core competencies as capabilities that serve as a possible source of competitive advantage for a firm over its rivals. Resource based view emphasizes the role of the resources and capabilities as distinctive competencies in creating the competitive advantage. High technology firms typically face dynamic, global markets. Customers are not geographically dependent and business activities can be located in many countries. This sets demands on wide-ranging competitive position, but on the other hand, brings

possibilities to utilize foreign resources. Ghosal (1987) notices, that global firm can utilize this comparative advantage of nations by configuring its value chain so that firm locates its activities in different countries according to the cost and intensity of that particular resource. Foreign recourses might lead to the competitive advantage because of the asymmetric resource endowments at a national level. The interviewed pointed out several factors that can be related to the above discussion. Government support and actions towards the existing big players might not yield the best possible outcomes. ”… kaikkihan noi Shokit on määritelty tiettyjen Suomessa toimivien suurempien pelureitten ehdoilla, että tietysti Nokia, jees, tärkeetä ja tuetaan Nokian toimintaa, sit siellä on niinku autoteollisuuteen ja tämmöseen [epäselvää] juttuihin liittyyvää juttua, joka on suoraan [epäselvää] ElektroBitin Shokki, ja sit siellä on niinku periaatteessa ihan, et ne on hyvin pitkälle lähtee siitä olemassaolevasta toiminnasta, ja siellä on hyvin vähän, jos ollenkaan, sellaista, joka tähtää mihinkään uuden luomiseen. … tullaan siihen, että mikä se tavoite, onko se tämän nykyisen toiminnan ylläpitämistä ja säilyttämistä, vai haetaanko oikeesti jotain uutta? Ja jos oikeesti haetaan jotain uutta ja sit haetaan uusia juttuja, innovaatiota, niin silloin se pitäis oikeesti, niin, kohdistaa näihin, sanotaan, niihin toimijoihin, joilla voi oikeesti tai joilta voi odottaa jotain uusia innovaatioita, elikkä silloin tullaan just start-uppeihin, ja tavallaan tätä yrittäjyyttä – ja itse asiassa yrittäjyys on vähän haasteellinen sana, että periaatteessa tätä start-up-kulmaa pitäis huomioida, ja ihan tällaista entrepreneurshippiä, … pitäs Suomessa saada 23

aikaseksi, mikä tässä just kaikissa [epäselvää] teknologiatuotteissa, missä pitäs kääntää paljon voimakkaammin tähän palveluinnovaatioon ja bisnesmalli-innovaatioon … sit vielä tää, mitä Suomessa kannattaa tehdä ja mitä ei, niin ei kannata lähtee tekeen väkisin innovaatioita sellaisilla alueilla, jotka on jo aika hyvin suurien pelureitten [epäselvää], ei sun kannata lähtee tekeen uutta Ciscoa Ciscon paikalle ...” Supplier power. Operators have a possibility to guide the development. ”Kyllä ne on täysin kilpailevia ja se konsernin sisäinenkin, et meilläkinhän on esimerkiks 10 000 KTV-, kaapeli-tv asiakasta. Ei me siihen verkkoon investoida, se saa kuolla pois. Jossain vaiheessa… me myös skräpätään nämä vanhat KTV-liittymät kuituliittymiks ja se vanha KTV-palvelu muuttuu IPTV-palveluks. Ne ei siis välttämättä ees tiedä, et niille on tullu IPTV-palvelu. … yhtäkkiä siellä napin takana vaan onkin, mistä voi ruveta kattoon viikon vanhoja ohjelmia ja sen jälkeen ne ei luovu siitä KTV-palvelusta koskaan.” Buyer power. Buying the services is tricky. Consumers don’t like to pay, don’t like to install DRM applications, and even in the cases they accept the fees, the payment methods are still in the very early phase. The un-usefulness of payment methods may prevent the business to grow. ”No, a la carte -kaupassahan meillä on tapahtunut se.... tai aikoinaan kun tuli, niin varmaan siinä oli se, että se käyttökokemus ei ollut mieluisaa, että siihen joutu lataamaan erilaisia playereitä, siin pelästyttiin sitä DMR:ää, jolloin se tietysti syntyi se hankaluus. Ihmiset innoissaan meni lataan, osti, tapahtui 24

niin kuin laskutus, mutta ei ikinä saanut sisältöä. Kaikkii tämmösii, se oli erittäin haastavaa, ja tavallaan siinä maailmassa eletään edelleen kun menee tavallisen kuluttajan kanssa puhumaan, ne sanoo, että ei sieltä löydy mitään, ja se on erittäin hankalaa ja vaikeeta ja vaatii luottokorttitietoja ja vastaavaa, että... Se, mikä on yks iso haaste tässä itse asiassa, kun sanoin just tuon luottokortin, niin sehän on nuorisolle erittäin haastaavaa, että se on varmaan yks sähköisen etäkaupan haaste niin fyysisellä puolella kuin digitaalisessa jakelussa, että millä se rahastus tapahtuu sitten siinä, että kun kuluttaja ostaa, niin, et me saadaan myös se teinikin ostamaan sieltä helposti, koska heillähän ei ole oikeastaan niinku luottokorttimahdollisuutta kuin mennä vanhemman luokse ja --- … ehkä vaatis sit ehkä semmosta niinku varmaan laiteteknologisestikin kehitystä, että siellä ois joku uus PayPal-systeemi tai joku tämmöinen, joka sitten räjähtäis Skypen tapaan, ninku kaikkiin koneiisiin tai vastaavaa. … kyllähän semmonen coreryhmä tietää paypalit ja muut, mutta... se on niinku... puhutaan niin pienestä massasta, että me halutaan se koko niinku kenttä haltuun ja halutaan siitä semmonen positiivinen, että tää on yks tapa hoitaa asioita. … Ehkä yks sitten vois olla mobiilissa operaattoreiden kanssa niin kuin mahdollinen, että laskulla maksut, tämmöset. Mutta niissä on sitten heidänkin omat komissiot, ne liikkuu aika hurjissa prosenteissa, että se tavallaan tappaa sen bisnesmahdollisuuden.” ”Sit taas kaikki tietää, että mobiili on vielä ihan lapsenkengissä, nettipuolella, siellä ollaan jo vähän pidemmällä. Toinen on tietysti se, mikä vaikuttaa liiketoimintamalleihin on se, että millä tavalla, mitä tahansa mediatyyppiä pystytään välittään digitaalisesti, eli kuluttaja

pystyy vastaanottamaan käytännössä jo HD-tasoista kuvaa tavallisella tietokoneella, jossa sitten taas niinku se näyttölaite pystyy oleemaan sama kuin mikä on tvkäytössä, ne ei oo niinku erillisiä laitteita. Se konvergenssi on siellä näyttöalaitepuolella kehittyny. Sit taas mobiilien omass maailmassa sitä 50-tuuman plasmaa on vaikeempi laittaa taskuun, et siel sit tulee sit omat rajotteensa, ja se mitä ihmiset haluaa taskuun, mistä ne on halukkaita maksamaan, niin siellä – ikävä kyllä, vaikka ehkä toimijat muuta haluaa – niin esimerkiks premium-palveluiden aika alkaa olla ohi, ne pitää pystyy paketoida jonkinlaiseen kuukausimalliin, ja toinen on se, et mistä asiakkaat on kerran kuukaudess halukkaita maksamaan, niin se on erittäin hyvä kysymys. Eli sielläkin koetaan, että netti on ns. ilmanen, niin myös mobiilinetti pitäs olla ilmanen. Ok, siirtotie ei sinänsä oo ilmanen, mut sitte taas sielläki kilpailu laskee sitä hintaa mitä ihmiset on halukkaita maksamaan ja sen lisäksi sen päälle pitää alkaa paketoida palveluita, ja siinä liiketoimintamalli pitäs olla niin läpinäkyvä, niin selkeä et kuluttaja ymmärtää sen, et se ei missään nimess mieti sitä et “tää on kallista”, sen ei pitäs niinku ajatella sitä mediaa käyttäessä, että tää on kallista, vaan käyttää sitä. Suurten lukujen matematiikkaa toimii. Se on se.” Innovations in the payment methods would be welcome. ”No, mä uskoisin, että nuo kaikki, tavallaan myös tuo maksutapa, maksupalvelu, niin, ne kaikki liittyy yhteen. Eli sen täytyis alkaa ihan siitä, että kun ihminen hankkii laitteen – on se sitten mp3-soitin tai puhelin tai mikä tahansa, kannettava, läppäri, mitä tahansa – niin, se olis valmiina siinä. … Tavallaan näkee, niinku, että no jos, että sen jälkeen kun kuluttaja niin päässyt sisään siihen, valitsee se

minkä tahansa tavan, niin, hänelle tuotais se hänelle niin helposti siihen, että “hei, hanki tästä”. Jos se on kuukauskäyttöliittymä, niin, “kiitos, että otit tän, nyt se toimii”, operaattori hoitaa sit tai mitä tahansa. Et tavallaan hänen ei tarvitsisi tehdä muuta kuin yksi rekisteröityminen yhteen paikkaan, joka identifiois sen laittteen hänen laitteekseen, jolla hän pystyisi sitten jatkossa toimimaan digitaalisen musiikin hankkijana. H: Aivan. JP: Ja vois käyttää sitten erilaisia sovellutuksia, mä uskoisin, että se ois varmaan, että kun me tuotais siitä sadan klikkauksen takaa toi homma niinku semmoiseen alle kymmeneen, että se ois helppo ja nopee. Muutamassa minuutissa käyttövalmis.” ”Siinäkin on taas se, että tiettyjä asioita sä voit tehdä sillä puhelinlaskulla, tietyt asiat sä lasket, ne on niinku tilauspohjaisia palvelupuolella, mut se, että sä pystyt konkreettisesti kännykällä hankkimaan hyödykkeitä, jotka pitää maksaa jotenkin, niin siinä on se mobiilikauppa, niin onhan se yks osa, joka on vielä lapsenkengissä.” The user experience is not always fully understood by the designers. ”Tavallaan et jos se lähtee sieltä teknisestä innovaatiosta, niin se on myös erinomaista, mutta ne ihmiset, jotka niitä toteuttaa, ne on niin uskomattoman syvällä siinä asiassa, että heille taas semmonen niinku tavallinen kuluttaja, joka tuolla vielä taistelee, että missä PC:ssä on power-nappi, niin se tavallaan ei kohtaa sitä. Että se sovellutus on edelleen liian hankalasti piilossa jossain. Niin kun miettii musapuhelimii, vastaavia, niin, se pitäisi olla niinku erittäin semmosen vanhan soittimen näkönen, että “paina tosta ja alat kuunteleet, tosta kirjotat siihen “Madonna”, ja sen jälkeen sulla on Madonnat siinä, ja valitset siitä, ostat

itselles tai kuuntelet niitä”, et miten vaan käyttääkin sitä omaa laitettaan.” User experience is in a key role. ”… vaikka mä oon teknologiajohtaja, mun on vaikee suhtautua teknologiaan teknologian vuoksi. Että teknologiaa ei pitäisi kehittää teknologian vuoksi, että, tuota... Kyllä se ehdottomasti tulee olemaan ne palvelut ja sovellukset, mitkä ajaa sitä, mitkä tavallaan valikoi* sen markkinan. Totta kai siellä on pakko olla jonkin tyyppinen verkko alla, että voidaan käyttäa sitä.” Users’ needs are difficult to reveal. ”... Niin, se varmaan lähtee siitä sitten, että kun tyyliin on se Facebook – mehän ei voida tyrkyttää niinku asiakkaille... tai myydä niille mitään, mitä ne ei tarvi, ja toisaalta on se vaikee myydä yhtään mitään, mitä ne ei tiedä tarvitsevansa. Ja jos vaikka ajattelee Facebookia, niin mä en usko, että sä voisit tehdä vaikka minkälaisia asiakaskyselyitä, niin sä et voi... ne ei vastaa sulle, että me halutaan jostain syystä niinku Facebook on, koska se on niinku... sitä ei pysty tiedostaan. ... Facebook opettaa siihen, että on ylipäätään virtuaalikaverisuhteet, ja voidaan niinku kommunikoida näitä käyttäen. Että voidaan lähettää synttäritoivotuksii Facebookissa – tai virtuaalilahjoja tai muuta. Virtuaaliruusuja, mistä on puhuttu paljon. Virtuaaliruusuthan maksaa enemmän kuin oikee ruusu. Silti sen arvo on ihan samalla tavalla koettu.” Users have learnt that content is free. To change this – it might be hard but worth trying. ”… ollaan jo yks sukupolvi menetetty laittomille latauksille, mutta tehdään vahvasti töitä, että saatais nää vertaisverkkoajattelumalleja ja muuta,

niin, niistä luotua järkeviä bisnesmalleja, jota on nyt tapahtumassa, ja hyviä esimerkkejä on tullut maailmalta, missä on onnistuttu luomaan konsepteja isojen operaattoiden kanssa. Näistä malleista henkilökohtaisesti nään, että tää ei oo enää edes tulevaisuutta, tää on tätä päivää. Me ollaan Suomessa vähän jäljessä, siihen on monta eri syytä, mut, tota... Ehkä tää vuosi tulee oleen se kaikkein isoin ja ratkaisevin Suomessakin, että nyt kun isot pelaajat aloittaa näillä isoimmilla konsepteilla niin nähdään sitten, että mihin tää kuluttajien käyttäytymismalli tulee sitten meneen. Suomi on kuitenkin aika teknologiamaa, mutta ihmiset on aika varovaisia maksukorttien käyttäjiä verkkoympäristössä ja muualla näin.” Substitutes. Development has cannibalized own business. ”Se on hauska aina, miten noihin luureihin esimerkiksi tulee seuraavaks, sinne ollaan kannibalisoitu kamera, ollaan kannibalisoitu GPS tai verkkopaikannus, [epäselvää], et yks driveri tulee olemaan mobiilin ostaminen.” SOA, SAAS as substitutes ”… kaikki on nykyään yleisesti ottaen, lähes kaikki SOA, elikkä arkkitehdit on SOA-arkkitehtejä joka tapauksessa. Mut sitten uusina asioina tulee niinku tällainen suorituskykyyn liittyvät asiat, jotka on niinku äärimmäisen tärkeitä. Et siinä ja siel tapahtuu kehitystä mun nähdäkseni koko ajan, aika paljon.” Potential entrants. Is it difficult to enter the markets? ”Toi on hyvä kysymys. Mä en näe sitä niin yksselitteisesti, että toimijoiden määrä esimerkiksi kasvais, vaan – tai vähenis, kumpaakaan – vaan, että varmaan aika pitkälti riippuu siitä, että minkä tyyppinen 25

tilanne on tähän asti ollut. Operaattorithan on hyvä esimerkki siitä, että niissä pelikentissä on oikeestaan on aina ollut suhteess vähän toimijoita johtuen nyt tietty jostain itsestään selvistä tekijöistä, siis säätelystä ja investointien kalleudesta ja tällai. Sit taas moniss muissa toimialoissa, jos nyt puhutaan vaikka näit meillä, niinku, digimainospuolella lähellä olevia toimijoita, jotku tietyt softatuotteet, muut ohjelmointitoteutukset, niissä taas toimijoita on paljon. No nythän konvergenssi on esimerkiksi operaattoripuolella vois mahdollistaa sen, et moniss semmosiss palveluissa, jotka on ollu, niinku, yksinomaan operaattoreiden tarjottavissa, niin konvergenssihan voi avata ovia monille uusille toimijoille tiettyihin yksittäisiin palveluihin. Ja siitä joku VoIP-puhelut on varmaan yks hyvä esimerkki siitä, tai niiden varaan rakennettavat jutut. Konvergenssihan on siinä, niinku, välttämätön semmonen alusta. Niin, tota, semmosiss tilanteissa toimijoita taas voi tulla lisää, mut vastaavasti sit taas joissain muissa tilanteissa – lähinnä mä nyt mietin jotain ohjelmistotuotteita, jotka on tähän asti voinut sisältää paljon eri toimijoita sen takia, että kukin toimija on keskittynyt johonkin tiettyyn nicheeseen tai muuten rajattuun alueeseen, missä on sitten entry-barrieria ja muuta ollut olemassa sen verran, et noissa tilanteissahan sitten konvergenssi voi sitten johtaa siihen, et sielt toimijoita lähtee katoamaan sen takia, et nää nicheet menetetään.” ”Se niinku, ettei tarvi huolehtia tällaisista perusjutuista, ei sua palvelunostajana vois vähempää kiinnostaa pyöritättekö te jollain Solarikselle, Linuxilla, whatever, kunhan se tarjoaa [epäselvää] paljon vaikka jotain page-view’ta tai mitä nyt tarvitaan siellä palvelussa, tai jotain kaistaa tai jotain vääntöä, niin, ei sua palveluntarjoajana kiinnosta pätkääkään, et 26

se on, vaikka sä tekisit sillä puolella vaikka miten paljon innovaatiota, et “meillä on tällainen verkko, meillä on tällainen juttu”, niin sit se loppukäyttäjä, et kyl siinä niinku sellaisen, siinä on tapahtunut, mitä aina jokaisessa bisneksessä, et... aikasemmin piti tehdä kun ei ollut, mut nyt siitä on tullut commodity, bulkkitavaraa, ja se on ihan älytöntä käyttää energiaa sellaisiin juttuihin, jotka ei oikeesti erota sua sieltä massasta, tai ei siitä palvelusta parempaa loppukäyttäjän kannalta. Se on ehkä se, et siinä mielessä sen teknologian tai tiettyjen teknologioitten merkitys on vähentynyt, ja itse asiassa ehkä se yleisin merkki, mistä paljon nyt käydään keskustelua, puhutaan näistä social networkeista, mikä on taas vaikka joku Facebook esimerkkinä, niin okei, ne on saanut mielenkiintoisen aseman markkinassa, mikä niillä on joku 130 miljoonaa käyttäjää tai whatever, mut se, että nyt se skaba käydäänkiin siitä, että miten pystytään hyödyntämään sitä käyttäjätietoa, profiilitietoa muissa palveluissa ja se on nyt ikään kuin siinä henkilödata ja profiili ja identiteetti ja kaikissa näissä jutuissa se juttu, ja siinä ei keskustella siitä, että saadaan perusbitit liikkuu jossain perusverkkotasolla, vaan se skaba käydään siellä [epäselvää] Facebook [epäselvää] tai jotain Google Friend Connectia ja siinä se taso, et sun ei tarvi palveluntarjoajana... Sä lähet, tai sulla on paljon enemmän juttuja käytettävissä, sun ei tarvi, tää hyvä esimerkki aikasemmin, että laitoit jonkun firman pystyyn, niin sun piti miettiä, että haluut jonku sähköpostipalvelimen tai jotain vastaavaa, eihän kukaan enää, tai ehkä joku jaksaa pyöritää sitä sähköpostipalvelinta itse, ehkä, no siis... eihän ykskään, tai hyvin harva start-up, hyvin harva aloitteleva firma rupee rakentaan mitään tollasta, ton tyyppistä toimistoinfraa, et se on ihan täysin turhaa, et kaikki, kaiken saa palveluna verkosta.”

”... ehkä se muuttaa sillä tavalla muotoaan, mikä on... minkä mä konkreettisesti nään, ja uskon, että se tulee jatkossakin olemaan, on että on pienempiä yrityksiä, jotka keskittyy tiettyyn teknologiaan, tiettyyn osaamiseen. Taas sitten suurimmat kokonaistoimittajat, me ollaan monessa hankkeessa, niin ostetaan alihankintana sitten tää erityisosaaminen. Varsinkin jos se ei oo niinku... jos se on hyvinkin rajattua. Vaikkakin saattaa olla kasvavaa liiketoimintaa, niin se ostetaan alihankintana, että jos vähänkin se liiketoimintamalli muuttuu, niin hyväksytään se, että itsellä ei oo pakko olla kaikkea. Ja sit toisaalta nähdään strategisesti semmoseksi, että se liiketoiminta alueena kasvaa merkittävästi tulevaisuudessa, niin silloinhan tapahtuu niin, että jossain perustetaan sitten osaamisyksikkö, joka sitten levittäytyy globaaliksi osaamisiseksi ajan myötä.” New entrants face a math of big numbers ”… pitäs päästä siihen isoon N:ään. Suomess on se reilu viisi miljoonaa ihmistä, niin se ei niinku heittämällä, vaikka ois kuinka hyvä bisnessman, niin sitä ei niinku ihan heti pysty kasvattamaan. … Se ei oo silleen myyntipuheenvuoro, et – niinkun se vaikuttaa – kun on miljardi käyttäjää. … Siitä lähtee niin iso N liikkeelle. “ Industry rivalry. Convergence is increasing the competition along with new opportunities. ”… tommonen paradigma --- samalla tavalla kuin aikaisemmin todettu tää kilpailun lisääntyminen ja liiketoimintamahdollisuuksien lisääntyminen samanaikasesti. Niin, muiden yritysten kannalta sit samanaikasesti palveluiden määrä, ylipäänsä vaihtoehtojen määrä kasvaa, mut sitten vastaavasti enemmän

osaamista tarvitaan niiden käyttöön ja valintaan ja operointiin, että.” ”… yritysten ja toimialojen kannalta, joihin konvergenssi lähinnä vaikuttaa välillisesti, niin niiden kannalta ehkä yks isoimmista vaikutuksista on se, että nimenomaan palveluiden valikoma kasvaa. Ja sehän nyt siis tarkoittaa luonnollisesti niiden kyseisten palveluiden tarjoajien kannalta, jotka on siis enemmän näissä konvergensseissa, verkkojen ja niiden palveluiden operoinniss mukana, niin, niillähän nimenomaan sama asia tarkoittaa kilpailutilanteen kiristymistä. Että VoIP-puhelut, tai ylipäätänsä puheviestintäpalvelut, on varmaan hyvä esimerkki siitä. … toimijoita, jotka ei itse siitä VoIP-puhelun välityksestä välttämättä hae rahaa ollenkaan, vaan ansaintalogiikka perustuu johonkin mainostuloihin tai johonkin muuhun tällaiseen, niin, tällähän on sitten kilpailutilanteessa sikäli radikaali merkitys, et ne toimijat, joilla se ansaintalogiikka on ollut puhtaasti sen toiminnan varassa, mitä joku muu tulee tarjoaan ilmaseks, niin sen vois kokea jopa haastavana.” Some key players might want to slow down the progress in order to protect their own businesses. ”… tietty osa toimijoista, niin, tämmösessä konvergenssi kun etenee, niin on usein herkästi tilanteita, joissa on järkevää koittaa suojata omaa liiketoimintaa. Toisin sanoen, koittaa estää konvergenssia tai tehdä jotain muutoksia siihen. Siis esimerkkinä vaikka se, että jos on nyt riittävän iso operaattori, joka teettää matkapuhelinvalmistajalla kokonaan omia laitteita, niin niissä kannattaa rajata, niinku, joidenkin rajapintojen ja verkkojen käyttöä ihan ihan sen takia, et suojelee niit omia kanavia, mistä rahaa pystyy tekeen.”

”Niin... Taisin mainita sen aikasemmin, et on tietty todennäköistä ja kieltämättä järkevääkin, niin, monen toimijan kannalta pyrkiä kehityskulkua hidastaan ihan vaan omien tähän asti hyvien asemien suojaamiseks, että siitähän ei päästä mihinkään.” Global big players will continue to expand and make the efforts to lead the development along their own paths. ”… mitä varmaan tulee jatkossakin tapahtuun, niin – nää globaalit isot toimijat, niin nehän varmaan jatkaa hyväks havaitulla mallilla, niinku laajenemistaan ja toisaalta tommost tilanteiden lukitsemista omaksi edukseen, ja varmaan tekno- ja sisältäpuolenkin pienii firmoja, niin, kaupaksi ulkomaille menee, nimenomaan niinku konvergenssiinkin liittyen ...” The benefit of big numbers, masses of users. ”Siellä on iso asia, mikä on ihan siis phenomenal, et on tietysti, hyvänä esimerkkinä voin tietysti käyttää aina tuota Applen Application Storea, 500 miljoonaa [epäselvää]. H: No, joo. VP: Se ei oo niinku “joo”, se on vaan, että “se on iso”. H: Tosta muuten hyvä esittää kysymys, että mitä se on tehnyt toisin kuin esimerkiksi Nokia? VP: Hyvä kysymys. Käytettävyys on ollut niin hyvä, sieltä on päässyt selailemaan niitä, hinnat on kohdallaan, helppo maksaa.” ”… niin sen tuotantokustannukset Googlelle ne on alle dekadin siitä, mitä meillä, ja aika harvoin se Gmail nurin on ollut tai, ja näyttää siltä, että tulevaisuudessa vielä vähemmän, koska ne on nyt rakentamassa tällaista globaalia mallia, jossa vetämällä henkselit minkä tahansa serverifarmin yli, yhtään ainoaa hakua tai Gmail-asiakas ei värähdäkään, että sellainen dedudanssi* pystytään tuottamaan

niin valtavalla kuluttajamarkkinassa luodulla käyttövolyymilla ja massalla.” ”… joka näyttää, että se on Googlen aikaansaamista, ja musta Google on ensimmäisiä ja ainoita, mitä mä oon nähny, joka kääntää kokonaan tän liiketoiminnan kehittämisen paradigman niin, että kun normaalistihan me ollaan toimittu kaikissa matkapuhelinpalveluissa ja ulkomaan kaukoliikenteessä, kaikessa televiestinnässä, IT-järjestelmissä, tietojärjestelmissä, ensin yrityksille, sitten hinnan laskun myötä, Mooren laki prosessori kehittyminen, sitten kulujallakin on varaa, sit ne siirtyy. Nyt Google tulee toisinpäin, eli Google valtaa tavallaan kuluttajan mielessään, ja varmaan aika harva enää, jolla Google ei oo niinku alotussivu, niin luo sieltä aivan ylivoimaisen kustannustehokkuuden ja laajan asiakaspeiton … niin nyt oli joku Merrill Lynch tai joku tällainen iso oli ottanut koko sähköpostijärjestelmän Googlelta, ja kysyin heiltä, että meillä on vähä tää sisäasianministeriö ja puolustusministeriö sitä mieltä, että serverit pitäis sijoittaa maan sisäpuolelle ja sitten tulee tää Googlen paperitehdashanke, niin nyt ei sitäkään argumenttiakaan enää. Että tavallaan niinku pystytään jopa tekemään vaativille asiakkaille.” Operators’ role as a byte pipe provider versus content providers’ business on a higher layers. Bytepipe provider has a further challenge in pricing, which has shifted from the transaction to flatrate. ”… että sillä ei oo niin merkitystä kenellä se fyysinen infra on, että kenellä se on hallussa, vaikka aina operaattorit varsin vierastaa tätä bitpipea, tai bittiputki tavallaan kuvausta tilanteesta, niin sitä se kuitenkin on ja siihen se on menossa, ja se on ihan ok. Ja se on periaatteessa jonkun pitää bittejäkin siirtää, 27

ja se voi olla ihan hyvää bisnestä, mutta siinä on tietysti puhutaan tällaisesta commodity-tuotteesta … Eli toi se, mitä vois tapahtua on se, että tulee kehittymään nää kerrokset vielä lisää, sulla on se infra, sitten sulla on palvelut sen päällä, ja se kaikkein mielenkiintoisin juttu tapahtuu siellä ylempänä tossa – ja tää koskee niinku verkkoja, tää koskee päätelaitteita, koskee kaikkia, se perusinfran on aika standardi tai tosi standardi tavaraa, sulla on IP-verkko, ja sulla on standardipalvelimia, sulla on standardi kaikkea, ja siellä muutamat isot pelurit, jotka tekee niitä juttuja. No sit sen päälle tulee se, tai innovaatiot tulee pääasiassa sinne ylemmillä tasoilla, et periaattessa jos katsoo just näitä ikään kuin isoja toimijoita tällä hetkellä niinku Google, Facebookia, mikä tuli jo tuossa mainittua, niin ei niillä oo ollu tarvetta rakentaa omaa verkkoa, [epäselvää] Google ja Facebook myös, ne pyörittää vain [epäselvää], ei tarvi tehdä sitä ihan sieltä alimmilta kerroksilta sinne ylös, se mielenkiintoisin toimi tulee siellä korkeemmalla siellä palvelukerroksessa” ”… murroksia, liiketoimintamielessä varmaan iso asia on ollut tää laajakaistapuolelta tullut ikään kuin flatratehinnoittelu, että se aikasempi liiketoimintamalli, joka perustu transaktioihin tai aikavelotukseen, niin se on varmaan tulossa tiensä päähän, ja tästä voisko sanoa verkkoinfrasta on tulossa jonkinlainen utility-asia.” Operators are facing a challenge of how to compete, how to differentiate their services. ”… Se niinku, ettei tarvi huolehtia tällaisista perusjutuista, ei sua palvelunostajana vois vähempää kiinnostaa pyöritättekö te jollain Solarikselle, Linuxilla, whatever, kunhan se tarjoaa [epäselvää] paljon vaikka jotain page-view’ta 28

tai mitä nyt tarvitaan siellä palvelussa, tai jotain kaistaa tai jotain vääntöä, niin, ei sua palveluntarjoajana kiinnosta pätkääkään, et se on, vaikka sä tekisit sillä puolella vaikka miten paljon innovaatiota, et “meillä on tällainen verkko, meillä on tällainen juttu … mut nyt siitä on tullut commodity, bulkkitavaraa, ja se on ihan älytöntä käyttää energiaa sellaisiin juttuihin, jotka ei oikeesti erota sua sieltä massasta, tai ei siitä palvelusta parempaa loppukäyttäjän kannalta.” ”... tässä on ehkä näitä luovan tuhon ja uuden ajatusmallin ehkä sitten taas tällaisia ääritapauksia, että jos sä haet liiketoimintatapamurroksia, niin yks murros on se, että nää muutamat gorillat löytää sieltä kuluttajamarkkinasta niin huikean kustannustehokkuuden, että kukaan yritysmarkkinassa, jos ne sinne haluaa, ei pysty hinnallisesti kilpailemaan, vaan se, että onko jotain muita keinoja differoida sitten ja ymmärtää paremmin asiakasta.” Competition between the content providers is also related to the competition between the operators. ”Joo, tässä voi olla käynnissä sellanen ilmiö, että tommoset – vaikka sisällöntuottajat niin ku MTV kolmoset – niin saattaa olla helisemässä siinä tilanteessa ku televisio ja internetti on sulautunu yhteen. Tää nykynen laitetelevisio, mää en usko että tää on vaan välivaihe, johtaa siihen, että sää – siitä sun kuvaruudulta napin painalluksella aktivoit – jotkut maksukanava plussan, maksu HD:n ittelles ja se välittömästi provisioituu sulle ja seuraavassa laskussa näkyy vähän enemmän hintaa, mutta sää voit myös napin painalluksella sen sieltä sulkea, jonkun maksukanavan. … siinä voipi käydä näin, että sellaset perinteiset sisällöntuottajat on helisemässä … vaikka joku

mikä hyvänsä Sony tai joku joka tuottaa sisältöä, kustantaa televisiosarjoja, se on siellä toisesssa päässä ja toisessa päässä asiakasta lähinnä on se operaattori, jolta tilaat laajakaistatelevisiopalvelu että ylipäätään sitä televisiokuvaa tulee sieltä laajakaistan kautta, niin että en mää osaa kyllä sanoa, että ketkä siinä välillä tulee säilymään hengissä, mutta sanotaan nyt näin, että jos aattelee, että me ainakin ollaan tähän mennessä ostettu sisältö jostakin, niin KTV:ltä me ostetaan, laajakaistatelevisioon jotain sisältöä, et me ollaan nyt päästy siinä ravintoketjussa vähän ylemmäs tähän laajakaista television avulla kun me ruvetaan niitä tallentamaan palvelimille.” Increased competition is both bringing foreign companies to Finland and moving the design tasks to cheaper labor countries. There is some room for niche players, though. ”Eli haetaan kustannustehokkuutta, jota sitten haetaan sitten joko sillä tavalla, että tarjoaja pystyy tekemään off-shorena halpojen työvoimakustannusten maissa töitä – puhtaasti, niinku intialaiset yritykset, ja intialaiset yrityksethän nimenoman toimii jo Suomessa ja Pohjoismaissa hyvin vahvasti … me puhutaan delivery center networkista, elikkä meillä on globaali verkosto, jossa Intiassa meillä on käytännössä varmaan 40–50 000 ihmistä.” ”… nää intialaiset pelurit kasvaa, me liitytään yhteen … perusolettamus on, että kun on riittävän iso, sulla on globaali peitto elementti, millä pystyt kilpailemaan kustannustehokkaasti. Ja nääki saa keskenään isoista diileistä. Samaan aikaan tää totta kai synnyttää sitten tällasiaa niche-pelureita, jotka tietyillä alueille, tietyissä segmenteissä omaa sellaista tietotaitoo, josta se maksettu premium

on suurempi ja pystyy sitä kautta, tota, elättään itsensä …” Open source, SOA and SAAS are shaping the big players’ competitive future. ”Microsoftin viimeisimpänä vetona on myös lähteny tähän palvelubisnekseen hyvin voimakkaasti, eli pyrkii hyvin, tota, selkeesti laajenemaan tästä perinteisestä roolistaan lähemmäs, tuota, meidän kaltaisia toimijoita. Ja taas totta kai, mitä Google tekee, niin mitä tahansa Microsoft tekee, niin Google pyrkii tekeen sen vielä paremmin ja ilmaiseksi. Tai hyvin edukkaasti verrattuna taas sitten Microsoftiin, eli heillä tuntuu olevan tämmöinen niinkuin copycat-tyyppinen kilpailu. Välillä ei tiedä, että kumpi seuraa kumpaa, mutta ratkaisut, mitä ne tuottaa markkinoille on hyvin samannäkösiä. Nostaisin noiden rinnalle vielä tän vielä niinku vahvemmin tän Open Source -pohjaisen kehityksen, koska siellä on, jos nyt kattoo suurii muutoksii, niin siellä tulee sellaiset tekijät ja pelurit, jotka aikanaan tulee laittaan IBM:t, Oraclet, tämmöset isot, vakiintuneet kaupalliset softa-vendorit ihan eri muottiin kun ne tänä päivänä on, että... Toi trendi on itse asiassa jo näkyvissä. Tulee vaikuttaan myös Microsoftiin tuossa sovellus- ja yritysohjelmistopuolella.” ”… niin aika iso osa menestyneistä IT-yrityksiä tänä päivänä, nimiä mainitsematta, mutta suuria systeemi-intergraattoreita, mutta niidenhän pääbisnes oikeestaan perustuu tällaseen projektityöhön, jolla sovitetaan keskenään sopimattomia järjestelmiä, ja silloin tavallaan tällainen SOA, avoimen maailman arkkitehtuuri, johon nimenomaan nää webbipohjaiset palvelut tarjoaa todella tavalla fiksun tavan, niin tullaan näkemään varmaan tällainen merkittävä tuottavuushyppy, eli tämmönen SaaS, tai

palvelut täältä cloudista … ja tässä mä nään, että jopa vielä operaattorikenttää suuremmaksi nousee haaste täällä ohjelmistoteollisuudessa, jossa nää perinteiset lisenssipohjaiset ja propri*-ratkaisut ja huonosti yhteensopivat, jotka on elättänyt sitten suuren joukon tämmösiä, meillä on esimerkkinä, etä hyvin paljon puhuttiin kun toimialla meni hyvin, että on tämmönen z toimijoita z accentureja ja tietoenattoreja z dataa ja tällaisia, niin nehän oli aika lihavia ne projektit, ja se tapa toimia oli sellainen, että rakennettiin järjestelmä, jonka jälkeen kaikki muutoksetkin oli aina tehtävä sen kyseisen organisaation kautta … että jos tän ottaa Accenturelta, niin se on semmonen 6 kuukautta ja vähintään miljoonan dollarin projekti, että me tehdään se kolmessa päivässä tällaisena webbipohjaisena – ja se on ihan totta … että joku Kone Oy ja Nokia otti käyttöön z SaaS-pohjaisen järjestelmän, oli vaan signaali siitä markkinasta … ei oo hirveen monta vuotta aikaa kun mekin tutkittiin, talossa oli siihen aikaan joku 7–8000 ihmistä, niin löydettiin penkomalla kaikki filet, että meillä oli jotain 16 000 Oraclen lisenssiä … täähän tukee tämmöstä verkkosentristä maailmankuvaa ja mehän nyt ollaan vuosikymmenet verkkoja rakennettu, mutta ei varmaan rakenneta, eikä laskuteta eikä toimita enää sillä vanhalla mallilla, että nyt on niinku meidänkin löydettävä uus vaihde ja uus näkökulma …” From competition towards cooperation. ”Ei, ei – tässä on kaks kenttää – yks on se et teollisuus standardoi asioita, elikkä koko teollisuus rakentaa sitä alustaa, ja sen jälkeen kilpailu käydään eri tasoilla siinä. Ja on kilpailua, esimerkiksi Microsoft-Nokia on hyvä esimerkki, niin on kilpailua ja positiivista yhteistyötä. Kaikki

isot pelurit, niin nehän sekä kilpailee että tekee yhteistyötä. Et sitten strategiat voi olla hyvinkin erilaisia, ja ne voi muuttuu matkan varrella …” (Generic) competitive strategies. Within the services, pricing is not a source for competitive advantage, consumers have got used to free services and are used to banners ”… kun joku toimija kuluttajille, tai asiakkaalle ylipäätänsä, tarjoaa ilmaiseksi, niin se on niin vahva kilpailukeino, siis – ollu aina – että muilla kilpailukeinoilla varustautuneet, niin ne on kyllä monessa tilanteessa kyllä hätää kärsimässä. Et, toki löytyy sitten tilanteita oikeestaan aina kun mainosrahotteisii palveluita, niin ja jonkinlaista ääriliikettä tai bisneskäyttäjää tai muuten vaihtoehtoihmisiä, -yrityksiä ollu, jotka on sitten ollut valmiit maksaan siitä, että ei tartte mainoksii kattella, mutta. Kyllähän toistesek nimenomaan tää ilmaisuus kilpailukeinona on ollut niin vetävä, että...” ”… se mitä ihmiset … on halukkaita maksamaan, niin siellä – ikävä kyllä, vaikka ehkä toimijat muuta haluaa – niin esimerkiks premium-palveluiden aika alkaa olla ohi, ne pitää pystyy paketoida jonkinlaiseen kuukausimalliin, … koetaan, että netti on ns. ilmanen, niin myös mobiilinetti pitäs olla ilmanen.” ”... Tää on niinku miten kuluttaja kokee sen hinnan, et se on ihan avaruutta. Ja sit toinen asia on sitten se, että se raha on aina jostain muusta pois, niin kyl se pitää aika tarkkaan katsoo, että jos ajatellaan, että sulla on 10 yksikköö tai 100 yksikköö käytettävissä, sit kun katsotaan miten se eri core-ryhmissä jakaantuu, niin tappeletsä farkkujen kanssa, tappeletsä leffalipun kanssa vai minkä kanssa sä tappelet siitä, että sä saisit jotain siihen laitteeseen? Ei mulla oo siihen niinku 29

mitään sellasta muuta kommenttia ku se, että kyllä tänä päivänä ihmiset on valmiita kuluttamaan, se ei oo mihinkään hävinny. Et kyllä hanakasti [epäselvää] lompakon tuota nyörit, mutta se, että mihin se raha käytetään on se kysymys.” ”… Bill Clintonin neuvonantaja näissä uusmedia-asioissa, että netin kautta kaikesta kontentista tulee ilmaista, sisällöstä tulee ilmaista, ja se itse se sisältö toimii vain mainostuksena maksullisille palveluille, lisäarvopalveluille tän sisällön päällä. Mun mielestä siinä on se ydin. Jolloin tullaan siihen, että se operaattorin rooli on siinä, et se voi periä hintaa palveluista, jotka liittyy sisällön helpompaan löytämiseen just siinä reaaliaikaisessa tarpeessa, eikä niinkään sen sisällön myymisessä, koska se sisältö voi olla jo lähtökohtaisesti ilmaista.” Service providers have to differentiate. ”… se et sä tuuttaat kuukaudess gigatolkulla kamaa yhdeksällä eurolla tohon päätelaitteeseen, niin sehän oli märkä uni vajaa 10 vuotta sitten, niinku oikeesti ja se lentää ihan hyvää vauhtia. Toinen on se, et päätelaitteet on oikeesti nyt niitä multimediatietsikoita ja se, et päätelaitepuotella, niin se differentointi tapahtuu enemmän ja enemmän softan kautta, et siellä ei oo, jos sä otat iPhonen, otat HTC:n, HD:n, ota Sonyn, ei vaan, otat Nokian, otat Xpressin, ne on niinku läpyköit, joissa on värinäyttö, nettiyhteys ja kosketusnäyttö. … hei, siis kuka tahansa saa rautaa kaupast, sitä on niinku ihan tarpeeks, nyt kyse on, et kyl se on se, mitä sillä tehdään. … Tottakai se design on edelleen tärkeetä, brändi on tärkeetä, onks se Nokia, Samsung, LG, SonyEricsson, siis ne ei oo niinku mihinkään hävinny …” ”… meillä on tällainen verkko, meillä on tällainen juttu … mut nyt siitä on tullut commodity, bulkkitavaraa, ja se on 30

ihan älytöntä käyttää energiaa sellaisiin juttuihin, jotka ei oikeesti erota sua sieltä massasta, tai ei siitä palvelusta parempaa loppukäyttäjän kannalta. Se on ehkä se, et siinä mielessä sen teknologian tai tiettyjen teknologioitten merkitys on vähentynyt, … se on nyt ikään kuin siinä henkilödata ja profiili ja identiteetti ja kaikissa näissä jutuissa se juttu, ja siinä ei keskustella siitä, että saadaan perusbitit liikkuu jossain perusverkkotasolla, vaan se skaba käydään siellä … ” ”… ja varsinkin Suomessa, meidän ei kannata lähtee tekeen tällaisia [epäselvää] ratkaisuja, et kyllä se pitää väkisin löytyy se oma kulma ja se erilaisuus, mut mä uskon paljon siihen, että pitää löytyy vaikka väkisin, että minkä takia se juttu, on se palvelu tai tuote tai vastaavaa, että miks se on erilainen. … sitten niitä muita etuja, et missä on kotimarkkinat [epäselvää] enemmän rahaa, enemmän tekijöitä tai näin. Kyllä sen pitää lähtee oikeestaan siitä innovaatiosta ja erilaisuudesta ja näin, pitäis löytyy se oma juttu, että se on [epäselvää] lähtee tekeen.” ”Täähän on just esimerkki niinku siis kaikki nää Apple ja nää sisältöpalvelut niinku puhelimessa, operaattorilla. Sä maksat sen operaattorien laskulla, silloinhan se operaattori on tehnyt sen, että se on kustomoinut sen palvelun sillä tavalla, et sä voit maksaa sen puhelinlaskulla. Sun ei tartte panna sinne sun luottokorttinumeroita, [epäselvää]. Se ei myy sitä sisältöö, vaan se myy sitä laskutustapahtumaa. Ja tätä ne ei oo niin kamalasti oivaltanut.”

Conclusions from industry analysis From industry perspective it is interesting to notice that the interviewed informants are concerned with the contradictory trends of their respective segments of the ICT industry and

the observations they make give support for business drivers that may lead to both convergence and divergence within the ICT sector. From industry environment point of view the big players’ “known” or “established” rules (read: generally accepted trends in the industry) are rather well understood by the informants, but they also see the consequences of these changes to be rather blurred basically from two perspectives, from the perspectives of customer behavior and industry structure. From customer perspective the informants are concerned with the time scale required for the anticipated changes. Due to convergence and technological development many of the future services, tools, applications, and devices are already available for the consumers and business customers, but the speed of adoption and the number of early adopters, especially in the current economic conditions, remains unclear. Also, the informants have identified that the new services and applications available require changes in the way how business customers and consumers use the services. Especially, among the business customers the need to change existing business processes and related business systems is a hindrance that the affects the speed of adoption of new things. The complexity resulting from a variety of different co-existing but contradictory technologies and respective business processes is a challenge – not only for customers but to for service, tool, technology, system, application, and device providers, too. The technology and business process related complexity is similarly reflected in the industry structures within the ICT sector. In the light of the

research questions of this study, especially related to the idea of the horizontals and verticals as extreme industry scenarios, it is interesting to notice that the blurring of industry borders and merging of different industries is resulting form the consumers’ side – a side that has often been seen to represent the horizontal businesses – and not from the technological, i.e., convergence related side. This is an interesting notion as the motivation for the whole research project was to understand convergence and its effects on the ICT industries. If assumed that companies typically find their businesses in verticals or horizontals, the way how the companies see and analyze their business environment and value chains does not seem to reflect this argument. Rather, contradictions such as small vs. big companies, entrants vs. dominant players, substituting vs. complementary offerings, internet vs. mobile, safeguarding existing positions vs. exploiting opportunities, and the emergence and existence of contradictory business models and value chains within an industry sector seem to capture the concerns of the interviewed informants. The law of big numbers, i.e., the need to create and serve big enough number of customers, appears as a concern that has roots in both sides of the industry dilemma, convergence and changing customer behavior. As convergence has resulted in a decreasing number of increasingly generalizing converged technologies, the pure technology providers or technology integrators seem to face the need to change their business focus. Similarly, on the service side, operators and application providers find this changing

customer need in the form of diverging new customer groups that behave in ways that they cannot understand nor anticipate. Thus, the ICT industry structures consisting of verticals and horizontals seem to be under pressure from two contradictory trends. First, those trends that strengthen the existing verticals as companies try to shelter themselves against change by focusing on their core business vertical or trying to find new opportunities in other verticals. This results in a zero-sum game between the existing players within an industry or a vertical. Second, those trends that are mainly coming from the consumer side and result in diverging customer groups with differing needs and behavior. In this kind of situation companies are trying to identify or develop new horizontally accessible segments they try to serve and in which they compete against other companies with horizontally defined businesses. To sum up, the former represents a passive or adaptive strategy towards change whereas the latter represents an active and growth oriented strategy. An unfortunate case is that the majority of ICT companies seem to be found to have a passive or adaptive strategy. The key question remains as what would be a viable strategy in the future regarding the verticals and horizontals.

Business ecosystem analysis Next we introduce the value network based ecosystem view that was used as one framework for analyzing the interview data of this research. The framework was originally published in Messerschmitt and Szyperski (2003), but was later extended in Warsta and Seppänen

(2006). Figure 3 below shows the interviewed firms positioned into the ICT ecosystem, in order to categorize their views. The value network consists of eight types of actors and the endcustomers, forming technology and application value flows. The actors operate in a network, so that some actors have closer interactions and synergies with each other than with the rest of the actors. Value creation is seen through three stages: development, integration and operation. This also means that the evolution of the business of an individual actor is heavily connected to the other actors, i.e. depends on the value network position of the focal actor and the interacting actors. We will now analyze the interview data of each type of actor separately, and then summarize our main conclusions. Pieces of data will be used to illustrate and justify the analysis results. The analysis focuses, on one hand, on views to the present status and future developments of the wireless and mobile business and technology landscape. On the other hand, the role and actions of the focal actor type in case and its perceptions towards the other types of actors in the ecosystem will be evaluated.

Consultants As illustrated in Figure 1, the industry consultant analyzes and conveys the needs of a vertical industry segment or some horizontal business functions. The business consultant spreads these results into practice, especially when the same or similar applications have been addressed in other companies. Basically the industry consultant focuses on the needs of all firms and the business consultant on adapting 31

Figure 3. The value network of the ICT ecosystem (Messerschmitt and Szyperski 2003; Warsta and Seppänen 2006).

Application flow A B Industry, business and customer consultant (Cons)

End-user organization

C

D

E Application software developer (ASD)

F

Application service provider (ASP)

H G

Products

I

Services

Systems

Channel (Ch)

Infrastructure software developer (ISD) J

N

System and infrastructure integrator (SI)

K Hardware developer (HWD) L

O Infrastructure service provider (ISP)

P

Q

R

M

Technology flow

T

S Content

applications in specific firms. However, consultants operate also in a reversed direction, as they promote application developers’ offerings to end-users. The convergence of wireless and wired networks was pointed out by the interviewed consultants, emphasizing that different kinds of wireless and fixed-line communication networks will be available and used at the same 32

U Education

V Regulator

time to form end-to-end solutions. Configurations of actual network usage patterns will depend on the use cases and applications and services in hand, not only on network parameters. An important matter to resolve will, however, be if the change is driven by those companies whose business is to develop and operate networks, or by those who “merely” make use of them. It was

seen that the evolution of the business of the latter will increasingly shape the businesses of the former. A related finding is that in Finland the ecosystem network has been sparse in the sense that can be only a few major representatives of certain types of actors, such as operators – and for example consultants, too. Convergence is likely to open business

opportunities for a remarkable number of new companies, which may however have a longer way to reach a similar value network position than the existing actors. The reasons for this will not be only technological, but change will depend much on socioeconomic factors, consumer behavior, etc. In other words the convergence context is much broader than bare interoperating and integrating technologies. Social aspects were seen to play a central role, especially when combined with low-cost or “no-cost” business models based on indirect earning logic. According to the consultants offerings need to be packaged, be they products, services, connections or content. Integration and interoperation must span over industrial borderlines, as opposed to vertical industry-specific end-to-end solutions. In part for this reason it will be even more difficult to cause lock-in effects in the ecosystem’s value network, and smaller players may give up and become merged with other, bigger actors. This kind of phenomenon is familiar from many past dominant segments of the ICT industry, and also from software businesses. The emergence of mobile TV, both as technology and service, has been slower than expected, to mention one specific case. What exists is more an early application than any true service concept. The kind of volume and frequency of use necessary to make mobile TV a remarkable breakthrough are still missing. Although technical convergence rests on IP, terminals and applications have been and will be diverging. How to effectively manage pivotal convergence points and make out of business from them are important questions.

There is a danger of partial optimizations, and it will not always be easy to find aggregating and integrating parties that have, in practice, the power to create and manage whole value networks or major portions of such – especially because the networks will not be static but are still changing rapidly. The Asian model based on emphasizing the end-user perspective through strong aggregation parties (cf. Docomo) has been working, on one hand, but has resulted in quite closed systems, on the other hand. A special problem even in this kind of an approach is to hide the enormous complexity of even simple end-to-end solutions from the endusers. Evidently, however, the pressure for the change comes from this perspective, neither from operators, nor from vertical businesses or technology providers, and Internet paves a road for the change. Example data from the consultants: ”Useita verkkoja on tavalla tai toisella samanaikaisesti hyödynnettävissä, ja sitä kautta ne nähdään, konvergoituneena jonkun tietyn käyttötilanteen tai palvelun kannalta.” ”[Muutos tapahtuu] sosiaalisen aspektin kautta. Yhdessä sen ilmaisuuden kanssa, se lisää taas niitä mahdollisuuksia, että tämä mainosrahoitteisuus ja mainonta ansaintalogiikkana, voisi olla ihan vahvoissa asemissa.” ”Verkot konvergoituvat IP:n pohjalta, mutta sitten palveluntarjonta ja päätelaitteet divergoituvat.” ”Et quassi [quality of service], quassi, quassi, se on se tärkein asia.” ”Osaoptimointia, että jokainen tekee vain sen oman palasen ja sitten oletetaan, että ne nyt löytää toisensa, mutta

kuten mobiilitelevisiossakin näki, että jonkun täytyy sitten juosta se kasaan se koko verkosto.” ”Ihminen helposti yliarvioi lyhyen ajan kehitystä.” ”[Tulevaisuutta on] service-vetoinen malli. Ei tulekaan sieltä operaattorimaailmasta, vaan se tulee täältä internetmaailmasta.” ”Et on lokaalia sisältöä ja on ylikansallista sisältöä.” ”Konvergenssin toteutuminen realisoituu siellä loppukäyttäjällä.” ”Kun joku toimija kuluttajille, tai asiakkaalle ylipäänsä, tarjoaa ilmaiseksi, niin se on niin vahva kilpailukeino.” ”Googlella on niin valtava monopoli.” To sum up, the key notions emerging form within the consultant group include the following: 1. Convergence of networks. 2. Networks will overlap and firms will use many networks. 3. Products and services are being packaged and service portfolios are widening. 4. Integration is extending over several industries.

Application software developers The application software developer (ASD) produces industry-specific software applications. The ASD thus tries to maximize its market share by attempting to meet the needs of the multiple enduser markets, and by emphasizing the company’s core competences, such as technical and project management skills in software development. Indirect business models have become common also among application software developers. One of the main reasons is the consumer’s view that “Web is available for free.” The same 33

is expected to be the case in wireless and mobile Internet services. Media content sales has become associated with application software sales. Business under the same brand is important, in addition to networking with media content owners and aggregating parties. In order to successfully develop applications one needs a well-functioning infrastructure solution, not only technology. It is also required that the applications, or rather services, are being well managed. Services need thus to be systematically developed, operated and managed, and tools are needed for each of these areas. Cloud computing principles will extend and renew the existing software-as-service concepts. During the coming 10 to 15 years cloud computing will be a big issue, and in more general terms virtualization of infrastructures, applications and services. It can be expected that whole value networks, in other words industrial segments and maybe even industries, will participate in building cloud platforms, so that they collaborate and compete at different levels and positions of the clouds. Personalization of PCs attached to clouds may emerge, comparably to mobile terminals. Various kinds of added value opportunities will be sought – and found, based on data-centric and data-intensive services and applications. This is a new area for many players, and also for consumers who are not accustomed to it yet. Moreover, not only operators but all others who are involved in the emerging cloud platforms will have opportunities to access and refine data for various kinds of value-adding needs. The key types of actors may still remain as they have been: operators, device 34

manufacturers, application software developers, and regulating parties. However, many of them will evolve from bare product businesses towards service businesses. Operator managed networks have been rather closed, compared to the open Internet world. This will create a remarkable conflict, if and when IP-based convergence is proceeding. Big changes are needed in the existing closed network architectures, as well as in end-toend application and service chains. A related change is that mobile anything is not yet free, whereas Internet anything is “free” in the sense of flat rate expenses. Better understanding of new profit making scenarios are needed, which stem from understanding consumers and other kinds of customers – realizing that consumers have in part become producers, alias “prosumers.” In general, it will not be too easy to create integrated and interoperable business processes and operational network-based end-to-end solutions between different types of actors. Many are seeking fresh views from service-based business concepts, but all cannot be service providers and operators who control the cloud or its key portions. Bigger actors that have taken the role of system and service integrators, will also face challenges to understand and manage new types of platforms, e.g. clouds, and all the processes and businesses revolving around them. Much has been talked and written about understanding customers and customer interfaces, businesses, and even legal issues, etc. However, technology wise systems have been diverging, and also application wise. Will the complexity need to be opened to the

end-users at all, is an issue, or are they only confirmed about certain service levels that are being agreed, and the related service models. In other words, there may be needs for great simplifications at the customer end of end-to-end solutions: jump-and-go to the cloud. Example data from the application software providers: ”Koetaan, että netti on ns. ilmainen, niin myös mobiilinetti pitäisi olla ilmainen.” ”Meidän liiketoimintamallin on se et me verkotutaan paikallisten sisällöntuottajien kanssa ja otetaan ne siihen meidän brändin alle.” ”Infran pitää olla ensin kunnossa, jonka päälle rakennetaan palvelunhallinta, palvelunkehitys, kehitystyökalut ja jonka päälle sitten voidaan rakentaa palveluita.” ”Markkina-arvo on tällä hetkellä kuitenkin huikea tässä [dataan perustuvassa] lisäarvoliiketoiminnassa. Ja sillä on valtavat potentiaalit olemassa, kuluttajat ei ymmärrä tätä, ja B-to-B-puolella ei ymmärretä sitä.” ”Tuotebisneksestä enemmän tai vähemmän siirrytään nyt palvelubisnekseen.” ”Operaattoriverkot ovat jossain määrin suljettuja verkkoja, ja sitten taas maailma, missä internet toimii on avoin. Tämä on ristiriita, ja jos kuitenkin ollaan menossa siihen internet-pohjaiseen maailmaan, niin siinä pitää tapahtua isoja muutoksia, että siihen päästään.” To sum up, the the key notions emerging form within the application software providers group include the following: 1. Business models based on advertising.

2. Cloud computing and virtualization. 3. PCs are becoming personal devices. 4. Integration business is re-shaping towards services. 5. Mobile world = data costs, Internet world = data is “free”.

should be simple enough. Also many ISD types of companies have moved to make use of fixed service payment schemes with their customers. In other words, they are moving towards service businesses in the ecosystem value network.

Infrastructure software developers

Example data from the infrastructure software developers:

The infrastructure software developer (ISD) has knowledge of a wide range of cross-industry applications, requirements and the needs of application developers. The ISD thus benefits from the economics of scale from infrastructure related standardization processes and outcomes, and operates in a close connection with hardware development companies. Device manufacturer, mobile operator and Internet service provider channels have become important for infrastructure software developers. Both wireless mobile and fixed line solutions may need to be developed and submitted to customers via several channel partners. Because infrastructure solutions have connections to technologies, applications and service operators’ systems, their development is quite complex today, compared for example to individual applications. Convergence is expected to create big business opportunities, but most of them cannot yet be foreseen. In the future the development of infrastructure software is even more challenging, due to the extending scope of typical solutions and the widening areas of competences required. Despite of the increasing scope and complexity of the solutions, the business models in use

”Mobiili- ja sitten ISP, elikkä internet service provider -kanavana, sinne me on fokusoitu. Ja sitten toisaalta nää laitevalmistajat.” ”Fixed-line ja mobiilia on niinku pitäs pystyä käsitteleen yhdessä.” ”Konvergenssi tuo aivan uusia mahdollisuuksia, mahtavia mahdollisuuksia, joita on aika mahdoton tietää tässä vaiheessa.” ”Hajautettu tuotekehitys on erittäin vaikea. Me ei pyritäkään tekeen itse kaikkee teknologiaa, vaan ostetaan hyvin paljon erilaisia komponentteja eri puolilta.” ”Meidän bisnesmalli on palvelu, elikkä kuukausittain laskutettava.” To sum up, the the key notions emerging form within the infrastructure software developer group include the following: 1. Mobile operator and ISP channels. 2. Fixed line and mobile solutions to be developed at the same time.

System and infrastructure integrators The system and infrastructure integrator (SI) specializes in the provisioning of software. The SI can emphasize its activities either on application or infrastructure integration. It acquires appli-

cation and infrastructure software from ASD and ISD supplier companies, making all the software to work together as well as installing and testing the whole system. Along time, the role of SIs has been significantly growing, as software and hardware brand owners are reducing the number of their direct subcontractors (Warsta, Seppänen et al. 2005)1, and end-customers are increasingly looking for turn-key end-to-end system solutions. System and infrastructure integrators have typically two kinds of sources for their earnings, one provided by end-customers for the service or content, another by advertising partners. Content aggregation has become important, because Internet content is “free”. The content is therefore a means to advertise some paying services and applications, or needs to be aggregated and processed for added value. Means to find and process relevant content are important, not only the processes for storing, managing and putting data available. This kind of basic data and computing hosting services have been outsourced by SIs already. Along the same lines, some traditional system suppliers are moving towards service aggregation businesses. In this business a SI does not sell bare content, however, but content access and use transactions. This has not yet been recognized by all integrators and other players. For example, operators have plenty of real-time data on their operative networks, but it is not being used much for anything yet. Advertising profiling needs may, in practice, serve as

Warsta, J., V. Seppänen, et al. (2005). Evolution of Secondary Software Product Businesses: Momentum of Concurrent Enterprising. 11th International Conference on Concurrent Enterprising, University BW Munich, Germany.

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one driver for operational data access and deployment. Related to this change, neutrality towards software and hardware vendors is increasing among SIs, in other words vendor neutral technology service provisioning. Moreover, as opposed to only integration platforms, service delivery platforms are needed. This requires new kinds of integration architectures and frameworks, whereas classic system integration focuses on making such systems to interoperate that were not originally designed to be integrated and interoperable. Even the biggest domestic SIs will face heavy global competition. Example data from the system and infrastructure integrators: ”Netin kautta kaikesta sisällöstä tulee ilmaista ja itse sisältö toimii vain mainostuksena maksullisille palveluille, lisäarvopalveluille tämän sisällön päällä.” ”[Datan] löydettävyys.” ”Perinteisetkin järjestelmäntoimittajat esimerkiksi verkkolaitevalmistajapuolelta, ne on siirtymässä tyystin omassa tuotekehityksessä suoraan integraattoreiksi. Se ei myy sitä sisältöä, vaan se myy sitä laskutustapahtumaa.” ”Vendor neutral technology service provider -rooli korostuu jatkossa.” ”[Kyse on]service delivery platformista. Tällainen intergraatioarkkitehtuuri tai framework, millä näitä asioita tulisi rakentaa.” ”Se on kaiken A ja O nykyisin, tota, taas se operaattoriyhteistyö.” To sum up, the key notions emerging form within the system and infrastructure integrator group include the following: 1. From integration to service delivery platforms. 36

2. Value-added content aggregation and access services, because content is “free”. 3. Heavy global competition.

Infrastructure and application service providers The application service provider (ASP) licenses and operates applications, whereas the infrastructure service provider (ISP) purchases and operates the required software and hardware infrastructures, like computers, operating systems, communication networks and data storages. During the past years the roles of ISP and ASP businesses has been remarkably strengthened, due to the use of communication networks as part of the comprehensive ICT infrastructure, as well as Internet and Web deployed not only as a distribution channel, but also as an operational platform for software-enabled services. Several interviewed infrastructure service operators emphasized the increasing role of fixed-line networks as the “communication pipeline”. Television and Internet were expected to be integrated, considering also that highdefinition TV will require much bandwidth, which will emphasize the fixeline network operators’ position. WLAN was seen to become an important means for digital voice transmission, also in homes. Software-as-service and cloud computing will create a basis for a (new) computing paradigm, moving servers from offices and even homes to server farms. The number of infrastructure service operators will for these reasons not explode, but on the contrary competition will lead to only a handful of big operators. The role of TV is changing, it will no more be just a device, but a service

access point, including cloud-based data access. This access will change means to consume entertainment, services and experiences in homes. Flat rate-based pricing is needed, however, based also on the fact that the network has become a common utility. Internet in its current form already indicates the pace of developments of service delivery and management platforms. Correspondingly, a “plug” will be available in TV to access all kinds of network operators, applications and value-added services in a HDTV level format. Music is not the only driver for this. Thinking of application service provisioning, one scenario is that downloading of software applications will vanish entirely, or at least decrease dramatically, as opposed applications are run through the network. Facebook can be considered as a forerunner and role model, also with regard to virtualanything kind of services. Compared to operator-based service platforms Facebook is active, not passive. In other words, it can be seen as a data and communication repository capable of monitoring and messaging as a system, not only transmitting enduser activated content to other endusers, or pre-planned content at fixed times to everyone. Data streaming is a new approach to create service contexts around individuals and communities, so that products can be offered as interoperable services. Example data from the infrastructure and application service providers: ”Televisio ja internet konvergoituu. Nykyinen laitetelevisio on välivaihe. Siirrymme ravintoketjussa ylemmäs laajakaistatelevision avulla kun alamme tallentaa ohjelmia palvelimille. Koko

homma, niin sehän on menossa laajakaistaan.” ”WLAN tulee puheensiirtoon, myös koteihin.” ”Palvelimet siirtyvät palvelinkeskuksiin. Tulee olemaan kolme isoa operaattoria.” ”Internet nykymuodossaan, siitä on tullut selkeästi palveluiden jakelu- ja hallinta-alusta. Operattori mielellään puhuu tästä reguloinnista.” ”Download-pohjaiset tuotteet tulee todennäköisesti, jos ei kokonaan häviämään, ne tulee ainakin vähentymään huomattavasti, jatkossa haetaan suoraan verkosta. ”Virtuaalimarkkinointi tai virtuaalileviäminen, vaikka just Facebookin kautta. Facebook-taso voidaan aatella ehkä aktiivisempana kommunikoinnin välineenä. Facebook on kanava levittää tietoa, nimenomaan siihen verkostoon.” ”Että kaikki kortit on annettu käteen, mutta mites näillä pelataan.” ”Sä et koskaan voi oikeesti kilpailuttaa enää sitä, kun se ensimmäinen propri [proprietary] –hämähäkki on iskenyt kiinni ja tehnyt sinne omat täkynsä.” To sum up, the key notions emerging form within the infrastructure and application service provider group include the following: 1. The role of fixed networks is growing. 2. Streaming model is proceeding. 3. WLAN used for voice. 4. SaaS and cloud computing based services. 5. The network infrastructure will become utility. 6. Facebook and other social communities as role models. 7. Pay-as-you-go world. 8. User profiling data.

Hardware developers The hardware developer (HWD) plays still an important role in the value network context, as it provides platforms for both infrastructure developers and system integrators. Their co-operation with ISD companies is especially intensive, because ISDs make use of platforms for their software products and services. Hardware developers, or more generally speaking device manufacturers, are active actors in the wireless business ecosystem. They have come up with many new technology-based product designs, usage-centered concepts and implementations. Many of the recent enablers are geared towards contextbased and situational features, “smartness”. Although truly ubiquitous computing devices in the terms of intelligent sensing and actions are still waiting for their breakthrough, developments are moving towards this direction. At the same time, some “traditional” mobile applications and services have been accompanied with early “smart features”. Moreover, content access, ownership and management are key drivers also from the viewpoint of hardware platforms and device level system engines, including content aggregation, value adding and other similar aspects already booming in Internet. Advanced devices can be seen to benefit this rather directly, too. However, comparably to network operators, device-based access to usage data is not much exploited yet, not to speak of its refinement and use for businesses and individuals. This sort of operational data would provide for control points in the value network, but other aspects, such as privacy need to be carefully

considered. One especially remarkable aspect of the use of such data in business, if possible, is that it is being created automatically and all the time by the users, the network, the operation centers and the devices. From the viewpoint of hardware developers operators appear sometimes slow in their pace to change business models. Example data from the hardware developers: ”Tilanneälyä korostavia enablereita mukaan, niin sanottuja kontekstisidonnaisia asioita, navigaatiot ja liiketunnistimia ja hyvin paljon sensorianturitekniikkaa.” ”Enää ei välttämättä puhuta mobiilipalvelusta, vaan puhutaan persoonallisesta palvelusta.” ”Suurimpia kontrollipisteitä ovat ne toimijat, joilla on tieto siitä, ketä käyttäjät ovat ja tieto siitä, et mitä nämä ihmiset tekevät eli on olemassa käyttäjätiedot, on olemassa rutkasti metadataa niihin käyttäjätietoihin liittyen, mutta ne voi kontrolloida, myydä hallinnoida ja kaikki tietystä tulokulmasta ja varmasti tätä metadataa on paljon maailmalla hyvin monella toimijalla olemassa.” ”Operaattorit eivät ole kovin innokkaita muuttamaan mitään liiketoimintamalleja.” To sum up, the key notions emerging form within the hardware developer group include the following: 1. Access and usage of data from operational devices opens up new opportunities. 2. Hardware engines and devices play still an important role in the ecosystem. 3. Truly ubiquitous devices are still rare, if not unexisting. 37

Other types of actors The Channel (Ch) type of an actor appears in varied forms, extending from wholesale trade to retail shops selling packaged software till new forms of Internet businesses. These companies supply software as such, hardware as such or assembled PCs in different combinations. They were not represented among the interview data. Regarding yet the three other types of actors, Regulators (Regul), Content providers (Cont), and Educational institutes (Edu), the following pieces of interviews data illustrate their viewpoints in a concise manner: Regulator on a critical business driver: ”Siinä keskustelussa on vastakkain ollut kaksi osapuolta, siinä on teleoperaattorit toisena ja sisällöntuottajat toisena.” Content provider on their future outlook: ”Subscription malliin uskon. Meistä tulee internetyhtiö.” Educational institute on the interaction of key actors in the ecosystem: ”Et operaattori ikään kuin odottaa, milloin täällä on tarpeeksi käyttäjiä tarvitsemassa kaistaa, palveluita, sama on tietyillä palveluntarjoajilla – palveluntarjoajat odottaa milloin on tarpeeksi väkeä vaatimassa ja haluamassa jotain hyviä palveluita – no sitten jengit taas joka on kohderyhmä siinä ja jonka pitäisi saada niitä palveluita ja haluta, niin se odottaa ehkä sitä, et milloin on verkko tarpeeksi kypsä, et sitten menee läpi tavaraa eli se on ikään kuin sellainen muna-kana ongelma.”

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”No samalla tavalla laitevalmistajat tekee laitteen, ne tekee tuollaisen kantti kertaa kantti ruudun, sitten sisällöntuottajat sanovat, että tehkää tuohon tavaraa. Ne ei vuoropuhelu keskenään – se on aika hankalaa syntyä sitä rahantekoa.”

Conclusions from the ecosystem perspective Referring to what is said above, there seems to be polarization ongoing in the ecosystem value network towards two ends. Truly technology-driven businesses are, on one hand, adding value by adopting software and integrating and partnering with formerly separate businesses. A much bigger change is, however, assumed to take place in the opposite corner of the value network: end-user centered businesses are increasing and involve not only ASP, but revolve much around digital content creation, access and management. The latter is almost non-existing such value network schemes as shown in Figure 3, in part because they focus on system development (and operation), as opposed to system use. If this kind of evolution will proceed, the middlemen – system and application integrators – will have harder times. Moreover, especially infrastructure but also application service providers face competition from content providers and even end-user communities. Contrasting the phrase quality-of-service (QoS) with something that could be called qualityof-content (QoC) illustrates the point. One clear consequence would be the need to open up the consumption (or, “prosumption” area of the ecosystem value network, perhaps making use of some analogies from the digital

media industry, but noticing the emergence of a cloud computing type of infrastructures. One special aspect in this is to ponder the roles of broadcasting and cellular technologies, mobile terminals, TVs and PCs, and the interplay between wireless and fixed-line networks. SIs will face challenges and may consider moving towards operator businesses. However, infrastructure provisioning was seen to become more a utility business, which would cause the move to direct to ASP businesses. Also ASP, as they are today, would change to become cloud operators for accessing, managing and adding value to digital content, and the related applications – if they only could make the change to happen. Who would possess and make use of the data gathered in real time from operative systems, is a good question. Although Facebook was brought up as a particular case and role model, the more general phenomenon behind it could be called socially enabled infrastructures and services loaded with user created and shared data. Communities of content prosumers may have much stronger effects on ecosystems and even industries as a whole, and in a way form a counterpart to pre-planned and organized value chains. Moreover, they will be an endless and vast source of information that has a potentially huge business value for various kinds of needs. “Quality of content” will matter much. Cloud computing is a tempting vision, but it will not be similar to the host-centered systems used in the seventies and eighties. On one hand, the

Figure 4. Prosumer-centered wireless ecosystem’s value network.

Value prosumption flow Value carrier flow

Cloud communities and end-users

Device access

Devices

Enrichted device supply

Device provisioning

Infra access

Cloud access

Real-time data

Infrastructure provisioning

processing capacity in the leaves of the network will still be considerable. In other words, ubiquitous and contextsensitive devices are emerging and will be loaded with features. On the other hand, high communication and could computing costs are not tolerated, value is consumed through the content. The complexity of end-to-end services will cause counter pressures to the costs, simple and cheap solutions will override complex and costly ones. For this reason “long tail earnings” based on access fees to such data for which someone is willing to pay, and indirect earning logic are needed. Realtime operative data is a good example of the former, content and application bundling, possibly with advertising, of the latter. Obviously the cloud computing concept needs to be opened up

Basic content, applications

E2E services

Content, applications

Content & application creation Value-added content, appliactions

Cloud use & management

Content & application enhancement

Digital content

On-demand applications

in terms of its architecture, management and deployment. Then, the big issue is who will become cloud owners and managers, in practice, and how the positions and roles of the present ecosystem players are changed. In an even longer run it may happen that interest is directed to prosumer communities also in terms of emerging business opportunities. In other words, cloud ownership may become a utility management business. It is not possible to know exactly how the value networks of the wireless ecosystems will be shaped in the future, but Figure 5 below shows some possible changes based on the findings discussed above. When compared to Figure 5 below, which is a rather “modern” view to a content-enabled ICT business – video game industry, it is easy to see that the logic in the former is entirely different.

Value prosumption rules the ecosystem, including simultaneous creation and use of content through “ondemand” applications, as well as data gathered from operative systems. The formerly prevailing technology and application development and system integration business are transformed to “enriched device supply”, and what is left from provisioning businesses is infrastructure operation, associated with “device provisioning”. Cloud-related value functions have replaced, or actually remarkably elaborated, application service provisioning type of businesses, not least by end-users and their communities becoming producers and consumers of content, applications and end-to-end services.

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Figure 5. The actors and their relationships in the video game industry.2

Sales Revenue

Console Manufacturer Regional HQ

Games and Consoles

In-house Publishing

License Revenue

Development kit

In-house Developing

Supplier approval

Final game code

License agreements

Game code Game CD manufacture Financing Game code

Publisher

Developer Fixed fee orfixed percentage of sales revenue

Revenue minus distribution fee

Distribution contract (often national)

Negotiation shelf space and margeting strategy

Distributor Games delivered

Revenue minus retailing fee Retailer

Retail value

Games

Consumer

Key: Actor Exchange of goods or services Financial transactions

Johns, J. (2005). Video games production networks: value capture, power relations and embeddedness. Journal of Economic Geography, 6(2006), 151-180.

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3 Secondary analysis Part  

Network analysis: Social networks in convergence Introduction Tsai and Ghoshal (1998) in their seminar article indicated that firms must understand social relationships in order to be able to achieve temporal competitive advantage, i.e. create new business (see also Coleman 1994). It is here claimed that firms need relationships to get information, resources and opinions about their business opportunities (Nahapiet and Ghoshal 1998). Elsewhere in management literature has been widely stressed the meaningfulness and importance of relationships to frame complex situations and cognitively simplify the insecurity of business management (see, e.g. Burt 1992; Tsai and Ghoshal 1998; Yli-Renko 1999). In the present study is assumed that the embeddedness of firms in networks of relationships means that relationships, and acting in relationship networks, are central determinants of the way how a firm creates new business (see Granovetter, 1985; Håkansson and Snehota, 1989; Anderson, Håkansson and Johanson 1993; Gulati 1998; Håkansson and Snehota 2006). Present study proposes that firms in networks use different roles and behaviours in a discursive and negotiative manner trying collectively to organize the fragmented situation and allocating

the innovations, resources and competences according to possible new businesses (Eliasson, 2005). On this basis the objective of this part of the study is to analyze how social networks are used to create new business while the industry dynamism is high. Below is first reviewed shortly the results of the research on social relationships and networks in new business creation. This is approached in such a way that the most important social factors are defined and discussed. The dimensions below are in line with the studies by Tsai and Ghoshal (1998), Singh, Hills, Hybels and Lumpkin (1999) and Yli-Renko (1999). Then it is presented the key results of the empirical analysis. This is done by using the network action perspective on new business creation in a qualitative analysis of the interviews of the experts of converging networks. Consequently, it is suggested five managerial ways of acting connected with new business creation in the dynamic business environment. In discussion it is note the implications of the network action perspective on new business creation in dynamic business environment.

Theoretical approach: Social networking nature of business management in the new business creation Social networking is here seen as social interaction, which could bring informa-

tion, resources, support and ideas under the new business creation of firms. Social networking could be divided into a structural dimension, relational dimension and cognitive dimension. The structural dimension refers to the amount of social interaction firms have with their social relationships, in other words, how active a firm is in social dialogue with its relationships. The relational dimension refers to the closeness of relational ties, i.e., how much of the communication happens between personally acquainted people. The relational dimension is about how close the relationships are and how important relationships are to a firm. The cognitive dimension refers to emotional commitment to the relationship. More specifically, it is a question about how deeply the parties trust each other, how well they understand and support each other and how much the parties believe each other in case of problems. Structural dimension of social networking By structural dimension of social networking is meant the structure of the social network, i.e., how many relationships a firm has, how much social interaction a firm has, how dense the relationships are and what is the hierarchical structure of the network (cf. Tsai and Ghoshal 1998). It was claimed already by Peterson (1985) that firms in 41

the dynamic situations need around them a holographic, flat and personal network type of organization in order to ensure the needed information for new business creation. This suggests that information is crucial to firms in the dynamic situations and that hierarchical, formal and complicated system of relationships hinder the fluent flow of information. It also suggests that firms willing to discover business opportunities and exploit dynamism should be in the middle of information flows and be tied by personal ties to the most important informants (see also Sarasvathy 2001). The idea of structural holes presented by Burt (1992) is in line with the above. He proposes that firms should be able to create new business when they are in the middle of two or more networks and when these networks have links to each other only through the firm. Then the particular firm is structurally in the position where it can exploit and connect the information from all the networks without the risk that someone else is doing it also. Of course this is an ideal situation and unlikely to exist as such in reality. However, structurally loose and dynamic networks include information which is not shared by all the members of the network. Thus, there are information gaps that alert firms could recognize to be opportunities for business. Also many other studies have stressed the importance of networks, primarily the number of social relationships (Christensen and Peterson 1990; Christensen, Madsen and Peterson 1994; Gunther McGrath 1994; de Koning and Muzyka 1996; Hills and Lumpkin 1997; Sigrist 1999). All the above studies suggest that the structure of social relationships 42

have an influence on business management, and especially on new business creation, in dynamic and complex situations. How does this structural dimension work in the new business creation? Looking more closely at Burt’s (1992) ideas, he stresses that structural holes between networks make it possible for a firm to recognize new business opportunities because in this situation it is in the position to receive information from different networks. This requires that the firm has enough relationships in general and that these relationships are loosely connected. This, then, could be interpreted so that a few close and strong relationships are needed. They need to be numerous enough in order to have access to a wider relationship network of weak ties. Weak ties are emotionally not that close relationships but they are known and it is possible to get valuable information through them (Granovetter 1973). It is proposed that many kinds of weak ties are the most important in new business creation. However, also a few strong ties are needed to gain social and emotional support to evaluate ideas, and to offer access to the contacts of strong-ties and contacts of contacts. As a whole, an active and wide base of relationships, both strong and weak, is obviously extremely important in new business creation. Further, Krackhardt (1995) studied the use of relationships in new business creation by using Burt’s (1992) theory of structural holes. Krackhardt (1995) proposes that a firm can create new business when it is in the structural hole situation where it is able to connect the information offered by these two networks that are loosely linked. If

these two networks are densely linked, most of the members in the networks have access to the information, and thus there are no information gaps as a basis for new business opportunities. The study by Krackhardt (1995) confirms empirically the above theoretical proposition: In the dense network it is difficult to create new business. It means that a lot of ties are generally good, but when these ties are densely connected to each other, this density could create constraints (for example social norms) that could prohibit new business creation. If summarized, the best situation for new business creation is when a firm has a number of relationships, which are not closely interrelated. Based on the above presented studies, the number and nature of social ties of firms should be studied carefully when trying to explain new business creation in dynamic and complex situations. Hereafter it is proposed that active and wide social network enhances the possibility of new business creation in dynamic business situations. Relational dimension of social networking By the relational dimension of social relationships is meant the nature of communication between the firms and social ties, i.e., how well the relationships are known, how often they are in communication and how important they are to the firm (cf. Tsai and Ghoshal 1998). Kaish and Gilad (1991) found that firms developing new business were not that active in social, interactive verbal search. Still, managers were quite eager to talk about their ideas with other people (Kaish and Gilad, 1991). The above could be interpreted

so that managers did not search for information by talking with others but searched for evaluations and opinions by discussing with them. Of the importance of constant communication an example is also the study by Steyaert, Bouwen and Van Looy (1996). They see business opportunities to be created through conversational construction of new meaning. Without conversations common understanding cannot be created and the possible importance of the relationship is neglected. Thus, the meaning of the business opportunity develops step by step as a dialogue (see Johannisson 1988). Business opportunities do not exist as such without human awareness like “laws of nature” but are created through social construction. Christensen and Peterson (1990) recognized the importance of informal contacts to new business creation. Furthermore, Christensen et al. (1994) propose building networks with long-term relationships to be an effective way of creating and doing business. A longterm network of firms might create competitive advantages, for example through its lighter administration. Hills and Shrader (1998) found that focusing on the market and the customers increases the probability of recognizing new business opportunities. Knowing the market and the customers requires purposeful dialogue with them. Finally, Hills and Lumpkin (1997) indicated that the nature of social relationships expands the area in which a firm is able to behave. Without experience and knowledge of certain relationships, such as customers, researchers, suppliers and/or investors, it would be almost impossible to establish a new business in the industry you do not know.

These above results indicate that the nature of the relationships, which could be informal, long-term, customer based, advisory etc., affect new business creation. Especially true this is when the business environment is dynamic. In the dynamic business environment information, activities and actors are dispersed all over the markets. Thus, the knowledge on the new business opportunities is extremely difficult to obtain by using traditional business logics. To a firm to be able to discover new business opportunities and exploit new business it must be active in social networking and have that kind of conversational structures that support informal flow of embedded tacit knowledge. Hereafter it is proposed that informal social dialogue enhances new business creation in dynamic business situations. Cognitive dimension of social networking In this study the cognitive dimension refers to the extent of emotional commitment of the parties to the relationship, i.e., trusting each other, understanding and supporting each other, believing the other will not let you down and accepting the goals of each other. Johannisson (1988) claims new business creation to be a result of successful development and maintenance of personal networks. He sees that networks are organizing contexts that help managers together with other people in the network to understand the business situation. Without other people managers are seen to be unable to give meaning to influential issues. In interaction with other people a situation is created which makes it possible to do business. Thus, the network is the vehi-

cle by which the fragmented present reality is enacted to make possible a future reality. Johannisson’s (1988) idea could be interpreted so that the creation of a meaning – a new business – is not only a cognitive process, which is taking place in a manager’s mind, but it is a social cognitive process that is realized through the dialogue of network members. Here it suggested that the network is one of the main resources in new business creation. Only through it can a firm obtain the needed resources, legitimate the venture in the market, maintain the motivation as the network gives mental and social support and find new opportunities as the network creates possibilities to existing firms of intensifying the acts of the whole network. With respect to the emotional commitment, Krackhardt’s (1995) study shows how emotionally too dense networks can sometimes interfere with new business creation by too strict norms, rules and objectives. However, it shows also how cognitively connected relationships need to have access to a wider network of information. It is proposed here that without trusting relationships individuals are not willing to share their knowledge. Manimala (1992) found, when studying the business opportunities and behaviour of high- and low-innovative firms, that high-innovative firms were more people oriented. They were sharing their ideas more readily and thought that the venture “belonged” to the other people as well and not only to themselves. Low-innovative firms were, instead, thinking that the business opportunity and the organization were created in the first place 43

to gain money for themselves, and only for themselves. Thus, more innovative firms created their business opportunities together with their network and also showed appreciation of the success to this network. Low innovative entrepreneurs wanted to keep the ideas and gains to themselves. This shows how cognitive commitment can affect new business creation. This is supported by the study by Steyaert et al. (1996), which showed how trusting each other in conversations created the ground for building new meanings, i.e., business opportunities. The studies by Hills (1995), de Koning and Muzyka (1996) and Singh et al. (1999), among others, have indicated that social dialogue is enhanced by the amount of prior social dialogue, in other words, by how used the firms are to social dialogue. This is wanted to point out in this study as well, since the extent of social interaction and emotionally close relations enhance the collective action of new business creation. This is also in line with the results reached by Burt (1992). It could also be underlined that decisionmaking concerning what is important information, what is happening in the industry and what will happen requires from the relationships trust in each other and strong commitment. Thus, to those firms who want to act collectively, emotionally strong relationships are valuable. Without willingness to trust each other the information needed for new business is simply not available – it is shared with some other parties. Hereafter it is proposed that cognitively committed and trust-based social dialogue enhances new business creation in dynamic business situations. 44

Empirical results: Network action in the development of new business under dynamic circumstances As Johannisson, Alexandersson, Nowicki and Senneseth (1994) have stated, firms able to create new business are rather organizers controlling social dependencies than anarchists needing individual independence. An individual firm is not an ”island” but firms behave as systems of communities (Larson and Starr, 1993). The data overwhelmingly show how the behaviour focusing on new business creation is more embedded and established in the social contexts than achieved by independent behaviour of an individual firm (see Grimaldi and Grandi, 2005). By analysing the data it was possible to identify a repertoire of firm level managerial action for developing relationships and their use by the managers, which drive the embedded development of new business creation. Next these managerial actions in order to create new business which were possible locate from the data are presented and interpreted. Table x provides primary data regarding these managerial ways of acting. Active discussing of the needs of the social network On the basis of data, the process of new business creation is behaviour, in which is mobilized the social context to support the business opportunity. A firm in this approach is a negotiator, who tries to make a deal with the social context about the use of resources in order to introduce something that would be valuable to the whole social context. The environment is an active discussion partner whose various points of view must be negotiated into a compromise.

A success factor is the firm’s skills to convince the social context that the use of resources in the new venture benefits the whole social context. The seminal articles, like those by Johannisson (1984), Birley (1985) and Aldrich and Zimmer (1986) proposed that new businesses are created by social interaction. On the basis of the analysis of the data, it could be argued alike and put forth new business creation to be about discussing the needs of the social context so that it initiates businesses that satisfies the needs of the social context. High-tech new businesses are created so that they are socially constructed and needed (see Calia et al., 2006) due to the severe industrial dynamism. The whole new business development points out the importance of understanding new business creation as a multi-level and multi-actor phenomenon. A single company, no matter how big and important, can not rule and govern the development of the industry. ” … No, tuolla on vaihtoehtoja. Et niinku siellähan Facebook, siellä on MySpace, siellä on Googlen... tää... mikäs sen nimi nyt on... Friend Connect, vai mikä se on, joku vastaava, missä on sitten taas useempii muita toimijoita. Mä en tiedä, mikä näistä tulee olemaan meille se oleellinen ja se, että tuleeks se olemaan mikään, vai tuoko se oman teknologian sieltä, vai tuoko se vaan ne kaveriyhteydet. Mutta, tota, ainakin tällä hetkellä Facebook on se ehdottomasti tärkein ja suurin.” Collaborative learning to legitimate the use of resources Second, the analysis of the data revealed that the establishment of new

business is about collaborative learning (cf. Reynolds, 1991; Keeble, Lawson, Smith, Moore and Wilkinson, 1998; Keeble, Lawson, Moore and Wilkinson, 1999), in which a business is created by cooperation with many instances and in which the firm is the driving force that has the capability to legitimate the use of resources in its own new business. The data pointed out clearly the dynamic nature of the industry. In this dynamism, the so called industry receipt does not work because sudden changes take place constantly, which are extremely difficult, if impossible, to forecast. Instead, firms collaboratively try to learn the mechanisms of dynamism. As a result of learning efforts, an innovative milieu is developed, in which knowledge, skills and other resources are in interaction. Learning together in the innovative milieu works as social and mental support in the vague new business creation situation (Keeble et al., 1999). The data points out that, if the innovative milieu does not develop, the experiments and mistakes, which are essential in creating new business, are not seen as desirable. Therefore, based on the data analysis, it is argued strongly for the need of collaborative learning in order to be able to discover and exploit new business opportunities for new ventures. Networking with weak links A third important result based on the data is the role of weak social links in bringing up new information (Granovetter, 1973; Burt, 1992). It has been seen that well known relationships do not bring much new information based on which something new could be created. In the network

in which the parties know each other well, there is not new information, and also little by little the unifying social norms and opinions start to hinder presenting new ideas and developing new businesses. Therefore, the relations to weak ties, friends of friends and people you meet every now and then and who do not belong to your immediate social network, can bring that kind of new information that is needed in new business creation. The data illustrates how regionally and industrially closed network of firms are unable to escape their history and culture and create new business. Thus, based on the data, the outsiders, the weak links, bring the new ideas, information and inspiration for new business creation. Burt (1992) has noticed that the best things are done and innovated by firms which locate in the network so that they are the only link between two or more networks. Thus, such a firm has access to information of all these networks while the others know only their own network’s information. A wide social network serves as the route to information gathering, the ground for idea evaluation, a resource base and a learning context. Based on the data, a wide social network has an important role in new business creation because the knowledge is widely spread all over the wide network of different organizations and individuals. The social network of actors is arguably alike and local and thus the knowledge base is often too homogenous for new business creation. Weak links obviously push the network of firms to question the viability and ingredients of their business. Thus, it is argued here that weak links are essential in the evolution and renewal of the whole industry.

”Tos tietty vaikuttaa tosin sekin, et niinku ihan aluks todettiin, niin konvergenssikin on yksittäiseen käyttäjään, ja hänen tapaan kokea palvelut, käyttää palveluita, liittyvä asia, niin silloin tietysti, niinku, radikaalia liikettä ei voi tapahtuakaan, kun ollaan tän sosiaalisen puolen takia... Suuri määrä ihmisiä, jotka kuitenkin toimii sitten yksilöinä, niin pitää saada mukaan, että, tota, mitään tapahtuu.” ” … Facebook – sitä ei pidä nähdä vaan silleen vaan niinku portaalina, koska Facebook pitää nähdä nimenomaan tietopankkina, missä on ne kontaktit muihin käyttäjiin, eli silloin kun se yks käyttäjä tulee meidän palveluun, me nähdään sen muut kontaktit. Me nähdään niistä muista kontakteista, miten paljon niistä on meidän asiakas [epäselvää], ja... Toi on yks tuo tietopankkinäkemys, tai -näkökulma, ja toinen on se, että se on kanava levittää tietoa, nimenomaan siihen verkostoon. Eli siinä pitää oikeastaan ajattelun muuttua siitä, että se ei oo vaan enää yhtä, vaikka webbisiteja, webbiportaaleja, vaan se on oikeastaan, niinkuin, muodostuu ihmisten ympärille.” Relationship-building based on trust and reciprocity Fourth, the data indicates that success in new business creation requires trustworthy and reciprocal relationships (Nahapiet and Ghoshal, 1998; Oliver and Liebeskind, 1998; Floyd and Woolridge, 1999). New business creation is not only about choosing the most efficient option possible but merely about the creation of trustworthy and reciprocal relationships, in which parties want to invest in the long-term development of the new business. 45

It has been seen that in the business creation, the development of the needed actions is about creating a social contract (Starr and MacMillan, 1990; Taylor, 1999). It requires relationships that are based on trust and reciprocity. If the social network is not able to build trustworthy and reciprocal relationships, the new innovations are extremely difficult to transform into new business. Based on the data, it is argued that as the industry is dynamic and the development thus difficult to forecast and interpret, it is needed trustworthy and reciprocal relationships to make understandable the vague and fragmented information. Also, as new business creation needs often the involvement of many firms, the trustworthy and reciprocal relationships are used as a ground for common value adding behavior. Common sense-making through interaction Fifth, the data revealed that new business creation is achieved by continuous incremental learning, in which learning takes place by creation of common understanding through interaction (Sarasvathy, 2001). Thus, social systems are not that much of decision-makers than sense-makers (Weick, 1979). It should be stressed that this sense-making is not an individual cognitive process but developed by using social interaction, discussions and enactment of common worlds of meanings. This behaviour is meaning-building and reality-construction and not decision-making under the circumstances. The data showed that managers use quite a lot of time in making sense of the situation. Thus, there are 46

not solutions that could be deduced by logical reasoning but they must be socially constructed together with others in that social situation in which those individuals live within. Based on the data it could be proposed that if the actors lack understanding of learning in dynamic environments and rather avoid than appreciate the importance of making mistakes in order to learn, it is very arguable if they are able to create new business. Here it is argued for, based on the analysis of the data, that firms need continuous incremental learning in order to collectively sense made the situation. In these incremental sense making situations managers create the grounds for new business by collectively discussing about possible new business opportunities and how those could exploited by new ventures. ” … Mut näis kaikiss on oikeestaan sit ehkä yhtenevää se, et taas tommonen paradigma – samalla tavalla kuin aikaisemmin todettu tää kilpailun lisääntyminen ja liiketoimintamahdollisuuksien lisääntyminen samanaikasesti. Niin, muiden yritysten kannalta sit samanaikasesti palveluiden määrä, ylipäänsä vaihtoehtojen määrä kasvaa, mut sitten vastaavasti enemmän osaamista tarvitaan niiden käyttöön ja valintaan ja operointiin…” ” … Ja se johtuu siitä, että käyttäjät – jos aatellaan sellainen normaaliketju, että käyttäjä löytää tuotteen jos sen... tuotteen käyttöönottoon liittyy se askel, että mun pitää ladata se tuote koneelle ja käynnistää se, ja sen jälkeen vasta mä pääsen käyttään sitä, niin, sillä tavalla tavoitetaan vähemmän asiakkaita kuin jos ei tarvi ladata mitään tai se lataaminen

on automaattista. Niin, kyllä niitä tullaan käyttämään, niinkuin, käyttämään suoraan online-ympäristössä.”

Discussion New business creation could be suggested to be the ultimate task of knowledge-based companies in the post-modern, digital economy (Christensen and Raynor, 2003; McGahan and Silverman, 2001). This constant renewal process takes place in the highly turbulent and dynamic business environment in which predicting based on earlier experiences is almost impossible (Sarasvathy, 2001). In this type of dynamic or even chaotic environment, economy as a whole develops through experimentally organized business programs, i.e. new ventures or businesses (Eliasson, Johansson and Taymaz, 2004). This experimentally organized economy builds upon network based competence blocks, which central economic actors are entrepreneurial firms, innovators, financiers, industrialists and customers (Carlsson and Eliasson, 2003). Network based competence blocks are the social units creating and proposing for markets new businesses. In this process entrepreneurial firms take the most central role by recognizing the prominent new innovations developed by the technology system, discovering customer needs in markets, organizing resources and finance and finally transferring the created new businesses to larger industrialist systems. This study suggests that the above-presented attempt (the GIGA programme) is important to analyze in order to enhance our knowledge concerning multilevel and multi-actor perspective on

high-tech new business creation (Baron and Hannan, 2002; Downing, 2005; Groen, 2005). Widely entrepreneurial behaviour of firms is defined to be business opportunity discovery and exploitation of new business (e.g. Shane, 2003). In line with this, the present study sees this to take place as a process of creating business ventures, in which a business opportunity is discovered and then turned into a form in which it creates economic value by using own and others’ resources and personal relations (Christensen, Madsen and Peterson, 1994). However, high-tech new business creation in the knowledge-based and dynamic economy comes into existence more collectively, i.e. in network based competence blocks, than we have thought (Buesa, Heijs, Martínez Pellitero and Baumert, 2006; Eckardt and Shane, 2003). Major reason for this is that technology systems are the drivers of new innovations (van Eijnatten, 2004; Groen, 2005) and that entrepreneurial firms as economic agents then socially construct, i.e. enact (Weick, 1979), new meanings in the form of ventures. Important in understanding the dynamic knowledge based business is that entrepreneurial firms are central and that innovators are secondary. But, however, we should also acknowledge that entrepreneurial firms have meaningful economic role only if there is an active interaction between all economic agents. Thus, new business creation takes place much more in interactive sense-making action than in firm level decision making based on data analyses. New business creation is an interactive process of many economic

actors and they all have an important role in value creation although entrepreneurial firms are in central role in transferring innovations into new business (Calia, Guerrini and Mourac, 2006; Sarason, Dean and Dillard, 2006). Still, without interaction with the other economic actors, entrepreneurial firms would not be able create new business ventures. Present study proposes that the economic actors (entrepreneurs, innovators, financiers, industrialists and customers) use different roles and behaviours in a discursive and negotiative manner trying collectively to organize the fragmented situation and allocating the innovations, resources and competences according to possible new business ventures (Eliasson, 2005). On the basis of the above presented, new business creation is a process where the mental creation and surroundings of the managers of firms are in continuous interaction with each other (Ulhøi, 2005). Inside this “entrepreneurial space” something is happening that is absorbing influences from the present business activities and that is causing chaos and irregularity as a result. This study proposes that the above-presented process of new business creation takes place in a network and that we should understand the dynamisms of networking behaviour in order to understand high-tech new business creation. On these grounds, there exist many knowledge anomalies in the network: much amount of knowledge is available, but there is simultaneously a great number of firms who are not aware of that knowledge. This creates business opportunities to those, who can analyze, understand and integrate

knowledge in a creative way. But, this is possible only if there are broad enough networks, in which the newest knowledge concerning new branches and things reaches the firm. Moreover, these networks need to be familiar and confidential enough that they can be used to ponder complex knowledge and future images together. The newest knowledge, opinions concerning many types of issues, comments regarding thoughts and ideas and support for our activities come from these networks. Through these networks, business opportunities are exploited as well. Summing up, the continuous change in the business environment creates niches for business opportunities, which can be understood as the frames to create new businesses. Hence, this sort of strategic change through business opportunities is consisting of: 1. Strategically flexible ability and creation of new businesses. 2. Need for social as well as virtual networks. 3. Focus on the core competence which activates networks. 4. Dynamism of business environment makes it possible to create new business. 5. Value creation by finding constantly new ways to create value. 6. Broad network of actors, which as a whole understands the value creation for customers. 7. Strategic construction of this network of actors in order to work towards a commonly accepted direction in a value creation. 8. The image seeing the company as a strategic part of a value creating network. 47

Resource analysis The resource-based view The traditional resource-based approach to business emphasizes the role of distinctive competencies as a basis for sustainable competitive advantage of the firm (Barney 1991, Miller & Shamsie 1996, Peteraf 1993; Roth 1995; Peng 2001). Heterogeneity of firms and their resource endowments, leads to different strategies and performance, due to differences in resource deployment, business activities, and learning capabilities. Similarly, heterogeneity is one of the reasons why the flexible, idiosyncratic attributes of the firm play such an important role in the development of its activities and performance (Dierickx & Cool 1989; Peteraf 1993). Resources that are distinctive or superior to rivals’ resources may become the basis for (sustainable) competitive advantage and action. However, in order to serve as potential sources of sustainable competitive advantage, the firm’s resources must meet four requirements. As Barney (1991: 105-106) writes, “To have this potential (of sustained competitive advantage) a firm resource must have four attributes: a) it must be valuable, in the sense that it exploits opportunities and/or neutralizes threats in the firm’s environment, b) it must be rare among a firm’s current and potential competition, c) it must be imperfectly imitable, and d) there cannot be strategically equivalent substitutes for this resource that are valuable but neither rare or imperfectly imitable...” Thus, firm-specific resources are “strategic” or “critical,” as opposed to the undifferentiated inputs of the traditional input-output flow of organizational transformation processes. In other words, critical resource 48

Figure 6. The traditional resource-based view of resource attributes contributing to competitive advantage.

Valuable Rare

Sustainability of Competitive advantage

Non-imitable Non-substitutable

stocks are those that are non-tradeable (Barney 1986), non-imitable, and nonsubstitutable (Dierickx & Cool 1989). All other resource stocks can be considered tradeable (Chi 1994). Tradeable resources can be used as basis for action, but not as basis for advantage. By definition, distinctive competencies need to be controllable and thus internal to the firm. Dierickx & Cool (1989: 1506) argue that the accumulation of strategic resource stocks has to occur under conditions of centralized control, since strategic stocks are accumulated by “choosing appropriate time paths of (different potential) flows over a period of time.” This implies that while flows can be adjusted instantaneously, stocks cannot. An individual firm can be seen as the combination of accumulated tangible and intangible resource stocks that are unique to the firm. These stocks, in turn, can be described as internal attributes of the firm, including assets, capabilities, processes, routines, and knowledge, that are tied semipermanently to the firm or controlled by it (Wernerfelt 1984, 1989; Barney 1986, 1991; Dierickx & Cool 1989; Roth 1995). Partly parallel to the traditional RBV approach, the dynamic resource-based view has its origins in Teece, Pisano &

Shuen’s (1997) definition of dynamic capabilities that involve adaptation and change through building, integrating, and reconfiguring resources. In dynamic environments the RBV has been used to explore why certain firms seem to have competitive advantages in situations of rapid and unpredictable changes (Eisenhardt & Martin, 2000). Dynamic capabilities can be characterized as simple, experiential, and unstable processes that rely on quickly created knowledge and iterative execution, and the outcomes of the processes are adaptive and unpredictable. However, if we are to capture and understand temporary competitive advantages, the traditional RBV thinking [that rare, valuable, non-imitable and non-substitutable resources contribute to sustainability] cannot just be turned around. Eisenhardt & Martin (2000) challenged the traditional resource-based view on competitive advantage by dynamism point of view by claiming that competitive advantage arises from valuable, somewhat rare, equifinal, substitutable, and fungible dynamic capabilities (resources). Dynamic capabilities involve the creation of new, situation-specific knowledge by engagement in experiential, learning-by-doing actions.

The dynamic capabilities or dynamic resource-based view approaches build on two perspectives of change: 1) market dynamism and 2) evolution of resources, whether internal or external to the firm (Oliver, 1997; Eisenhardt & Martin, 2000; Helfat & Peteraf 2003; Schreyögg & Kliesch-Eberl 2007; Pacheco-Almeida, Henderson & Cool, 2008). The discussion on market dynamism within the dynamic capabilities approach of the RBV can be summarized by stating that the higher the dynamism of the market, the more unpredictable, volatile, and temporary the competitive advantages become. From the competitive advantage point of view some notions concerning dynamic capabilities (Schreyögg & Kliesch-Eberl, 2007) even suggest that capabilities may become obsolete as strategic resources in highly dynamic markets. The discussion on the evolution of resources has looked upon capability life cycles (CLC). Helfat & Peteraf (2003) defined three original stages in the capability life-cycle: founding, development, and maturity. But, the branching of capabilities emerging during the life-cycle is often more interesting. After a selection event the capabilities may become retired (dead), retrenched (gradually declined), renewed (improved), replicated (in a different market), redeployed (in a different productmarket), or recombined (with another capability). In addition, Pacheco-DeAlmeida, Henderson & Cool (2008) discuss resource accumulation lags that they define as the average time a firm takes to accumulate the resources to produce one unit of output in a product-market of interest. If seen from the CLC point of view, this lag starts after the point of selection and ends as

the resource contributes to the competitive advantage and activities of the firm. Again, assuming these notions of resource evolution, it might be argued that as resources evolve their heterogeneity increases and the competitive advantages based on them become more unpredictable, volatile, and temporary. Sustainable competitive advantages, in turn, can be argued to emerge as the effects of market dynamism and resource evolution decrease or their determinants loose relevance in competitive situations.

Indicative results of the resourcebased analysis Seen from the resource-based and dynamic resource-based perspective, the heterogeneity of resources and resource development trends among the ICT companies appears to be a fact. However, the trends of the industry and the development activities initiated or emerging among the interviewed companies does not seem to reflect the ideas advocated by the resource-based perspective. The trends are seen to appear as a rather unified way and their effects are seen in a similar light in all of the sub-sectors of the ICT industry. At the same time, distinctive resources at the company level are hard to find. Resources that could be used as a basis for creating competitive advantages appear to be astonishingly vague and unclear for the interviewed informants. Valuable, rare, inimitable or non-substitutable resources are not a conception that could be identified easily from the interviews. Indeed, convergence seems to have resulted in decreased heterogeneity within the different sectors of the ICT industry. And, should this be true, decreased hetero-

geneity should also have narrowed the spectrum of possible business models within the industry. One of the strategic key assumptions held within the ICT sector has been the strong push of the mobile technologies. However, one of the consequences of convergence has been the fact the internet technologies have taken a stronger role in the development of the industry than the mobile technologies. It has been difficult for the companies to adapt to this new situation, and a great deal of the uncertainty encountered by the companies can be explained by the emerging role of the internet technologies. It can be said that one of the most fundamental challenges the ICT sector in Finland is facing is to speed up the process of understanding the role of internet technologies and their related business models and value creation mechanisms – not to mention the required new cooperation and customer relationships and positions. The basic technical know-how within the ICT sector was seen as the key resource of the past, but the role of this kind of resources or competences in the future was debated with a concern. This concern originated from the consequences of convergence, a situation where bigger players controlling customers dictate future development activities related to technology development, the old core of the Finnish companies. Also, the decreasing number of new and inconsistent technology platforms was seen to narrow the role of technological resources as such. Rather, the new thinking and resources that were seen to be the key in the future should be found from within the trends coming from consumer side of 49

the ICT sectors. As a result, a wider spectrum of (combined or recombined) resources, competences, and skills were seen to be needed in the future. Example data picked from the resource perspective: ”että jos täällä on tällaisia isoja toimijoita integraattoreina, niin kuin me, me puhutaan kymmenen vuoden päästä prosesseista, prosessien mallintamisesta, bisnestarpeen haltuun ottamisesta prosessien kautta. Tämähän on meille jo tuttua tarinaa sieltä kahdentoista vuoden takaa, mutta hiljalleen nyt myös arkipäivää. ” ”… että jos lähdetän henkilöstä niin että … osaamisen muoto muuttuu jonkin verran… pienillä firmoilla on tämmöistä osaamista, että ne keskittyy vaan yhteen tiettyyn teknologiaan tai komponenttiin, tai jopa niinku tällaiseen tuotteeseen…jos puhutaan erityisosaamisalueista, jotka on sitten toisaalta niche-alueita, että niitä alueita ostavia asiakkaita esimerkiksi paikallisissa palveluissa niin kauheen paljon ole…” ”Joo, tää trendi mitä me itse voimakkaasti edistetään, niin kuin äsken sanoin, niin vahvistaa sitä liiketoimintaprosessien ymmärrykseen liittyvää osaamista, siihen liittyvää määrittelyosaamista, ja tota sen rajapinnan, mikä se teknologiaan liittyy siihen kohtaan, sen merkitys kasvaa.” ” …kyl mä edelleen nään tulevaisuutta tän niinku meidän kyvyllä innovoida, tuottaa uusia teknisiä ratkaisuja. Ei ehkä sellaista niinku perustavaa laatua, Nobel-tason tutkimusta, mutta kyky sitten koostaa erilaisia ratkaisuja, palveluita yhteen, viedä niitä eteenpäin, niin se vois hyvinkin löytyä siltä puolelta se meidän teknisen kyvykkyyden helmet jatkossa ja

50

se, mikä siihen liittyy on tämmöinen tervetullut uus ilmiö tässä nyt markkinoille tulleissa sukupolvissa, tämmöinen ihan niinku häpeilemätön kaupallistaminen, ja tota niinku myyminen, asioiden myyminen, niin siihen on tullut ihan eri lailla draivia.” ”… se vaatii vähän eri tyyppistä osaamista kuin, mitä me ollaan aikaisemmin tarvittu, eli me tarvitaan enemmän osaamista verkkopuolelle, tarvitaan osaamista siitä niinku asiakkuuden ymmärtämisestä. Eli just se kun me ei aikaisemmin olla oltu suoraan yhteydessä asiakkaaseen, niin nyt me ollaan. Niin meillä pitää olla osaamista niinku optimoida se käyttäjäkokemus. Ja tuota, pitää olla tietty osaaminen luoda mielenkiintoista sisältöä. Siinä muuttuu niin moni asia…” ”… siis tuoteperheet laajenee, ja tulee hyvin paljon erilaisia tuotteita, niin se osaaminen pitää olla niinku laveampaa… mitä tehdään… ja siihen, miten se tarve määritellään, elikkä niinku tää perus… tällainen tuota vaatimusmäärittely-analyysi, toteutus, prosessi, osaaminen… ihan yleisprosessiosaaminen ja tekemisen osaaminen, että et sä voi ennustaa, että mitkä ne on ne tuotteet, jotka menestyy viiden vuoden päästä…” ”ja toisaalta tää hajautettu tuotekehitys on erittäin vaikeaa. Me pyritään siihen, että meillä on lokaatioissa endto-end responsibility jostain alustasta tai tuotteesta.” ”… tosi iso menestys, niinku tän teknologiainnovaatioiden kehittämisessä, mutta tosiaan kaikella on aikansa ja nyt ollaan täällä palveluinnovaatiopuolella…” ”… esimerkiksi juuri tään liiketoiminnan sähköistämiseen ja digitaalisten prosessien viemistä tosi syvälle…”

”… mutta että kyl meillä varmaan näissä sekä yritys- että kuluttajien käyttäytymisen prosesseissa varmaan olisi hyödynnettävää, ja voi olla, että me ei varmaan sitäkään pystytä yksin tekemään…” ”suuri etu kontentin luojille… kun siinä on se konteksti mukana… monessa muussakin paikassa törmänny, että puhutaan siitä, että behavioraalisen oli sen datan, niinku hyötykäytöstä…” ”Kontrollipisteet on ne toimijat, joilla on tieto siitä ketä ne on ja tieto siitä mitä ne ihmiset tekee, elikkä on olemassa tämmöiset käyttäjätiedot… ne voi kontrolloida, myydä, hallinnoida…” ”Niin, siis tää liiketoiminta on mennyt niin kovaa eteenpäin, tuotteita, sisältöä kehitetty. Ei oo niinku ymmärtämystä mitä on tuotehallinta. Ja mitä on tuoteprosessointi ja myyntiprosessi. Nää kaikki, ne on niinku ihan uutta… tota se tuotteistaminen on pienissä yhtiöissä aina ongelma.” The comments picked from the data highlight one fundamental change in resources, the need for understanding resources as processes rather than stocks that have been accumulated. As a result, the idea that business environment consists of networks and it can be seen as an ecosystem, where value creation and positioning takes place through partnerships, is accepted by many of the interviewed informants. Thus, understanding of customers’ needs and experience and related customer processes, ability to manage, productize and tailor product and service offering, and understanding content development in differing contexts are seen as the key resources of the future.

4 Conclusions Part 

Introduction The purpose of this chapter is to answer to the questions set forth for the research and draw the conclusions related to the questions, Also, the purpose of this chapter is to assess the quality, reliability and validity of the research, the answers given, and the conclusions drawn. The semi-structure frame utilized in the interviews consisted of the following themes: background of the interviewed, convergence and its consequences, business models and the business environment, resources and competences. The original research questions presented in the first chapter of the report were as follows: 1. What could be the core elements and perspectives that could be used to capture and explain change with the ICT companies? b. In order to answer the above question, what kind of tools, perspectives and theories we can use to explain and understand the ICT sector and the companies in it? 2. What are currently the most important drivers of change if the change scenarios developed by the GIGA work groups are used as a starting point for research? c. In order to answer the above question, what kind of consequences the identified drivers

and scenarios have on the companies, their business models and value networks? 3. What are the extreme scenarios for ICT companies in practice and how we can identify their consequences for companies? d. And finally, in order to answer the above question, what kind of business models and value networks could help companies succeed in their particular businesses? The first research question regarding the core elements and perspectives was formulated in order to identify a functioning approach to business models and select approaches by which changes within the ICT sector can be captured and explained. The selected research themes and discussion topics were used to open up the elements of business models as understood by the interviewed. The data indicates that all of the interviewed informants understood the concept of business model differently, depending on the specific industry sector they represented and the models from which they had earlier experience. However, it can be stated that the selected approach made it possible to reveal the different elements of the business employed by the ICT companies in a consistent and profound manner. Considering the se-

lected theoretical perspectives – industry, ecosystem, network, and resources – it can be stated that these theories have widely been used to research the ICT sector also in prior research and that the ideology that these theories represent make it possible to research businesses in a coherent and holistic manner. It was found out also in this research that the use of the theories added value to data analysis and result generation processes by providing a functioning frame of reference for the analysis. As regards to the second and third research questions related to the drivers of change and scenarios of business employed within the ICT sector, the selected approach and the data collected during the research showed that the companies within the ICT sector are concerned of the business drivers and are rather well aware of the general trends in the industry. In addition, the interviewed informants were rather well aware of the scenarios and related terminology of verticals and horizontals, indicating that these two categorizations added value to their thinking of the business environment and potentially usable and working business models. To rank the importance of the drivers is, however, a challenging tasks as the rankings vary from company to company and from one business model to another. However, a certain 51

clustering of these drivers emerged from the data, indicating that certain drivers were of greater importance than others when the companies were looking at the anticipated or feared consequences of their future business opportunities and challenges. Thus, it was assessed that the results of the research fulfill the basic requirements for quality, validity and reliability. At the closing part of the data collection, based on the interview results, we presented a preset powerpoint slide set to two panels consisting of ICT professionals, managers, and entrepreneurs. In the panel discussions the purpose of the discussion was to deepen, clarify and test the validity of the conclusions drawn from the interviews and third party information. The presentation set that was used as a primer for discussion is attached as an appendix to this report. The most important change drivers can be grouped as follows: 1) change in the media landscape and social media and 2) cloud computing and convergence. It appears evident that for consumers the media landscape is diverging rapidly through new sources, channels and types and roles of information, resulting in attention divergence. Social media and its changing role is, accordingly, leading the change in consumer behavior. Media landscape and social media have also several parallels with technological convergence – as well as with technological divergence. Also, if the communication networks are seen to be converging, devices and industries seem to be diverging. The new cloud computing is the wild card in this development as it seems to be changing the rules of the ICT related businesses through new business modes, such as free data, 52

SaaS, and open source. New entrants from internet or consumer business to the mobile related businesses apparently create distress among the established mobile focused companies. A good example in this respect is Apple; it has succeeded in changing the behavior and rules of the whole mobile industry. In the following these drivers and their consequences shall be discussed in a more detailed way.

The trends themselves Media landscape and its connection with convergence From business perspective, we are undergoing one of the greatest media transformations in history. This transformation will gradually result in a situation where the media landscape of today and tomorrow is drastically different – media is evolving and the introduction of broadband, IPTV and digital radio means that consumers are now able to view content, information or entertainment wherever they are across a wide variety of devices. The wide variety of platforms and mobile access to content available to consumers at present means that media and people are becoming connected – converging distribution networks and devices are reshaping how consumers create, describe, find, share, and remix media content, and to connect to each other in ways that have not been available never before (see e.g. Microsoft: Europe Logs on, 2009). About the change of media landscape: ”Se oli itse asiassa sellainen, jota ei mun mielestä oikeen hyvin oo nähnyt edes mediateollisuus… kyseessä ei ole vain jakelukanavan muutos… vaan koko

homma miettimään monella tasolla uudestaan, elikkä ne uudet tavallaan kanavat ja menetelmät, tarkoittaa ensinnäkin sen sisällön, sen täytyy olla siihen sovitettua. Sitten sen sisällön käyttötavat muuttuvat, elikkä kuluttajat kuluttaa eri lailla ku ne istuu kotisohvalla versus ku jos ne istuu, on liikenteessä, ja sit tosiaan se, että se vaikuttaa siihen mainontaan, eli se muutos on moninkertainen ja monitahoinen, ja se on isompi, koska ymmärretty ja vasta nyt ole alettu näkee, että... esim. tuolla Jenkkilässä katsoin, että esimerkiksi tällainen sosiaalisen median käyttö, että mietitty, että jos katsotaan kuka sillä tekee bisnestä, niin itse asiassa se ei olekaan se bisneksen tekemisen, se ei oo se väline, vaan se on se väline saada se intressiryhmä. Siellä on jo nyt näkyvissä, että tulee saitteja, jotka kerää tietyn intressiryhmän, tietyistä asioista kiinnostuneet ihmiset samaan paikkaan. Ja se sosiaalinen media on vaan keino tehdä se, että ennen ku sä paat sinne 237 HarleyDavidson videota samaan paikkaan, niin arvatkaa ketä sinne tulee? Ihmisiä, jotka on kiinnostuneita Harley-Davidsonista, ja niin se vaan toimii, että tavallaan se ei oo se rahantekokoneista, vaan sen ympärille on rakennettu se rahantekokoneisto, ja se on yks osa sitä, mikä on selkeesti muuttumassa ja ollaan oppimassa hiljalleen. Mut sit se on se vaikeus, että ne käyttötavat muuttuu entistä nopeammin, että konsepti, joka on luotu tänä vuonna ja toimii Q2 oikein hyvin, niin se ei oo enää ihan varma Q3:lla, että toimiiko hyvin, että se on semmonen jatkuva muutoksen tila, että sieltä löytyy se.” It is also widely accepted among practitioners and academics that IP convergence is shaping media landscape and affecting profoundly on the media production and consumption. This

phenomenon is very well illustrated by Sami Salmenkivi (2007): The above discussion entails the following elements: 1. Industry convergence. 2. Divergent industries, including media, ITC, telecom and entertainment are converging. Mergers and acquisitions are emerging across the traditional industry boundaries. a. Media divergence. b. The number of content and channels in television, Internet and magazines, etc. is growing very fast. This has inevitably resulted in a situation where marketers face challenges of media clutter also in online media. 3. Network convergence. a. IP convergence is undeniable fact. 4. Device convergence. a. All technologies and applications are available at every device. Smartphone or any other device includes PC, phone, music player, camera, etc. 5. Attention divergence. a. Hundreds of different media are actively followed by TV, PC, Notebook, Hand held device and so on. Thus, people are increasingly facing information overload. ”Jos sitä katsoo ihan teknologian näkökulmasta, niin se on ikävää, että kaikki menee IP-pohjaiseksi pitkällä aikavälillä, koska IP on kuitenkin loppujen lopuksi tällainen päästä-päähän -malli ja sitten se johtaa, puhdas IP johtaa siihen, että CNN:stä ladataan samaa tietoa tuhansia ja tuhansia, tai miljoonia ja miljoonia kertoja, et siinä mielessä tavallaan se tarve, mikä siellä on ja puhdas IP, ne ei oo teknologiamielessä kovin hyvin sovi toisiinsa. Tietysti se IP:n tuleminen voidaan nähdä, et sieltä tulee taloudellisia hyötyjä,

lähinnä sen teknologisen standardoitumisen myötä ja sitä kautta konvergoitumisen myötä. Ja varmasti se lyhyellä tähtäimellä tulee olemaankin näin, mutta jos sitten ajatellaan pitkiä syklejä, niin mä kuvittelisin, että pitkässä syklissä, eli puhutaan 30 vuodesta tai jotain sellaista, niin IP on välivaihe, jossa siirrytään johonkin, en tiedä mihin HTTP:en.” ”Jolloin johtopäätös on se, että lähimmät 10 vuotta eletään vaan tässä maailmassa, ja siihen on ikään kuin sopeuduttava.” ”…kyllä oikeestaan kaikki isot suuryritykset on joutuneet taipumaan sen eestä, että meillä on geneerinen perusteknologia, joka nyt on IP-pohjaista, että sitä sitten siirretään erilaisten [epäselvää] sun muitten ylitse. En mää nää siinä paljon vaihtoehtoja. Se on kustannuskysymys, ja se on myöskin siinä, että tällaisten standardien voima iskee siellä, mutta se ei tarkoita sitä, että se on pysähtynyttä, että ollaan kaikki vanhassa teknologiassa kiinni. Nopeudet kasvaa ja kaikki tämmöset, että sitä vaan venytetään vanhaa teknologiaa entistä pitemmälle, mutta kyllä tossa... ei oo vastaväitteitä. Siihen on hankala löytää vastaväitteitä tällä hetkellä.” IP convergence also affects traditional business models: ”Niin, siihen suuntaan se näyttää nyt menevän jos katsoo, jos ajatellaan, että IP-maailma ikään kuin ensimmäisenä tuhosi operaattorien perinteisen vuosisataisen ansaintalogiikan, että aika-tapahtuma-pohjaiseen velotukseen liittyvistä malleista, ja taas tuolla mediapuolella noitten perinteisten medioiden dominanssi oli hyvin stabiili, tavallaan tämä muutamat pääkanavat, ja nyt näyttää siltä vaan, että ihan samanlainen liiketoimintamallien, voisko sanoa

perinteisten mallien, tuhoutuminen tapahtuu tuolla mediakentässä, että isot toimijat on jo nyt todenneet, että se siirtymä – ja voi olla, että se juuri – itse uskon tähän pitkähäntäistymiseen, että siltä alkaa vaan näyttää, ja kuka sitten, älykkäät toimijat luovat sitten tällaisia uusia mediarakenteita, jotka pystyvät hyödyntämään sitä, että sulla onkin – en mä tiedä onko jotain tällaisia digitaalisia mediatoimistoja tai muita, jotka pystyy hanskaamaan 2000 kanavaa sulle, suoraa mediakamppanjaa ja muuta, että ei se niinku se maailmankuva heilahtaa, ja ainakin nyt näyttää jos katsoo näiden perinteisten toimijoiden [epäselvää]... Tää musta tää enemmän liittyy bisnesmalleihin, ja bisnesmallit murtuu tässä, ja yritykset nyt kuitenkin toimivat ikään kuin näillä omistaja-arvon* tuottamisrakenteilla, ja jos bisnesmalli tuhoutuu, niin silloin niinku haasteet on aikamoiset, että joka tapauksessa se murros tulee, mä olisin taas vähän veikkaamassa sitä tähän. Ainakin tietyssä vaiheessa, voi olla, että se pitkähäntäistymisen jälkeen syntyy jonkinlainen tällainen konsolidaatio, ehkä, mutta ei se siltä tällä hetkellä näytä. ” At present, digital data is one of the most powerful assets of companies. But it also entails one of the biggest question marks of our times: How to monetize the data? It needs unique and sophisticated set of business intelligence – skills, technologies, applications and practices to utilize the data. Digital data is a great opportunity but also a big challenge for marketers. Digital consumers are increasingly moving from mass broadcast media to social media, making current marketing communication processes less effective than before. To adapt to this change, marketers need to use more 53

dynamic marketing strategies that take advantage of two-way communication with consumers. Thus, solutions for analyzing massive amounts of communication and transaction data are needed. These provide considerable benefits to both the marketing department and CRM managers. Analysts can utilize data for selecting the most effective targets, the influencers, in the target audience. CRM managers can use it in improving the results of customer loyalty, customer acquisition and customer retention. ”Se, joka pystyy tän homman niinku hallitsemaan, ja poimimaan, analysoimaan sitä tietoa, mikä on käytettävissä ja jolla on lupa lähestyä sitä loppuasiakasta, niin se on todella kingi, ja se voi itse asiassa mun mielestä, tämmönen mainonnan logiikkaa muuttuu sillä laillakin, että ku nyt sä maksat siitä mainoksesta, että sulla on se mainos, niin mä en usko, että sen jälkeen maksetaan enää mainoksesta, koska tämmönen toimija voi tehdä diilin, että sä maksat pelkästään niistä suoritteista, ostoksista, saat sieltä sen tietyn katteen siitä välistä, ja se riittää sulle sen takia, että sä saat niin kovan pullin aikaseksi, ja se on mainostajalle tosi mielenkiintoinen juttu, koska sä et koskaan maksa turhasta.” ”Se on mainostajan näkökulma. Mitä rupesin miettimään, mitä se on se relevanttius, että tuleeko siinä semmonen ilmiö, että tavallaan se pirstaloituu liikaa se vastaanottajajoukko? Että voidaan tarjota aina sille vastaanottajalle se relevanttitieto? Että tavallaan, sitä mä mietin ongelmana, että riittääkö, että mainostajalla on resurssit tarjota ainoastaan relevanttia tietoa juuri sille henkilölle, juuri sinä oikeana aikana? Totta kai sä voit automatiikalla onnistua jossain määrin, 54

mutta mä itse näen ongelmaksi sen, että siinä tulee sitä, että se käytännössä kuitenkin menee siihen, että mainostajalla ei riitä osaaminen siihen, vaan se tuleekin vaan bulkkimainonnaksi, joka ei sitten kosketa.” Cloud computing is a general term for anything that involves delivering hosted services over the Internet. These services are broadly divided into three categories: Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS). “The rise of the cloud is more than just another platform shift that gets geeks excited. It will undoubtedly transform the IT industry, but it will also profoundly change the way people work and companies operate.” (The Economist, “Let it Rise,” 10/23/08” A cloud service has three distinct characteristics that differentiate it from traditional hosting. It is sold on demand, it is elastic – a user can have as much or as little of a service as they want at any given time; and the service is fully managed by the provider (the consumer needs nothing but a personal computer and Internet access). Significant innovations in virtualization and distributed computing, as well as improved access to high-speed Internet and a weak economy, have accelerated interest in cloud computing. In Finland, fascinating projects are build around cloud computing. One of the most interesting is called Supermatrix (see www.supermatrix.fi). The project aims at bringing 100-megabits and faster connections to homes and desktops, making personal computers obsolete. According to Supermatrix weg page, this is the world’s first project where the operator aims to virtualize users’ computers and will provide the whole desktop as a service.

With connection speeds of a hundred megabits and more, all computers including desktops can be located in the operator’s computer room in each town and village. The user only needs a display unit, mouse and keyboard. The user’s computer is a virtual part of an extremely powerful computer system connected directly to the Internet backbone. Performance of one hundred times or more than is currently available will be possible if necessary. All local applications are directly interconnected. Each Supermatrix locality has its own supercomputer that accommodates next-generation applications for the vincinity. In Supermatrix, backups, hardware maintenance, virus security and operating system updates are taken care of professionally. Users are able to see their own applications and desktops, even if they change the terminal device. In mobile and remote use, connection to one’s own desktop can be realised easily and safely. In addition, it is easy for the user to switch operating systems and expand memory. It seems that cloud computing is challenging existing business models especially in B-to-B markets: ”…niin aika iso osa menestyneistä IT-yrityksiä tänä päivänä, nimiä mainitsematta, mutta suuria systeemi-intergraattoreita, mutta niidenhän pääbisnes oikeastaan perustuu tällaiseen projektityöhön, jolla sovitetaan keskenään sopimattomia järjestelmiä, ja silloin tavallaan tällainen SOA, avoimen maailman arkkitehtuuri, johon nimenomaan nämä webbipohjaiset palvelut tarjoaa todella tavalla fiksun tavan, niin tullaan näkemään varmaan tällainen merkittävä tuottavuushyppy, eli tämmönen SaaS, tai palvelut täältä cloudista.”

”[Google] …tulee yritysmaailmaan sieltä kuluttajapuolella hankitulla valtavalla kustannustehokkuudella ja tämmöisellä luotettavuudella, ja nyt nämä suunnitelmat, niinku on nähty näitä paprepitehtaita ja laivoihin niinku ja jäähdytykset ja [epäselvää], haetaan viimeinenkin sentti siitä, niin kyllä siinä pienellä pelurilla aika haastavaa ruveta jotain white label emailia vastaan tappelemaan. Mä oon huomannut monen yrityksen todenneen, että 1/10 kustannuksilla Google tekee sähköpostin mihin tahansa, niinku tällasena white label -tuotteena, vain esimerkkinä niinku vaan siitä. Että tää cloud computing, SaaS tuo niin toisenlaisen maailman, että aika monella isolla pojalla on vitsit vähissä kyllä tässä pelissä. Ja aika isoja tämmösiä proprietor rajapintoihin liittyviä ja teknologiaan liittyviä bisneksiä tulee kuoleen tässä aallossa, tai ainakin voimaan huonosti. Tää on mun henkilökohtainen näkemys, mä oon kans muutaman kerran käynyt näitä jenkkipään SaaS [epäselvää] kuuntelemassa ja seminaareja, ja [epäselvää] B-to-B-to-C-markkina [epäselvää] B-to-B [epäselvää] markkina.” However, cloud computing also involves security issues. ”Mun on vaikeaa sanoa mitään tohon lyhyellä tähtäimellä, mutta sitten jos pitkällä tähtäimellä ajatellaan, niin varmaan niinku cloud storage ja siitä tämmöseen informaatiosentriseen [epäselvää] meneminen on sellainen, joka tulee säilymään ja pysymään, mutta niinku cloud computing, siellä on niin isoja tietoturvaongelmia loppujen lopuksi, että siitä on vaikea sanoa, että mikä niitten painoarvo pitkässä juoksussa tulee olemaan. Cloud storagessa ei oo sitä kun se kaikki tieto voidaan tarvittaessa kryptata* ennen ku se tallennetaan ja silti se on

löydettävissä sieltä, ja jopa rajatussa mielessä voidaan tehdä hakuja [epäselvää] olemassa, hyvin rajattuja hakuja verratuna siihen, mitä voidaan [epäselvää] kuitenkin. Että sitä on vaikee ennustaa, että mikä luottamuksellisuuden ja tietoturvan ja yksityisyyden merkitys pitkässä juoksussa tulee olemaan, mutta ne ainakin toimii vastapainona selvästi sille sovelluksen toimintalogiikan pilveen siirtämiselle. ”

Social media Social media is one of the greatest buzzwords of our times. In this report social media refers to media designed to be disseminated through social interaction, created using highly accessible and scalable publishing techniques. Social media supports the human need for social interaction, using Internetand web-based technologies to transform broadcast media monologues (one-to-many) into social media dialogues (many-to-many). It enables people around the globe to contribute and share content, experiences, ideas, and expertise, etc. According to Wikipedia businesses also refer to social media as user-generated content (UGC) or consumer-generated media (CGM). The main characteristic of social media is audience fragmentation: sources (hundreds of millions of blogs, wikis, forums…) as well as tools. The following framework provided by redcavazza.net illustrates the richness and diversity of social media. The various tools and services displayed on the landscape are listed bellow. 1. Expressing tools allow users to express themselves, discuss and aggregate their social life: a. Publicatin tools like blogs (Blogger, Typepad, Wordpress), wikis

(Wikipedia, Wetpaint, Wikia), microblogs (Twitter, Tumblr, Identica), citizen news (Digg, Newsvine, AgoraVox) and livecast (JustinTV, Ustream, BlogTV); b. Discussion tools like forums (phpBB, Phorum) and video forum (Seesmic), instant messengers (Y! Messenger, Live Messenger, Meebo, eBuddy), comments services (IntenseDebate, Cocomment, Disqus, BackType) and 3D chats (IMVU, Habbo, WeeWorld, vSide); c. Aggregation tools (FriendFeed, SocialThing, LifeSteam, Profilactic, Plurk…). 2. Sharing tools allow users to publish and share content: a. Content sharing for videos (YouTube, DailyMotion, Vimeo), pictures (FlickR, SmugMug, Picasa, Fotolog), music and playlists (Last.fm, iLike, Deezer), links (Delicious, Magnolia, Reddit) and documents (Slideshare, Scrib, Slideo); b. Product sharing with recommendations platforms (Crowdstorm, ThisNext, StyleHive), collaborative feedback platforms (FeedBack 2.0, UserVoice, GetSatisfaction) or swaping platforms (LibraryThing, Shelfari, SwapTree); c. Place sharing with tools based on local adresses (BrighKite, Loopt, Whrrl, Moximity), on events (Upcoming, Zvents, EventFul, Socializr) and on trips (TripWolf, TripSay, Driftr, Dopplr). 3. Networking tools allow users to search, connect and interact with each other’s: a. Search networks allowing users to find ex-classmates (Classmates, MyYearBook, Alumni) or persons (MyLife); 55

b. Niche networks (Boompa, Dogster, PatientsLikeMe, Footbo); c. BtoB networks (LinkedIn, Plaxo, Xing, Viadeo); d. Mobile networks (Groovr, MocoSpace, ItsMy, Zannel); e. Tools to build an online network (Ning, KickApps, CrowdVine, CollectiveX). 4. Playing services that now integrate strong social features: a. Casual games portals (Pogo, Cafe, Doof, Kongregate, PlayFirst, PopCap, BigFish, Prizee); b. Social games portals (Zynga, SGN, ThreeRings, PlayFish, CasualCafe, ChallengeGames); c. MMORPGs (World of Warcraft, EverQuest, Lord of the Rings Online, EVE Online, Lineage, Dofus, Runescape); d. MMOs (Drift City, Kart Rider, Maple Story, Audition, Combat Arms, Quake Live); e. Casual MMOs (Puzzle Pirates, Club Penguin, Neopets, Gaia Online, SmallWorlds, OurWorld). This framework helps us to draw a broader picture of social media phenomenon. However, the million dollar question remains unanswered: How to monetize social media. During the last few years, people have “learned” that content in the Internet is free. However, there is fundamental problem: “The digital revolution has opened many new and inexpensive distribution channels but it has not made content free.” Broadly speaking, in digital media, there are a great number of business models, but none have proved to be very successful. ”…mikä on leimaa antava niinku tämmöseen internetaikakauteen on, että 56

ne liiketoimintalogiikat, ne ei oo enää kauheen yksinkertaisia. Tämmönen perinteinen bisnes, vaikka sanomalehden painaminen, se on hirveen yksinkertainen se peruslogiikka siinä. Mutta sä joudut rakentaan niinku varsin monimutkaisen liiketoimintamallin, jossa kaikki komponentit, jotta siitä tulee, jotta sä saat siitä kannattavan.” ”Jos me sen kuluttajan näkökulmasta katsotaan, niin onko se niin, että se, että ne palvelut eivät ole enää, tai ne sovellukset eivät ole enää tuolla tietokoneella, vaan se, että ne on tuolla verkossa, niin sillähän ei niinku kuluttajan näkökulmasta, sehän ei oo relevantti asia ollenkaan, missä ne on, mun mielestä, mutta se relevantti asia on siinä, että sillon ku ne on siellä pilvessä, niin joku muu maksaa. Ne on aika usein kuluttajalle ilmaisia, sen takia, että se ansaintalogiikka lähtee jostain aivan muualta. Ja se, että – tää on suosittuakin, musta tuntuu, että että kyllä tästä loppukäyttäjän näkökulmasta, kuluttajan kannalta, se ilmaisuus on, se on tosi, se on...” ”...Mä luulen, että mä en ehkä olis enää ihan tässä jos mulla se vastaus olis. Mutta tota, kyllähän se varmaan, mun mielestä tuo YouTube-esimerkki on hauska sinällään, että kyllähän ne perustajat teki rahaa, mutta et onks Google tehnyt rahaa se on sitten se seuraava kysymys ja mun käsittääkseni ei vielä. Mut et, sehän onkin vähän semmonen avoin beta varmaan myös siinä suhteessa kaikki tää touhu, että uskotaan siihen, että kun saadaan tuollaisia massoja liikenteeseen, niitä silmäpareja saadaan sinne, niin se on kuitenkin jollain tavalla sellainen, mistä voidaan se raha ennemmin tai myöhemmin tehdä, mutta sitä mallia ei oo vielä keksitty, ja se haaste varsinkin YouTubella ja noilla on, että kun sinne yritetään puristaa tai on mietitty …”

Some remarks regarding the trends Evolving digital media that is inherently social is reshaping our lives. Blogs, wikis, tagging, podcasts, and social networking websites such as MySpace, YouTube, Facebook and Flickr have radically changed user interactions on the Web from a simple, static, unidirectional consumption model to a complex, dynamic, multidirectional, participation model. With the emergence of a mobile phone as a ubiquitous platform for media production and consumption, people are transforming media participation on the personal, social, and global levels. We can now gather and link media metadata about the spatiotemporal context and social community of media, and more importantly, capture and use the data to enable people around the world to create, describe, find, share, and remix media content, and to connect to each other in ways that have not been available never before. Consequently, people are increasingly engaged in the iterative design, development, and analysis of large scale socio-technical systems that will ultimately connect billions of human beings, computational devices, and media assets into a global processing network. Therefore, it has been suggested (e.g. Marc Davis from Yahoo!) that the future Web will be reshaped by the creation of large scale mobile social media systems, in which a web of stored documents gradually evolving into a live network connecting billions of humans around the planet across space and time. However, deficiencies persist in our understanding of this emerging phenomenon. The design of these socio-technical systems calls

for interdisciplinary teams to tackle the complex challenges related to these new services. It requires us to rethink the core assumptions and boundaries of social science, information science, computer science, media studies, and design. The main intellectual shift reframes technological challenges for mobile media within social and humanistic understandings of context, communication, information, memory, and identity. As a result, by understanding mobile media technologies as socio-technical systems that connect people to the spatiotemporal contexts of their activity and to each other, we also provide a platform for new service and technological innovations.

Towards the business models of the future What kind of business model and value creation related managerial conclusions, then, can be drawn from the analysis? In the following we will use the ecosystem approach to classify the players of the ICT sector and discuss the consequences of convergence and other trends by category: consultants, application software developers, system and infrastructure software developers, system and infrastructure integrators, infrastructure and application service providers, hardware developers, and other type of actors. Among consultants the traditional approach to business has been two-fold, either being in the verticals, focusing on selected technologies, or serving national or customer-group specific, rather narrow horizontals. For consultants it can be concluded that the new business opportunities can be found in the horizontals. Especially, the

packaged or bundled services area and in the service side and cross-industry integration in the technology side appear as opportunities. The fundamental question in the whole ICT sector is how fast other than entertainment related services are coming to play a greater role within the ICT sector, and what these other-than-entertainment services shall be, especially in consumer business. For application software developers the trend is clear, these companies can find new opportunities within services in the horizontals. The ability to build business or consumer applications that utilize technological convergence with new features that enable the use of advertising as a business model, that include context awareness, or enable data intensive services are examples of opportunities emerging from the data. Especially areas where Internet and mobile can be connected appear as interesting. At least to some degree, it can be stated that the business environment of both consultants and application software developers are similar, as these companies are used to looking and identifying new opportunities in changing environments. For infrastructure software developers the trends in the ICT sector are not so promising, majority of the firms seem to be hoping that the business they are in remains in the verticals. The fast industry maturation together with increased convergence has lead to a shrinking market with a high tendency towards off-shore outsourcing. Also, due to convergence the transformation from mobile business to internet service provisioning where mobile and fixed communications become as one from technology perspective, the

driving forces are not favoring companies in the mobile sector but those that can combine mobile with internet. In this kind of situation strong foothold in the traditional verticals is a danger, as companies tend to focus on their old core as a response to the convergence related crisis. For system and infrastructure integrators the message of the trends in the ICT sector is similar as for the infrastructure software developers: out from the old verticals, and fast! Being service-oriented, the change towards the horizontals and new businesses should be easier for system and infrastructure integrators than for infrastructure software developers. New opportunities for system and infrastructure integrators can be found in service delivery platforms as well as value-added content aggregation and access services. For the infrastructure and application service providers there is a twofold dilemma in the business; either to be shrinking inside the existing horizontals in which they have a position, or become a content provider. However, there seems to be a profound difference in the business approaches of the dominant content providers (of the entertainment services) and the infrastructure and application service providers. It is a good question whether the content providers can really win customers from the infrastructure and application service providers, but if they can, the business that remains is a rather narrow, to become only a pipeline. An interesting project in this is the Supermatrix-project of the regional infrastructure and application service providers. Another strategy that some of the infrastructure and application service providers have adopted 57

is diversification towards something completely new. The idea seems to be to use the existing pipeline as a basis for new services that are integrated with the existing pipeline. For hardware developers the trends lead again to two-fold consequences, whether to remain inside verticals and focus on certain technologies, end customer groups, or devices, or to find short-cuts across different areas of the business ecosystem. By short-cuts it is meant that by combining technologies and applications or devices directly with services, the companies find a way to cross or skip existing verticals and create new horizontal businesses. A good example of this is Apple with the combination of iPhone and Appstore or iPod and iTunes. In addition to the short-cuts, ubiquitous business and intelligent devices emerged from the data as opportunities for the hardware developers. Other types of actors consist of a variety of different players, and the consequences of the trends vary accordingly. Regulators, research and education organizations, non-profit organizations, or consumer movements can be categorized to be in this group. What trends has the greatest effects on these group and what kind of consequences they induce, depends on the case. The most interesting of the organizations in this category can be said to consist of social media related organizations that do not directly generate revenue or profit, but function as platforms for other businesses to thrive. So for Facebook nor Twitter has been able to generate considerable revenue streams, but the hundreds of millions users constitute an interesting potential for other companies to mobilize as customers. 58

To sum up the above discussion, divergence and fragmentation in the media landscape seems to be overriding the consequences of convergence. In the same time, the access, identification and utilization of user data, wherever located within converging networks, is increasingly becoming the source of competitive advantage for the ICT companies. Social media and its phenomena change industry structures and business models in unpredictable ways, purely vertical or horizontal based business models are deteriorating, and companies are looking for short-cuts, sidetracks, and across-traditional-segmentation strategies. One of the key drivers in this the cloud computing that seems to be changing the rules for both business customers and consumers.

Strategies used within the ICT sector As regards to value creation, several different kinds of networks were identified within the companies studied. All basic methods of value creation were mentioned, novelty creation, efficiency development, complementarities, and ties. Novelty creation was most often related to offering either through new products and services or new delivery channels and content. Efficiency development as a strategy consisted most often of attempts to improve cost-efficiency and it was, astonishingly, mentioned almost solely by infrastructure and application service providers. Complementarities were mentioned as a value creation strategy by all groups of the ICT ecosystem. Bundling of products, services or content was a typical strategy. Ties were utilized as a strategy most often in the case of consumer businesses, and the

realization of this strategy took place for example through cannibalization of own products and services. The future business models of the ICT sector appear to stem from a variety of rather strange and contradictory considerations. ” Ja muuten on totta kai erilaisia businessmalleja ja luodaan hieno nicheteknologia ja perustetaan yritys, jonka joku näistä isommista edellä mainituista sitten aikanaan ostaa, niin sehän on monen valitsema liiketoimintamalli. Kaikki ei siitä onnistu….” ”Jos me lähdetään konvergenssimaailmaan, niin kuvuttelisin, että siellä tarvii juuri tällaisia, miksi niitä sanois, konsortioita tai tällaisia palveluverkostoja, joilla on kaikilla oma lokeronsa siinä koko ketjussa, arvoketjussa, mikä tulee loppuasiakkaalle.” ”Niin, siihen suuntaan se näyttää nyt menevän jos katsoo, jos ajatellaan, että IP-maailma ikään kuin ensimmäisenä tuhosi operaattoreiden perinteisen vuosisataisen ansaintalogiikan, että aikatapahtumapohjaiseen veloitukseen liittyvistä malleista, ja taas tuolla mediapuolella noitten perinteisten mallien medioiden dominanssi oli hyvin stabiili, tavallaan tämä muutamat pääkanavat, ja nyt näyttää siltä vaan, että ihan samanlainen liiketoimintamallien, voisko sanoa perinteisten mallien, tuhoutuminen tapahtuu tuolla mediakentässä.” ”Ei ole business-mallia, sama muuten tulee Facebookilta, ei oo businessmallia.. Ei ole siis strategiaa, joka pohjautuu johonkin tiettyyn bisnesajatteluun.” “ Googlella oli, mun mielestä, lueskelin sitä kirjaa, niin niillä 2003, kuus vuotta aloittamisen jälkeen alko ensimmäisen kerran hahmottuun jotakin ajatuksia siitä, miten rahaa tehdään.”

What the real business models and strategies will be in the future in the ICT sector is an interesting question. Rather than answering this question directly, we would encourage the reader to draw conclusions from the quotations presented in this report. However, some light on this business model / strategy question is shed by Porter’s (1980) generic strategies approach, as many of the interviewed used that terminology in a manner that reveals at least partial inconsistency between the theory and the practice. Porter’s ideas on strategy were based on the dimensions of scope and focus of competition, which led to the idea that there are three generic strategies (cost leadership, differentiation, and cost or differentiation based focusing) available for companies within an industry. Despite the fact that the ICT sector as such can not be understood as an industry but rather as a compilation of different interrelated industries, industry thinking however providers an applicable and practical way of classifying the results. Cost leadership strategies were mentioned by several companies interviewed. The following themes were found to appear in the data: 1. Flat-rate pricing and related rationalization of capacity and operations a. Profit maximization, e.g., by flat rate pricing that allows to increase profits as indirect costs can be pruned b. Capacity optimization c. Selling out over-capacity and developing the needed network d. Minimizing costs e. Decreasing the amount human resources needed in business,

automation of production and striving for maximized efficiency. Example data related to cost leadership strategies: ”ei se oo helppoa noilla mobiilioperaattoreillakaan – kyllä ne nyt pärjäilee, mutta voimakkaita investointeja niittenki pitää tehdä näihin LTE:hen ja siihen, että ne saattaa 3G-verkkonsa sellaseks, että ne oikeesti pääsis syömään niitä hitaita kiinteitä laajakaistoja [epäselvää] toimivalla mokkulalla.” ”vahva usko nyt on xxxn suunnalla tuohon televisioon, niin mites näkisit nyt noi tulevaisuuden liiketoimintamagneetit ja tulovirrat? Laajakaistassahan on jo aikoja sitte menty tähän flatrateen ja yleisesti ainakin uskotaan, että mobiilissa datasiirron väärinkäyttö Suomessa ja mobiili-internetin käyttö johtuu siitä, että siel ei oo menty flatraten hinnoitteluun heti kättelyssä” ”tän IT:n ja tietoliikenteen sulautumiseen, et se on vähä niin ku sellasta konvergoitumista – että ykshän ominaisuus on tietenki se, et nää niin ku puhelinvaihdejärjestelmät, mitä kuitenki tarvitaan – siis ei kiinteät puhelut kokonaan katoa, tietyt työtehtävät sitä edellyttää, niin se muuttuu niiden järjestelmien kauppa- ja ylläpito IT-järjestelmien kaupaks. Et ei oo erikseen enää puhelinvaihdekauppaa ja jotaki IT-järjestelmäkauppaa. Ne sulautuu ja tällä tietoliikenteellä on voimakas kytkös tuohon IT:hen, että siellähän on siirtymä käynnissä, et palvelimet siirtyy palvelinkeskuksiin ja jonkalainen mekin ollaan tähän investoitu” ”se raha, mikä teleoperaattoreilla on kiinni infrastruktuurissa, ja myöskin millä teleoperaattori tekee kannattavuutensa, koska sen pitää tienata sen seuraavan sukupolven investointirahat näillä verkoilla, niin kyllähän se tehdään siinä

bittiputkiosuudessa. Tää palveluliiketoiminnan, se on asiakkaiden hankkimisen kannalta keskeinen, mutta kannattava... uskaltaisin väittää, kannattavuuden kannalta täysin marginaalinen, jos mä teen tämmösen raa’an jaon siitä. Ja, se bittiputken kannattavuus, niin se on periaatteessa täysin kilpailutilannelähtöinen asetelma...” ”periaatteessa semmoinen operaattori, joka on automatisoinut itsensä, niin sehän pystyy pelaamaan aika pienellä henkilömäärällä. Siis tarvitaan asiakastuen, myynnin, asiakastuen ja suunnittelun henkilöitä, mut ei tarvita sitä back-officea.” Differentiation strategy, especially related to services and service provisioning but also product and application development, was a commonly mentioned strategy by the interviewed companies. The following themes were found to appear in the data: 1. Customer’s value maximization a. Reduction of customers’ costs i. Free offering to hook customers b. Increasing efficiency of own operations c. Additional or bundled services d. Utilizing convergence in handsets i. Call optimization ii. Software integration e. Leasing hardware or handsets f. Providing total solutions (rationalization) g. Providing customized solutions 2. New services a. New applications or platforms b. New content i. Music ii. Social media services iii. Service communities iv. Utility services as opposed to   entertainment services 3. Extended services a. New business models. 59

Example data related to differentiation strategies: ”kyllä se on tämmöset tv-kaistat, laajakaistat, televisiopalvelut, Saunavisiot ja niin ne on ne jutut. Teräväpiirto siellä pikantti lisää, missä kaistavaatimusta, mikä taas pelaa kiintiän operaattorin pussiin on se syy, minkä takia nämä mobiilisuulla puhuvat isot operaattorit puhuvat ja investoivat kaupunkeihin raivokkaasti koko ajan.” ”nimenomaan palveluiden valikoma kasvaa. Ja sehän nyt siis tarkoittaa luonnollisesti niiden kyseisten palveluiden tarjoajien kannalta, jotka on siis enemmän näissä konvergensseissa, verkkojen ja niiden palveluiden operoinnissa mukana, niin, niillähän nimenomaan sama asia tarkoittaa kilpailutilanteen kiristymistä. Että VoIP-puhelut, tai ylipäätänsä puheviestintäpalvelut, on varmaan hyvä esimerkki siitä. Ja sitten vielä – tää taas liittyy läheisesti näihin ansaintalogiikoihin – että jos nyt VoIP-puheluit käyttää esimerkkinä, niin koska on todennäköistä, että VoIP-puheluilla, niin kuin niillä jo nytkin on, mutta ehkä tulevaisuudessa viel selvemmin rakentein, niin toimijoita, jotka ei itse siitä VoIP-puhelun välityksestä välttämättä hae rahaa ollenkaan, vaan ansaintalogiikka perustuu johonkin mainostuloihin tai johonkin muuhun tällaiseen, niin, tällähän on sitten kilpailutilanteessa sikäli radikaali merkitys, et ne toimijat, joilla se ansaintalogiikka on ollut puhtaasti sen toiminnan varassa, mitä joku muu tulee tarjoaan ilmaseks, niin sen vois kokea jopa haastavana.” ”siirtotie ei sinänsä oo ilmanen, mut sitte taas sielläki kilpailu laskee sitä hintaa mitä ihmiset on halukkaita maksamaan ja sen lisäksi sen päälle pitää alkaa paketoida palveluita, ja siinä liiketoimintamalli pitäs olla niin läpinäkyvä, niin selkeä et kuluttaja ymmärtää sen, et se ei missään 60

nimess mieti sitä et “tää on kallista”, sen ei pitäs niinku ajatella sitä mediaa käyttäessä, että tää on kallista, vaan käyttää sitä.” ”Me omalta osaltamme silloin tähdätään enemmänkin siihen, että meillä pitäis olla tästä infrastruktuurista lähtien tämmönen avoin palveluvalinta, että asiakas voi tehdä... tai siihen voidaan olla niinku operaattorina sanomassa, että käytät vain niitä palveluja, joita olemme operaattorina tähän määritelleet, vaan asiakkaalla on jollain valikkopohjaisella ajattelutavalla, niin omalla valinnalla mahdollisuus niitten palvelujen valintaan. Voi olla, että meillä on paikka siinä kohtaa niin kuin ehkä markkinoilliseen ja laskutukselliseen, tän tyyppiseen yhteistyöhön palveluntuottajien kanssa. Mutta ainakaan mä en näe niinku meillä roolia itsenäisenä sisällönpalveluntuottajana, jos täällä on yhteisöjä, jotka tuottaa hyvää juttua, voidaanhan me olla edistämässä niiden välittämistä eteenpäin.” ”yks tapa erilaistua, että tarjotaan meidän maailmassa kaikkien palvelut, on se sitten nää operaattorit tai sitten eri näköset viihdetalot, mitä ne nyt onkaan sitten.” ”ihmisethän on niin kuin omaehtoisia sisältöjä lähteneet tekemään, hurjia määriä. Ja kun teknologia antaa eväät, ja ne on kaupallisesti järkevillä hinnoilla, mun on hiton vaikee nähdä, miksi tämmönen tota liikkuvan kuvan -buumi ei nousisi. Ja jos mietit sitä, että minkälaista massaa edellyttää se liikkuva kuva suhteessa niihin isoihin, hienoihin vaikkapa kuvatiedostoihin, jota olet tähän mennessä siirtänyt, niin pikemminkin, mä ennustan, että on mahdollista, että se ryöpsähtää vielä voimakkaampaan kehitykseen.” ”sinne on pakko synnyttää, uusia malleja, jotka aivan samalla lailla kuin mainonta vaatii sen, että on hyvä käsitys

asiakkaiden niin historiallisesti käyttötiedosta kuin realistisesta käyttötiedosta, jolloin voidaan tarjota palveluita, ihan niinku kaikki muutkin kanavat, mutta kustomoida niitä reaaliaikaisesti just ja vain siihen tarpeeseen.” ”Mut pystyykö esimerkiksi suomalaiset operaattorit, niin, aidosti muuntautumaan palveluntarjoajiksi, sisältöpalvelun tuottajiksi? Tuleeko siihen niinku kolmansii osapuolii? Tota... mä sanoisin niinku näin, että sisällön välittämisestä, siitä ei... siinä on nähtävissä vaan datatuloja, mutta operaattorit pystyy sitten rakentaan lisäarvopalveluita sen sisällön päälle… netin kautta kaikesta kontentista tulee ilmaista, sisällöstä tulee ilmaista, ja se itse se sisältö toimii vain mainostuksena maksullisille palveluille, lisäarvopalveluille tän sisällön päällä” Focusing strategies were by far the most common strategy utilized within the Finnish ICT sector, and it does not appear plausible that the importance for focusing would decrease in the near future. Focusing strategies seem to be more adaptive than aggressive in nature, and the company focus was most often found through the role or position the company had in the value chain network or business ecosystem. At least the following focusing strategies were found to appear among the data: 1. Geographical focus a. Regional b. National c. Global 2. Segmentation focus a. Specific customer group focus b. Specific customer need -based focus c. Specific channel or position based focus

3. Technology focus a. Niche in the ecosystem as a focus b. Application or a device as a focus c. Content based focus 4. Business model focus a. Internet and/or mobile

Theoretical conclusions and Implications for future research As the final conclusions of the research, a few words must be devoted to theory level conclusions and implications for future research. The theory level approaches selected for this research for understanding the ICT sector included industry approach, business ecosystem approach, network approach and resource-based approach. All these approaches were well suited for the

analysis and helped to provide meaningful interpretations and results from the data. The triangulation of the different approaches was however found to be rather complicated as these theories partly include inter-related and overlapping concepts and items. Both from academic and managerial perspective the ecosystem thinking was found to provide a consistent framework for analyzing the value creation and strategies of the ICT companies. The ecosystem thinking can even accommodate the contradictory aspects of the network and resource-based theories, and value creation and differing business models can be understood within the framework. One of the findings of the panel discussions was the deep concern of the experienced ICT managers and

entrepreneurs regarding the usability of traditional strategy tools utilized by companies. It was found out that the traditional strategy analysis tools and concepts shed light to modern business problems of the ICT sector only to a limited degree. As the ICT sector is rather volatile and fast changing, assumption-based, scenario-based, and game-like strategy tools were thought to work better than the traditional ones. Also, the ICT sector today appear as a field in which the traditional industry boundaries are bended, twisted and disappearing, not only between business-to-business sectors but also between consumers and business customers. New theories and concepts for capturing and analyzing this kind of industry changes would be welcomed by both academics and practitioners.

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Tekes Reviews in English

274/2010

Business Dynamics and Scenarios of Change. Petri Ahokangas, Miikka Blomster, Lauri Haapanen, Matti Leppäniemi, Vesa Puhakka, Veikko Seppänen, Juhani Warsta. 65 p.

272/2010

The Future of Service Business Innovation. 75 p.

267/2010

Silicon Valley Journey – Experiences of Finnish IT Startups from Dot-Com Boom to 2010. Raija Rapo & Marita Seulamo-Vargas. 176 p.

264/2009

BioRefine Programme 2007–2012. Yearbook 2009.

263/2009

Drive for Future Software Leverage – The Role, Importance, and Future Challenges of Software Competences in Finland. Mikael von Hertzen, Jyrki Laine, Sami Kangasharju, Juhani Timonen and Maarit Santala. 93 p.

259/2009

Technology Transfer of Research Results Protected by Intellectual Property: Finland and China. Rainer Oesch. 28 p.

254/2009

Evaluation of Bioprocessing Expertise in Finland. Colja Laane. 22 p.

242/2009

Foresight for Our Future Society – Cooperative project between NISTEP (Japan) and Tekes (Finland). Eija Ahola and Mikko Syrjänen. 59 p.

241/2008

FinNano Programme – Intermediate Evaluation. Pekka Koponen, Juho-Kusti Kajander and Matti Kuusisto. 20 p.

239/2008

BioRefine Programme 2007–2012. Yearbook 2008. Eija Alakangas & Tuula Mäkinen, eds. 130 p.

236/2008

Major challenges for the governance of national research and innovation policies in small European countries. Mari Hjelt, Pim den Hertog, Robbin te Velde, Mikko Syrjänen and PaavoPetri Ahonen. 65 p.

232/2008

Future of Enterprise Mobile Devices – From Tornado Age through Value Mess onwards to Mobile Things That Think. J.Kotovirta and M.Nurmela. 19 p.

231/2008

Mobile Enterprise Applications and Business Models. 24 p.

228/2008

MASI Technology Programme 2005–2009. Yearbook 2008.

227/2008

Tekes-Japan foresight – A cooperative project between NISTEP (Japan) and Tekes (Finland). Mikko Syrjänen and Alina Pathan (Eds.)

224/2008

Nanosafety in Finland – a summary report. Tuomas Raivio, Piia Pessala, Mari Hjelt, Pirita Mikkanen, Hanna Kahelin.

219/2007

VICTA – Virtual ICT Accelerator. Final Report. 25 p.

214/2007

Universities, industrial innovation and regional economic development. A report of local innovation systems. Editors: Richard K. Lester and Markku Sotarauta. 231 p.

213/2007

Trends and Opportunities in Packaging R&D in the US. Niels Hauffe, NWV Market Discovery, Inc. 54 p.

212/2007

Consumer Packaging in Poland, Czech Republic and in Moscow Area. 50 p.

207/2007

MASI Technology Programme 2005–2009. Yearbook 2007. Eija Alakangas & Pekka Taskinen (eds.)

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Further information Petri Ahokangas Professor, International business University of Oulu [email protected]

Tekes – Finnish Funding Agency for Technology and Innovation Tel. +358 10 191 480 Fax +358 9 694 9196 Kyllikinportti 2, P.O. Box 69 FIN-00101 Helsinki, Finland E-mail: [email protected] www.tekes.fi

June 2010 ISSN 1797-7339 ISBN 978-952-457-505-8