Escolar Documentos
Profissional Documentos
Cultura Documentos
May 2014
Author
Christian Jantzen (303104)
BSc in Economics and Business Administration
Academic Supervisor
Peter Kesting
Associate Professor
Department of Marketing and Organisation
Characters including tables and figures, excluding blanks: 93.105
Abstract
The purpose of this paper is to investigate how Danske Spil changed their business
model to overcome the changes following the market liberalisation of 2012. The
paper chooses to mainly feature the subsidiary company DLI (Danske Licens Spil),
which is the part of the group operating on the free market. Through the appliance
of Ostenwalder and Pigneurs (2010) framework the Business Model Canvas, the
entities of Danske Spils business model are analysed before and after the external
changes. Furthermore, the framework of Cavalvante et al. (2011) is applied to
determine the nature of the changes. The analysis finds that change has occurred in
all areas of the business model. The main changes occurred in the fundamental
activities, shifting the focus of the company to be entirely profit-oriented, which in
turn influenced the changes in all other areas, thus following the trend of business
model revision. The analysis further concludes that the main reasons for a
successful transition was the abilities of leaders and the structural changes made
prior to the liberalisation. Following the changes a series of challenges also
occurred. Here the main challenge were the gap between two groups of employees,
where one group is operating on the free market, and the other in a monopoly.
Using the findings in the analysis the paper discusses the theoretical fit and
prospects for future research in the area. It finds that some theory fit better than
other and that researchers in turn should focus on creating literature and theory
that can be used to generalise case, thus creating a mean for comparison.
Key words: Business models, business model innovation, business model
change, market liberalisation, business model canvas, change management,
business model revision, challenges of change.
Table of Contents
1. INTRODUCTION
1.1 BACKGROUND
2. THEORY
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3.1 METHODS
3.2 LITERATURE
3.3 DATA
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4. FINDINGS
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5. DISCUSSION
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6. CONCLUSION
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7. REFERENCES
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8. APPENDICES
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1. Introduction
Change is inevitable. This is the reality that all companies are faced with at
certain points of their existence. Whether the change is of a radical or milder
nature differs, but one thing is for sure; change is inevitable. It is in dealing with
these changes that companies show their true character and survival instinct.
Because failing to deal with changes in the right way, can ultimately cause a
company to fail. Therefore, the process of change is a rather interesting matter,
which will be investigated further in this paper.
The paper will revolve around the case of Danske Spil, a Danish sports betting
and online casino carrier, who is mostly owned by the Danish state. In 2012 they
faced radical changes in their market; however, still they managed to maintain a
leading position in their core areas and expand the company to serve a new
range of customer demands. The paper will thus be asking the question: How has
Danske Spil changed their business model to cope with the changes from 2012? The
paper aims to answer this through an investigation of how these changes have
influenced the business model (shortened BM from here on) of Danske Spil
(shortened DS from here on). Through the appliance of relevant theory the paper
will analyse the BM prior to the changes thus creating ground for comparison
with the BM today, in order to analyse how external changes has led to internal
changes. Through an analysis of both fundamental processes and micro-activities
the end product of the research will be an in-depth analysis of what was changed
inside the company, what were the challenges, and what was important in the
process of change. Furthermore, the paper aims to discuss the theory developed
in the area of BM and the change process, through a discussion of how the theory
held up through the actual findings of the case.
This case is particularly interesting to study due to a range of factors. It is the
story of a small state-owned company which has historically operated as a
monopoly in more than 60 years with a strong identity of donating their profits
to charity and local associations. Without any real experience of competition and
competitors their market is all of a sudden opened up to a big group billion-dollar
cooperation hungry to take over the new market, since it is no longer protected
by monopoly. The interesting part is now following how the company deals with
these radical changes and what consequences this have had inside the company.
It may thus paint a picture of what it takes to survive a transition from a
monopoly-company to a perfectly competitive company, operating on equal
terms with the market competitors.
1.1 Background
Following the years after WW2, DS was formed in 1949 by the Danish
government. Back then the company was named Dansk Tipstjeneste, and all their
profits where donated to local society, such as sport clubs etc. The company has
had a strong corporate identity as a company whose existence was purely for
doing good, manifested in their slogan For joy and benefit. Up until 2012 DS had
a monopoly in the Danish market, and their main activities was to run the
national lottery as well as related games such as sports betting and lottery
coupons. This meant that no other carriers had access to the market, and they
could not market or sell their products in the market. All this changed when the
Danish government decided to liberalise part of the market on 01.01.2012. This
now means that every company who buys a license in the Danish market can
compete on equal grounds, upon paying a state fee of 16% of their revenue. The
liberalisation concerned part of the market, such as sports betting and online
casinos whereas the national lottery is still protected by a monopoly. DS
responded to the liberalisation by dividing the group into three companies; Elite
Gaming which is a company operating on the market of physical gaming
machines, Danske Lotteri Spil (DLO) which is the part of the company still
operating on the monopoly protected part of the market - here all profits are
donated to local associations, and Danske Licens Spil (DLI) representing the last
part of the group. DLI is the company that will be dealt with in this paper; they
operate on the liberalised part of the market. The liberalisation is an opportunity
for DS since their competitors used to have an advantage with lower taxes (Danes
could still access their products online), whereas now they compete more
equally. However, it also means that other companies now can market and
promote themselves in the Danish market, meaning that they can actively
compete for market share with DS (Lind Nielsen).
2. Theory
This part of the paper will be presenting the existing relevant literature inside
the field of business models and business model change. It will introduce the
concept of business models itself, and present different views upon what a
business model is. The paper will then take a deeper look at models used to
describe and analyse a BM, and argue why some are preferred over others. I am
also going to be dealing with the notion of BM change to see what parts of
literature can be applied to the specific case of Danske Spil. Since the field is still
quite small and emerging it should be possible to paint a rather complete picture
of the existing research conducted.
One of the earliest authors to define a BM is Timmers (1998) who argues; The
business model is an architecture of the product, service and information flows,
including a description of the various business actors and their roles; a
description of the potential benefits for the various business actors; a description
of the sources of revenues (p. 2). The definition clearly strives to perceive all
elements of what a BM contains, however, the definition can be hard to work
with due to the predefined nature of it. Although Amit & Zotts (2001) definition
focuses on the value creation through business opportunities, it has certain
similarities with the definition by Timmers through the emphasis on structure
and content. They argue that a BM is a set of structure, content and governance
of transactions that is created to help businesses exploit opportunities (p. 511).
Chesbrough & Rosenbloom (Chesbrough & Rosenbloom, 2002) link the technical
potential to the realization of economic value. They argue that the two are
connected by a heuristic logic and it is this that defines the BM. Although
acknowledging the importance of value creation, they do not point to specific
factors that are included in the BM like Timmers for instance. Magretta (2002),
takes a somewhat different and more abstract stance when presenting his paper
Why business models matter. In here, he states that a BM should answer Peter
Druckners four questions: 1) Who is the customer? 2) And what does the
customer value? 3) How do we make money in this business? 4) What is the
underlying economic logic that explains how we can deliver value to customers at
an appropriate cost?(p. 4). Again no specific factors are mentioned. The next two
definitions can be said to be very specific in addressing what factors are included
in a BM, and they can thus be said to eliminate some of the abstraction created in
the two definitions above. Morris et al. (Morris, Schindehutte, & Allen, 2005) do
this through a description of the BM as how a set of decision variables is dealt
with in order to create a competitive advantage. They address six fundamental
components: Value proposition, customer, internal processes/competencies,
external positioning, economic model, and personal/investor factors. Johnson,
Christensen & Kagermann (2008) also mention specific factors that create a BM.
Their definition involves 4 interlocking elements, which when taken together
creates and delivers value (p. 52). These are customer value proposition, profit
formula, key resources, and key processes. It is through defining the different
factors included in a BM that research is moving closer to a practical appliance of
BM theory, such that practitioners have real-life tools that can be applied to their
companies and the context which they operate within.
Looking at more recent definitions of the BM (2010 and onwards), CasadesusMasanell & Ricart (2010) are short and concise, when describing a BM as: a
reflection of a firms realized strategy. Along the line with Magretta their
definition is somewhat more abstract and less applicable for businesses as a
single tool, but can be used in coherence with other theoretical frameworks.
Finally going back to Teece (2010) who argues that a BM articulates different
factors such as the logic and the data that make up a value proposition for the
customer, but also represents a cost and revenue structure of the company that
delivers this value to the customer. The definition thus links the notion of value
proposition with internal processes of a company, thus emphasising that the
ultimate focus should be the customer.
Since the paper will be revolving around the term BM, it is very appropriate to
pick out one definition that will describe what is meant upon using the term. This
is done in order to avoid ambiguity about what is meant with the term. As shown
above defining a BM is not a simple task. Although there seems to be an overall
coherence between the definitions, some of the definitions are different in their
meaning and focus points, and it is therefore important to pick one that can
create coherence and meaning with the rest of the theoretical framework. This
paper will not be using any of the definitions above, however, it will use a
definition evolved from the theory above.
Zott and Amit (2010) evolved their 2001 definition off a BM and it is this
definition that will be used as a point of reference inside this paper. Their
definition of a BM is: a system of interdependent activities that transcends the
focal firm and spans its boundaries (2010: 216). The reason for choosing this
definition is two-fold; First of all, it acknowledges that a BM is not just a single
system that should be seen upon as a whole. The emphasis on interdependent
activities will help create coherence with the rest of the theory used for this
framework. Secondly, it is still a rather open definition. It does not try to define
the specific entities thus maintaining an open scope open for individual
interpretation.
Some of the other definitions would have fitted the somewhat same needs
however; they lack the complete two-sided focus. For instance, Teece (2010),
Morris et al. (2005) & Johnson et al. (2008) all put an emphasis on the fact that
business models have different entities that make up a whole, but it is when
trying to define these that they fall through. Upon doing this, they close down the
scope and the openness thus limiting the definition. This would damage the
coherence with the rest of the theoretical framework and is therefore not ideal
for this paper. Others, like Magretta (2002) and Casadesus-Masanell & Ricart
(2010) have a definition which is simply too open thus failing to be accurate
about what a BM actually is and therefore again lacking coherence with the
theoretical framework of this paper.
will also be using for convenience. BMD refers to novel start-up BMs and BMR
refers to changing existing BMs.
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elaborated on later on in the paper, however, the model will first be introduced
and briefly explained.
When looking at and putting this model into practice, it is important to note that
inside established firms there are two blocks named II. The first block represents
the current state of the business model whereas the other represents a process.
The model proposes that we can distinguish between four different types of
business model change:
(1) Business model creation (block I); the creation of novel BMs through the
entrepreneurial act of establishing a new business.
(2) Business model extension (block II (+); adding new activities or extending
already existing core activities.
(3) Business model revision (block II (+)/(-); the act of revision implies
terminating old activities and replacing these with new ones.
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(4) Business model termination (block (-); abandoning existing areas of your BM.
The slashed arrow means that other activities will still be developed.
One of the main reasons for choosing to work with this particular model is that it
does not necessarily rule out the rest of the theory. It merely creates a framework
in which the rest of the theory can be applied. In other words, the model is not
offering specific suggestions on how to change a business model; it is rather
presenting the different ways in which we can categorize our other theoretical
tools. This creates coherence with the rest of our theoretical framework since it is
assuring us that we can work with a broader scope than if we had settled on a
somewhat narrower framework. Using the model thus helps us create an
overview of BMR even though the complexity of the topic is still highly
acknowledged. This also implies that when working with theory further on in the
paper other theories will not be neglected, but rather used in connection with the
model. This will ensure that a complex and nuanced analysis is carried out inside
a clear and visualized framework. Hopefully, the model will also be a tool that
makes it easier for practitioners to comprehend the rather abstract analysis.
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conceptualization of the BM. The model is illustrated below, but will not be
elaborated further on since the illustration is considered rather self-explanatory.
At the top-level of abstraction we find business models to be conceptualized as
narratives. BM narratives are key to inducing stakeholders on which direction
companies are moving, and how they might act in different situations. Narratives
can be used by both managers and entrepreneurs to help explain the company in
a more simplistic and thus less complex way (Perkmann & Spicer, 2010). A
narrative can thus be used as an overall guidance both internally and externally
inside a company, setting up the framework or the story (Magretta, 2002) of how
an enterprise works, a definition that has already earlier been touched upon in
the paper. Massa and Tucci (2013) argue that a narrative can be used as a device
for communicating, allowing companies to achieve goals like persuading external
audiences, surrounding the company with a sense of legitimacy or guiding social
action. However, it can also be said that narratives can be somewhat hard to use
for analytical purposes.
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Moving downwards in the model we find the notion of BM archetypes. This can
best be described as a pre-set description or recipe on how a business model
works. But as noted by (Baden-Fuller & Morgan, 2010) not all cooks can make
all recipes work and different combinations (ways to make and bake the cake)
can create success (p. 167). One example of archetype BMs are the freemium
model in which a company has a free version of a product, and charges for a
premium version (companies such as Spotify and LinkedIn has adopted this).
Another example is the model described by Zott & Amit (2010) as the razor and
razor blade model, in which Gillette sold rather cheap razors and then charged
high prices for the blades. The problem with high abstraction forms of BM
conceptualizations is that they can be somewhat difficult to use for analyzing and
comparing companies. Therefore we must go down the abstraction-ladder in
order to obtain specific tools that can be used and applied in a practical oriented
case study.
Earlier on, the paper touched upon definitions of what a BM is and it will return
to some of these. (Johnson et al., 2008) proposed that the BM consist of four
interdependent elements, which are customer value propositions, profit formula,
key resources, and key processes. These four interlocking elements thus make up
their framework for how a business creates value for both itself and its
customers. Similarly (Morris et al., 2005) created their framework around the
assumption that the main objective for a BM is to create a competitive advantage
for the company. They propose that this competitive advantage can be created
through six different factors, which they argue is what a business model is made
of. Their six factors are: Value proposition, customer, internal
processes/competencies, external positioning, economic model, and
personal/investor factors. Since both definitions have been used already they
will not be elaborated further. Creating a more precise and visualized model Lim
(2010) has proposed a business model framework that is based on structure,
operations, strategy and environment, the model is named ESSO. His framework
describes the three as being the interdependent components, which make up a
BM; however, they link together through knowledge management and
operational competitive priorities. His model also factors in the environment in
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which a company is operating and mentions the PESTEL factors. The over-use of
meta-models can be problematic due to a potential loss of complexity, which is
noted by Massa & Tucci (2013) who argues that although these types of
conceptualizations recently have become popular amongst practitioners due to
their simplicity, they cannot provide analysis with the needed depth and
complexity. They argue that a main problem is that the models do not factor in
the dynamic aspect of the business model, and they can therefore have
shortcomings when they are trying to describe a companys particular business
model. Meta-models, they argue can make up for these limitations and help giving
a more complete picture of a companys BM, since these models can help us
understand how different business models operate in a network of other
exchange partners. The author of this paper shares their concern, however, also
acknowledges that the use of more simplistic models is necessary to create a
framework which is clear and structured.
Going a couple of steps further into the model Gordijn & Akkermans (2001) have
the approach that conceptual modelling should describe how economic value is
created inside a network of actors. They call their model e3-value-onothology
and it is somewhat different since it deals with a value-based view (instead of a
process or system architecture view, as previous models). The approach is
building on terms like actors, value exchanges, value activities, and value objects.
These terms or notions are thus transferred into a model network in which it is
described how companies and consumers interact, and how economic value is
created, distributed and at last consumed by the end-customers. On a somewhat
similar note (Zott, C., & Amit, R., 2010) have proposed an activity system
approach that is based on their perspective that a BM is the set of interdependent
activities. This means that in their model the firm is the center, also taking the
activities of the network surrounding the firm into account. As they describe it:
an activity in a focal firms BM can be viewed as the engagement of human,
physical and/or capital resources of any party to the BM (the focal firm, end
customers, vendors, etc.) to serve a specific purpose towards the fulfillment of
the overall objective (p. 217). The strength of the meta-models and activitysystems is that they can be used as overall models in which you can still use more
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specific theories to elaborate further, while still capturing the dynamics of how
business models interact in networks.
The canvas proposes that a BM is made up of nine different components that all
together create an overview of businesses part and processes. The different
components can be viewed in the illustration above. Through an analysis of each
component we can thus dissect what changed inside the company through a
before and after description. The framework also gives us the opportunity to
assess which parts of the companys BM changed the most thus making it
possible to assess which parts were most important to change in the company.
The theory can again be seen as a framework in which other theories can be used.
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Using the BM canvas thus allows us to apply more theories to the different parts
of the BM of DS. Furthermore, there is a great coherence between the definition
of a BM created by Zott and Amit (2010) and the framework of the canvas. Their
definition describing the BM as a system of interdependent activities that
transcends the focal firm and spans its boundaries (2010: 216) has a great match
with the BM canvas and as mentioned earlier the coherence of the theoretical
framework is important for this paper.
The reason for choosing the BM canvas over other models is that it has more
means for comparison of BMs than other models. It would for instance be very
vague to compare two narratives or archetypes to each other, since they are not
deeply engaged inside a company, making it hard to specify concrete differences.
Therefore, they can be used for other purposes, but in this case they are not
relevant. The reason for not working with meta-models or entity-systems is that
this paper is mainly engaged in the internal processes of the company. It would
be a great perspective to have, but it could be feared that the larger scope of the
model would compromise the internal analysis of the company. It could also be
problematic not to be able to work entirely in depth with a more limited scope,
since the paper may end up becoming to broad, and thus not really be able to
point at specific conclusions. Of course there are certain pitfalls associated with
using the BM canvas. A problem could be the loss of complexity. Since the paper
will be using particular models, which can only capture part of the real world, we
could end up loosing part of the holistic perspective. Hopefully, this can be made
partly up for by using as much supporting literature as possible to carry out the
analysis, as long as there is coherence with other literature being used.
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3.1 Methods
The study will be set as a single case study only investigating the particular case
of DS. It is designed as an intensive case study, striving to create a holistic
understanding of the case and not create generalizable theory that can be used
for general cases. The reason for this, is the belief that in order for this to be
done, the study must be designed either more longitudinal or with multiple cases,
in order for larger amount of empirical data to base theory upon. The time frame
of the study is approximately 3 months from February to May 2014. The
references used for the study will almost exclusively be based on scientific
research as well as most data will be primary data gathered inside the company
to ensure high quality. The paper will take an abductive approach to the findings
since it will be mixing the approaches of both deduction and induction. The
deductive elements are the theory that changes have occurred due to the
changes, and it is thus this that the paper hopes to prove. The inductive part
comes from the desire to theorise what it takes to successfully overcome radical
changes in the external environment. It can thus be said that the study is based
on exploratory research which will be approached circularly and can be everchanging in the process. But mostly the study will be designed in such a way that
the findings will be open and it cannot in any way be predicted what sort of
outcome the study will have. It is a key factor that the interviewees will be
influenced as little as possible, while still sticking to the agenda, which is
researching the BM. In order to reach the findings the paper will be applying
existing developed theories to the case. Practically, the Business Model Canvas
will be applied to the BM of Danske Spil both before and after the events in 2012.
Upon looking at the results after using the BM canvas, it will then be decided
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what research can be applied to the newly obtained results. This should ensure a
flow in the research in which it develops as the data is analysed, promoting a
flexible research design rather than rigid research.
The practical implications of the above will include the following; prior to actual
research background knowledge must be obtained. This is done through an
analysis of company materials such as income statements and economical
figures. Furthermore, this will include retrieving recent data from newspapers
and other online sources, creating a knowledge-framework through
understanding the company and its situation. It is important that this framework
is set prior to moving on. Following this, three interviews will be conducted.
These are elaborated further in the data section. From the interviews the analysis
will be carried out, a relevant theory will be applied to the case. It is the authors
belief that this method should ensure high quality research and create a realistic
and nuanced picture of the case.
3.2 Literature
The main source for finding scientific literature has been through the EBSCO
business source complete database. Here key words have been business model,
business model innovation and business model development. The search has
mainly been limited to include articles from 2000 and onwards since the field has
been under a vast development, and it has been desired to have recent theories
and thoughts since this is when the field has really fallen in the interest of
scholars. This does, however, not imply that no literature prior to that year has
been used. From the database search, two recent literature reviews have been
used for inspiration as to what literature to include in the theoretical section of
the paper. These two papers have also functioned as catalysts into further
research. From the research four papers where picked out to create the overall
theoretical framework for the paper and these have each been described
thoroughly in the theory section above. These are: Business Model Dynamics and
Innovation: (re)establishing the missing linkages (Cavalcante et al., 2011),
Business Model Innovation (Massa & Tucci, 2013), Business Model Generation
(Ostenwalder & Pigneur, 2010) and The Business Model: Recent Developments
and Future Research (Zott et al., 2011)
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3.3 Data
The collection of data will be based on three main sources: company documents,
articles and through in-depth interviews. The company documents will mostly be
used to create overview with regards to the companys history (thus creating a
historical context), their financial performance and key economic figures before
and after 2012 and their general data. This type of information will not be used
directly in the paper, but it has functioned to create a basic understanding of the
type of company that has been dealt with in the exact study. The articles will
serve the same purpose. Although they may not be used directly in the paper,
they will be used to create a basis for understanding before going into more
direct data collection through the interviews. This should ensure basic
knowledge prior to further investigation, thus ensuring the quality of the
questions and research. Furthermore, DS themselves created a BM canvas that
will be used in the paper. In the data collection that is directly related to the
findings, and what these are based upon three main interviews have been set up:
1st interview w. Project Leader in the department of Business Development, Lotte
Lind Nielsen, on Thursday the 20th of March 2014:
The main focus of this interview will be to get information about what the BM
canvas has been looking like before and after the market changes. It is thus not
subject to many individual thoughts and ideas but will be very structured and
with a tight agenda. The reason for this is that the information is vital for creating
a foundation for the analysis, and it can thus be seen as the building blocks on
which the findings rely.
2nd interview w. CEO in DLI, Niels Erik Folmann, on Wednesday the 2nd of April
2014:
This interview will be concerned with what the changes has been looking like
from the top. This interview will be focusing on how the CEO has felt the changes
and what challenges has been associated with implementing changes in the BM.
It will thus represent the management part of the findings focussing on the role
of management with questions regarding challenges, essential changes and
revenue and cost changes. The interview will have a semi-structured design, thus
allowing it to develop through what sort of answers is obtained. Since no prior
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4. Findings
This section of the paper will be presenting the findings made in the study. It can
be broken down into three different sub-sections; presenting the BM-Canvas
before and after the changes, comparing and discussing the canvasses, and
investigating how the process of change has been seen from the management's
perspective. It will be based on interviews with managers and employees as well
as internal documents.
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What can mainly be inferred from the interviews is that the organisation as such
has operated more casually prior to the liberalisation. Since there was no
competition and customers who were loyal and had trust in the company (and
nowhere else to go), things where moving more slowly inside DS since there was
less external pressure demanding the company to perform. Like mentioned by
Lotte they were still trying to make money, but in a different way than today
where the organisation's ultimate key performance indicator is how big a profit
they can generate. Since the company is now divided in such a way that a part of
the company is profit based (DLI) and another still donates profits to local
associations, it is mentioned that there has been created a bigger gap between
employees, and even though the culture is still internally strong there is not the
same sense of coherence between employees. CEO Niels Erik Folmann also notes
this phenomenon, describing it as a clash between two cultures from before and
after the liberalisation and that this has been a challenge to manage (This will be
elaborated further in the coming sections).
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Key activities: In the activities we see a somewhat different picture than preliberalisation. DS now sees their key activities as product innovation and acting
as the market leader. They now see interaction with customers as a focus point
and they are determined to create entertainment for their customers. They also
work closer with their partners, in trying to create collaborate goals in order to
stay on top of the market. Trend spotting is also mentioned. Perhaps the biggest
difference is that now the emphasis is on operations. Operations are now seen as
the foundation for the company and it is probably the most key of all activities
after the liberalisation.
Key resources: The resources are still somewhat focused on the employees and
their competencies. Collaboration across the organisation is emphasised as being
a big resource for DS along with a good culture. As more rigid assets they
mention liquidity as a key factor, as well as the IT-systems that are used to
provide their online platform and all of their games.
Value propositions: The company is creating value through excitement,
entertainment and the creation of dreams. They put emphasis on the fact that
they are a Danish provider of games, and that they are linked to the state. The
money earned either goes to charity or directly to the state. A high-level of
service is now provided and their identity is well known by most people in the
country. Another big emphasis is put on having a large product range available to
the customers, and making sure that product development is always competing
with the main competitors in the market.
Customer relationships: DS is striving to have a close bond to their customers.
Knowing that they now have a wider range of suppliers to choose from, this is
becoming more of a key factor. They want their games to be both appealing and
interactive thus making them entertaining and not only seen as games played
with the sole purpose of either winning or losing money. However, DS also seeks
to inform their customers about the potential dangers of gambling. DS wants
their customers to absolutely certain that their money is safe and that their
earnings will be paid out.
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after the liberalisation were mainly casino games with a very high level of
payback percentage to the customers compared to for instance the national
lottery. This also means that DS needs to sell more games in order to earn money,
which of course leads to an increased emphasis on having a strong sales
apparatus that can overcome the challenges. This has been done through
integrating affiliate sales in which partners will share profits with DS on
customers that they provide, as well as cooperating with some supermarkets to
now provide their products. Also as noted by Lotte, the sales department inside
the company has been heavily increased. The partners working with DS have
been changed through BM extension, since the main change lies in the addition of
new partners in order to meet the conditions demanded by the market. Amit and
Zott (2012) also propose the addition of activities as a way of changing your BM.
When looking at their key activities several things are interesting to look at. First
and foremost it is rather clear that there is a clash between the large emphases of
profitability and the ethical aspects of people loosing their life savings on
gambling. This has been dealt with through integrating a CSR strategy as a key
activity, highlighting the responsibilities of the company which when all comes to
all is owned and operated by the Danish state. However it cannot be denied that
it is a fact that DS is now aiming to be as profitable as possible and therefore can
have a conflict of interest at this point. During our interview, the CEO noted,
"we'd rather have a million Danish people loose 10 DKK each, than have 10
people loose 1 million". The quote above somewhat sums up the conflict rather
well. He further notes that DS is the only company on the Danish market who has
these kinds of concerns. In general the key activities could be argued to the point
in which DS has seen the most changes. In extension to their conflict of interest of
course comes the fact that today operations are the foundation of all their
activities. It is somewhat unusual for a state owned company to all of a sudden
have profit generation as their number one performance indicator, and there has
been a trickle-down effect to most other areas of the company. And this of course
also influences all other activities. Evidently the changes in activities follow a
strong pattern of revision since fundamental changes have been made which has
altered how business is done in other parts of the company. Mainly the
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How DS are providing value for their customers has also been altered to a certain
degree. Although the basic value that DS are proposing such as entertainment,
excitement and safety has remained somewhat unchanged, it is now being
acknowledged that in order to keep customers coming back to their games other
value propositions are needed to support the basics. Therefore, the list of values
proposed has been extended and especially the development inside two
components are significant; the new found emphasis on having a high level of
customer service and having both a wide and deep product range. These are now
two important factors needed to provide value, and as mentioned earlier they can
be directly related to the increased competition in the marketplace. Perhaps the
most interesting observation is: what has always been taken as a given inside the
company, the fact that the company is Danish and deeply rooted in the people of
the country could be argued to now provide a significant amount of value to the
customers. All of a sudden customers are faced with the decision of either placing
their money with big international carriers with whom profits are placed in the
hands of the investors or DS where the money is either supporting local society
or directly to the state. This has significance for more reasons, 1) it is deeply
anchored in the Danish people and thus creates an advantage, and 2) this is a
value that no other competitor can copy (at least it seems highly unlikely that
they would even try), and it is therefore a value that will always be unique to DS,
creating a sustainable competitive advantage. It is certainly interesting that
something that has always been taken for granted all of a sudden could be argued
to be perhaps the most important provider of direct customer value and give the
company a decisive competitive advantage. In terms of the Cavalvante et al.
(2011) model this one is slightly more ambiguous, since it could be argued that
customer service and more products are additions. However, the changes have a
different nature, since the entire product range was revised to suit the new
market situation which is also why this paper will argue that the changes follows
the trend of BM revision. The example shows that it can be hard to distinguish
between the two in certain cases, which is why it is required to be specific when
analysing the BM.
34
As an analyst you could be suspecting that most monopoly companies would tend
to neglect their customer relationships, since the customers quite frankly have
nowhere else to go. Therefore, it is of course interesting to investigate how the
focus on customers has shifted once the market situation changed. DS themselves
describes this as their promises to customers and their promise is to deliver
games that are appealing, that the company is informative about potential
problems with gambling, as well as they strive to interact and create close bonds
with their customers. On top of this they promise to provide a sense of safety that
the money is secure and that winnings will be paid out. What is interesting is not
necessarily what DS decides to promise their customers, but actual act of creating
promises for their customers. As described before 2012 it was noted that the
company's customer relationship was less commercialized, but also that it was
very influenced by the monopoly situation. All of a sudden customers of DS can
enjoy the benefits of a company with a high level of service and even an emphasis
on co-creation of the company, which is also why we can clearly infer that DS has
revised customer relationships. The fundamentals have simply been changed and
today there is a completely different emphasis on this part of the BM.
When it comes to segmentation of the customers, DS has still been operating with
the same framework as prior to the liberalisation. However, there are two
significant changes to point out; the segments are now used to target specific
products to specific customer types and the integration of special benefits for
larger customers. DS has always tried to be somewhat aware of who their
customers have been, but pre-liberalisation the information has not been used
directly to sell more specific products to target customers. This has now changed,
thus again supporting the image of a more commercialised and profit oriented
relationship to customers. It also points towards the trend of a revision since it is
the way things are done that has been changed rather than an addition.
Furthermore, the linkage of activities follows on of three ways of innovating your
BM proposed by Amit and Zott (2012). The integration of large-scale benefits can
be said to be somewhat contradictory for DS, and it is a rather precise picture of
the moral issues that can be related to the changes. On one hand DS has a
responsibility not to create gambling problems and addiction, but on the other
35
hand they still need to be able to compete and make large profits through
offering what some players want. And no matter how it is put there is a
contradiction between the two. With regards to the channels preferred by DS the
most significant changes have been made through a "technological upgrade" so to
speak, through the integration of social media, mobile phones and applications.
These seem to have been necessary in order to follow the competitors in the
market, since all main competitors are providing these opportunities. As noted
earlier in the analysis, part of the channel extension has been to expand the sales
apparatus through implanting a DS outbound department responsible for direct
sales and campaign information to the customers, again building on the notions
of a more aggressive and commercialised relationship with customers. Channels
follow a clear trend of a BM extension since these have almost exclusively been
changed through the addition of more activities.
In terms of changes in revenue streams and the cost structure there are one main
change to both of them. Upon developing their canvas DS did not touch upon the
two, however through the interview with the CEO the changes were clarified. The
revenue in the liberalised part of the company has doubled after the market
liberalisation (according to the CEO), which in itself of course points towards a
change in how money is generated. Due to new amount of competitors entering
the market, the price setting was radically altered as prescribed by classical
economic theory (monopolies vs. perfect competition). The change in the
margins means that DS now has to shift their focus to increasing their sales
volume in order to generate the same profit as before, since each game will
simply generate less profit. It further proposes revenue model innovation, since
the pricing strategies have been changed in the company (Geisen et al. 2007).
This can be used to explain the change of strategy with regards to sales,
marketing and the altered customer relationship. Changing cost from fixed to
variable has been at focus in DS. Through revenue share models with some of
their game developers, they have tried to accomplish this. The vision behind this
strategy has been to minimize the risk when moving into new markets in which
the company has no know how. Since most of the competitors in market already
had a well-developed portfolio of games, a lot of product development was
36
needed in order to keep up. Therefore, making costs more flexible has been the
way to make ensure that the company can keep up with the demand for larger
investments in the market although it has the potential to influence the earnings
per game negatively.
To sum up the overall changes, a series of interesting findings were made. First
and foremost it can be concluded that the liberalisation has definitely altered the
different components in the BM of DS. The by far most influential change has
been the fact that DS' performance is now measured in pure profit. The reason
for this particular change to be highlighted is that this is ultimately the factor that
has caused most of the other changes. As a company the changes can be said to
have followed a pattern of BM revision since the overall and fundamental changes
have caused other parts to change. The emphasis on profitability has made DS
shift their focus in many parts of their BM, such that it can now compete with
other suppliers of games in the marketplace. This means that the parts that have
been changed through the extension trend have mostly been in order to serve the
main purpose of revision. The CEO, when asked what has been the most
significant change, also mentions: "today we are being controlled by KPIs from
top to bottom meaning that the group has goals which are transferred down
through the departments and even employees. This means that we not only
measure sales and income, but also the waiting time in customer service for
instance. This is very unusual for a state-owned company". And it is indeed
somewhat unusual. When entering the headquarters of the company, you do not
in anyway get the feeling that you are entering anything related to the state, but
rather that you are entering a company as anywhere else. They are now by far
the company in the entire country spending most money on ads and commercials
(Christiani & Hst, 2013), and they have even implemented a bonus system
rewarding the high performing employees and departments. There is no doubt
that inside the part of the company operating on the liberalised part of the
market it can be hard to distinguish between them and any other company
striving to make profits and keep their investors happy. However, it is also clear
that the changes have caused certain challenges especially related to the
organisational identity that DS has always been associated with. As noted by the
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CEO one of the main challenges has been to manage the relationship between the
"monopoly-employees" and the more performance and competition minded
employees. Since the liberalisation meant a fast organic growth for the company
this also meant hiring a lot of new employees who came in with another mindset. It is a phenomenon like this that means we cannot neglect the management
side of dealing with BM changes, and as the CEO notes "this is not something that
can be taught in any of the theory books". It was further noted that the change of
pace in DLI due to the competitive nature of their market situation has been a
subject of conflict. Since both DLI and DLO are operating under the same
organisation but now has a different customer-supplier relationship, they have
been experiencing internal conflicts since employees in DLI seem to move at a
higher pace, demanding work assignment fulfilled faster and more effectively
than the employees of DLO.
Therefore, a vital part of the analysis is also to acknowledge that the management
plays a large role in implementing and managing changes in an organisation and
this has certainly also been the case here. The problem of the "culture-clash" as it
is described by the CEO has been dealt with through the creation of common
goals, such that employees will be working together towards the new order.
Another problem that DS was faced with was the contradiction of being a
responsible company that did not create gambling addiction and still trying to
earn as much money as possible. This issue could be somewhat more serious
since it is threatening part of the deeply rooted identity in the company saying
"we are here to benefit and make people happy". Although it may be near
impossible to overcome the problem completely due to the direct contradiction,
the management has tried implementing and emphasising a new CSR-strategy
which has an important role in the company in order to maintain as much
responsibility as possible. As mentioned earlier the right management is an
absolute key to implementing changes, and there is no doubt that the situation in
DS could have been completely different, had the management not had the
willingness and readiness to change. What was emphasised as the most
important leadership factor was the change of structure that followed the BM
changes, meaning that the organisation has become more flat, and the companies
38
are now operating as separate entities. As analysed below, this can be said to
have helped DS overcome a lot of the traditional barriers to change and this has
certainly been a valuable decision made by the leaders. According to Doz and
Kosonen (2010) it is the leaders that drive changes of a company's BM, and it is
their responsibility to create a more flexible and agile organization, as well as
taking on the risk of venturing into new areas and experiment with the BM.
Although the changes have also created more flexibility through separation and a
flatter organization there is still work to do, as noted by Ditte-Maria. She argues
that even though the company has become more flexible they are still somewhat
rigid in their it-department, which has caused frustration with suppliers since
products are hard to scale to the needs of DS. Employees also expressed
frustration, that the company is not as agile as their competitors. She further
notes however, that it is a clear goal to improve upon the flexibility of the
organization, and she expects the company to improve further over the next
couple of years. Another way of innovating a BM is through leaders creating
mutual engagement of employees as proposed by Santos et al. (2009). This has
been done by the company through giving out more responsibility to each
employee, making them feel as a bigger part of the whole. Also, the creation of
common goals has been contributing to mutual engagement. In order for the
organization to stay flexible in the future, leaders should engage in one or more
of the three meta-capabilities developed by Doz and Kosonen (2010), strategic
sensitivity, leadership-unity and being flexible with resources as well as engaging
themselves in further BM innovation, to stay flexible (bock et al. 2010).
As described by the authors the process of revising a BM does not come without
challenges. Some of the key challenges mentioned besides the uncertainty when
revising a BM are the lack of knowledge and skills and a general resistance. The
lack of knowledge became evident through the presentation of new products.
Since all of the competitors had been operating with casino games for many
years, DS fell a bit behind. However, a strong preparation a year in advance
meant that they quickly overcame this problem. They even had a competitive
advantage the first six months since competitors were not used to the market and
the regulations. The challenges of resistance and blinders go very well hand in
39
hand with the already mentioned notion of a "dominant logic" (Prahalad, 2004)
and as well argued by Pisano (2006) and Chesbrough (2010). In this case
however, DS has been able to simply overcome all potential resistance through
hiring and creating a new team of managers. In the liberalised part of the
company a new CEO was hired as well as a lot of new manager positions was
created, thus meaning that the managers have been able to come in with a rather
"fresh" view on things which could be argued to have had a significant positive
effect on the company's readiness to undergo changes. Therefore, DS seems to
have avoided classical barriers through new management, but it could also be
argued that the separation of the companies has played a significant role. Today
the part of the company operating on the liberalised market has been able to
incorporate a large amount of changes, however, you could suspect that if the
companies had not been separated as clearly, DS could have been facing some of
the problems above. The alteration of management positions is also addressed as
being an effective way of overcoming potential barriers to change, and is
mentioned as one of three tools to overcome these by Chesbrough (2010). An
interesting concept that can be linked to the case is that of an "identity trap"
which can hinder progress and change due to the fact that a company has a
strong sense of identity which it fights to stick with (Bouchiki and Kimberly,
2003). DS historically has a very strong identity as a responsible company
serving the people's interests and their slogan "for benefit and joy" somewhat
supports this picture. Therefore, naturally it could be feared that this identity
could cause a barrier to change and that part of the organization would be
resisting. What can be inferred is that again the separation of the activities into
different companies operating on different markets could have helped overcome
this barrier. Since a new branch of the group was founded, they have had time to
build their own identity and since the old monopolistic branch was separated as
well, this part of the organization does not necessarily have to associate itself
with the liberalized branch and their values. In DLI the CSR-strategy now plays a
larger role helping employees not loosing the sense that they are here to do good,
and this can also be said to have helped DS maintaining an overall identity similar
to old times, thus enabling them not to fall into the identity trap.
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5. Discussion
The last part of this paper will be discussing the findings made in the study as
well as a discussion of the structure of the case study. From this discussion, it will
furthermore be discussed how theory has seemed to fit with the particular case,
and whether or not there have been pitfalls and lack of theoretical framework to
use as an analytical tool in this study. Furthermore the section will round up by
drawing conclusions on the study as a whole and answer the questions proposed
in the introduction of this paper.
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broader range of cases such that the process of change and innovation can be
more generalized, however, still taking into account the uniqueness of the
particular context inside a case. Since we are dealing with a very complex
process, rigid and narrow theories will not be able to serve a broad purpose.
However, this do not suggest that specific theories on change is never useful.
Specific theory could be useful if it is somewhat related to a different subcategory of cases or has significant similarities with the case. For instance the
experimentation approach from the Naturhouse study (Sosna et al., 2010), can be
very useful, however, it implies that there is an actual case in which the theory is
applicable. The same goes for theories developed by Geisen et. al. (2007) and
Amit and Zott (2012) since they are definitely applicable and relevant but need a
specific case fit to ever infer much about the actual case. Theories that have a
greater fit for the purpose of our case are for instance Santos et al. (2009)
proposing a dynamic view on change through organizational dynamics. Theories
like these are more applicable to the DS case since they work as broad
frameworks, in which you can insert data specific to the particular case. Other
examples of theories fulfilling these characteristics are Doz and Kosonen (2010)
and Bock, Opsahl & George (2010) (besides already mentioned Cavalcante et al.
(2011) and Ostenwalder & Pigneur (2010)). Through the emphasis on theoretical
tools like these a case study can be conducted without the loss of context, and
thus the practical applications.
To sum up the discussion it can be argued that the case shows us that
generalizing particular ways of changing a company's BM can be dangerous since
trying to fit the process into already developed framework can blindside us as
researchers. The case further implies that with the right mind-set from the
management, barriers of change can be overcome, however, it requires
awareness of the issue and a structural setup that can carry the process of change
without falling apart. Although the odds seemed to be against DS when their
monopoly days came to a hold they had the willingness to adapt to the new
situation rapidly, and have been very successful in implementing the first wave of
changes to follow the market. Whether or not this readiness for constant
alteration will stick is going to be interesting to follow. It is likely to be needed.
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6. Conclusion
The paper began by asking how Danske Spil had changed their business model to
cope with the market liberalisation. It is this question that the paper has tried to
provide a thorough answer to, and through the analysis of the findings, the paper
can now conclude:
First, that DS did in fact have to change their BM to deal with the changes. These
changes included altering the business processes in nearly all areas, although
some more drastically than others. The changes spanned from adding activities
to changing already existing processes. The changes can be said to have been
rather fundamental and radical since the main focus of the company shifted into
being purely profit oriented, inside the part of the company operating on the
newly liberalised market. The main changes occurred in the key activities and the
value propositions of the BM
Secondly, the kind of changes implemented followed a pattern of BM revision.
The changes consisted of changing core processes, which pointed to the
conclusion of BM revision, although a lot of the changes were made through
adding new activities to the BM. This paper has contributed with research on
what elements can play a role when companies are seeking to change their
business models through revision
Third, the changes can be described as a "chain-phenomena" in which overall
fundamental changes worked as a catalyst for changes on the micro level. This is
thus the overall description of how changes have behaved in this case, and the
paper further argues that the changes cannot be seen as static entities since they
do not necessarily behave in a specific way or order. This is truly a highlight that
should be taken from this paper if ever used in further research.
Fourth, the paper found that management played a large role in overcoming the
potential pitfalls and barriers associated with the process of changing a firms BM.
It was through a structural change in how management were put together and an
overall change of the company's structure, which led to the breaking down of the
potential barriers and avoiding resistance from the organization.
45
Fifth and last, the paper has contributed to the discussion of what sort of theory
should be developed in further research, in order to serve the demand of future
case studies and to be applicable to practitioners. It is argued in the paper that
scientists should avoid the trap of fitting their findings into too many specific and
predefined models. They should instead seek to use broader theoretical literature
and from this derive specific knowledge about the case through comparison and
discussion thus avoiding the loss of context.
The author of this paper hopes that the research presented can further
contribute to the field with research inside the field of BM innovation and the
change process. Nevertheless, the paper has provided research contributing to
the process towards creating a stronger theory-based approach in the future.
Hopefully, the paper has also eliminated some of the abstract thinking
surrounding part of the field and presented findings in a clear and direct enough
way such that not only abstract-thinking scholars will be able to benefit from the
research conducted.
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6.3 Acknowledgements
First and foremost, a big thanks to Danske Spil and especially Ditte-Maria Heide
Kristensen who has acted as my contact person during the research period.
Without their openness and large engagement the results in this paper may not
have been as concise and, conclusive. Secondly, a big thanks to professor Peter
Kesting for his supervision and general sparring on this paper. Without his
knowledge and guidance this research had not been possible. Last but not least, a
thanks to my co-students with whom ideas and thoughts has been tossed around.
47
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8. Appendices
The original inter BM Canvas developed by the employees of Danske Spil.
Source: Danske Spil A/S
55
Financial figures from years 2009 to 2013.
Source: Danske Spil A/S
Interviews can be found on the USB handed in with the paper.
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