The business model features and rapid internationalization
The collected data through semi-structured interviews from the respondents were used to explain how and what different aspects of business model affect rapid internationalization of case companies. The theme-based data analysis is used to analysis the several features of business model (ex: value proposition, value creation and value delivery, and value capture). Moreover, scalability, replicability, and novelty aspect and digital elements of the business model and how those factors impact on rapid internationalization of case companies will be discussed. Here the discussion aims to analysis empirical results based on theoretical framework and RQs developed for this study.
The value proposition (offering and market) aspects of the business model
First, this study emphasises the importance of value proposition aspect of the business model as an enabling factor for rapid internationalization. It is basically focus to answers the questions as what firms sells and the intended customers (target market).
The offering aspect of the business model
Empirical evidences gathered from five Finnish digital firms for this study, the value proposition aspect is considered as pivotal factor for realization of rapid growth in the foreign markets. The offering aspect refer to what firms sells and why customer willing to pay amount for specific product. Accordingly, the respondent of case A argue that offering unique digital solution is created somewhat “state of art” to the digital e-material management.
“our platform is a place where you can purchase, create and manage the organization's e-learning materials from one place. So that would be the easiest way to describe it. it's a solution” (CEO of Firm A)
Case B is clearly an indication of providing digital solution for learning foreign languages faster and permanently. The responded of case B argue that because of the existing language learning apps are light and casual nature, this solution has offered specific value to its customers and thereby grow faster in different markets.
58
“We have a digital language learning service. So it's available both in the web and as an app who need to learn for permanently………. developing an AI system that is able to detect mistakes in spoken English and then give individualized feedback like a private teacher” (Head of Talent of Firm B).
As an early stage digital company, case C’s digital gamification learning app was able to spreading faster in multiple foreign markets as a result of proven impact of this solution. CEO further responded that higher results can be achieved through this solution while it making simple and powerful reporting tool for parents, teachers, and the school management.
“one of the results actually says that, with a wooden playground, children are completing up to eight times more tasks compared to traditional learning methods” (CEO of Firm C).
The common characteristic of case D and E is both the firms offer online games for mobile phones which is spreading early and faster due to their specific nature and the wider availability. Similarly, both respondents agreed with the point where providing unique offering is an important factor for gain huge success in the multiple markets.
“it was a very light weight game so it's run also on weak devices……So doing well….and we got 100,000 downloads very first day when we launched the game globally. of course we got some popularity before the launch when we had like a better version of the game and some internet gaming site, pick it up and say that this is quite cool game.” (CEO of Firm D).
“It's based on transportation and there isn't so many games that are based on transportation. We don't have any time artificial timers in the game. That's also something that it's a little bit different and it's like living aquariums something happening on the screen all the time. So that's, that's the difference for the player” (CEO of Firm E).
Therefore, it is clear that all cases confirm the importance of creating compelling value through its offering/solutions that is desired by the customers rather than let the customer to find the value.
As well as all firms are closely related with the customers to further development of the solution as a critical part of their business model. For instances, all cases collect customer experiences on a regular basis from digital ways. Therefore, firms can utilize updated customer centric data for
59
upgrade the offering and solve issues real time. This process compensates companies to accelerate the speed to enter new international markets.
“most of the downloads come from players who search again…… (CEO of Firm D).
The ability of customization and localization of the solutions is another highlighted factor emerged from the interview data. This was emphasized by all respondents where they agreed it influences the internationalization. For instance, all solutions are able to scalable with the target market requirements especially how to integrate with local education system and different pricing models accordingly. For instance, CEO of firm C stated that customization of input language help them to grow fast. i.e Spanish app is spreading faster in Latin American countries and willing to translate in to more languages in future.
In contrast, firm D argue that local adaptation is not relevant for gaming because target customers have shared same characteristics all over the world. However, firm D develop the product in Russian and Portuguese languages for rapid expanding to specific continents. i.e attract more Brazilian players.
“we improve the game, but we don't have any country specific because shooter games are something that similar” (CEO of Firm D).
Surprisingly, case E argue that localization of content would be benefited in several international markets although users have common characteristics.
“we are aware that we would benefit from localizing the game to suit different markets in the East………… Middle East, India, China, Japan, South Korea, those sort of markets, we would benefit if we would have localized look and feel” (CEO of Firm E).
Overall, the empirical results collected from the interviews highlighted that offering aspect of business model for value creation is vital for rapid internationalization of successful INVs/BGs.
60 The market aspect of the business model
On the other hand, market aspect of the business model is another important feature of entrepreneurial business model framework, which is basically answers to “who do we create value for?”. Previous literature highlighted those factors as target market size and the international market needs combined with rapid internationalization (Morris et al., 2005).
Accordingly, the empirical results confirm both home market and potential foreign markets are main drivers for rapid growth. However, both drivers play an important role more or less in their internationalization strategy. But on the other hand, all firms agreed to the point where Finland is too small market in terms of population and thereby small market size is motivating factor for internationalization. Therefore, entrepreneur seek growth opportunities in international markets.
“I mean, if we do a Finnish thing, it's gonna be relevant only for the Finnish player, for example, and it's pointless for us to do it because the market is so small” (CEO of Firm E).
When searching opportunities in the foreign markets, the size of the market and the strategic focus has positive impact for rapid internationalization.
“we have been focusing on private systems, just because it's much easier and much faster, to be able to make a deal with one school, instead of like a country that has 1000s of schools” (CEO of Firm C).
This idea has been further confirmed by case B where tighter focus will accelerate the growth rather than focusing big markets. For instance, rather focusing big audience it is useful to target smaller markets that led faster growth in multiple markets.
“Because when we have a tighter focus, it's faster to develop. So if we have only one product, one market that we concentrate on, we can move very fast” (Head of Talent of Firm B).
In contrast, potential market size and their needs also play critical role in internationalization process. All cases highlighted the importance of having unique, efficient and novel concept when entering into new markets. These novel solutions can be applied in the foreign markets to achieve faster growth.
61
“There are so many different ways of using digital solutions. When in comparison, for example, Africa, which is not so or they are just coming and rising to become more digitalized” (CEO of Firm A).
This is also related to the importance of niche positions and it is assumed as motivating factor for entrepreneurs for seek more opportunities in those markets. According to the interview data, it is reasonable to consider that all firms found niche markets for their solution within their business scope.
“We still haven't found and school in the world that might not be able to benefit from a solution like this” (CEO of Firm C).
“I believe this is a niche game and well………it's definitely a niche game. It's a tycoon” (CEO of Firm E).
In addition, the importance of trusted local partner was highlighted by firm A and C when enter in to new markets. It was helped to find potential opportunities and approach local market speedy and efficiently. This partner network help firms to critically evaluate the local context of the country’s education system, thereby enables grow faster rather than approaching schools directly.
However, this argument was not supported with the cases B, D and E where the solution is freely available to customers and no requirement for having partners.
“I would say that when trying to go to new markets, whatever the market or whatever the business case is, you have to have a trusted partner and trust would be underlined and bolded” (CEO of Firm A).
The above statements evident that potential foreign market size and its characteristics are crucial factor for shaping the rapid internationalization. To sum up, both offering aspect and market aspect of business model clearly indication for grow rapidly in foreign markets.
62
Value creation and delivery (internal capabilities and competitive advantage) aspect of the business model
Another important aspect of business model is value creation and delivery that include internal capabilities and competitive advantages of the company make them to stand out competitively.
Accordingly, the interviewed cases explain that internal capabilities play an important role in the establishment of successful firms. For example, case A addressed that firm has a committed staff with strong background of education and digital skills. Case B and C highlighted the importance of diverse and multidisciplinary team. In contrast, case D and E argue that passionate about the gaming industry is critical capability apart from the other factors.
“It has always been the team. I believe that they have knowledge of the games much better than I do” (CEO of Firm D).
Additionally, the building of trusted partner network also influential capability for a firm for fast internationalization in multiple markets.
“I guess it's more important to find like if you have a good team like us, we have the resources, we have the knowledge, we have the potential” (Head of Talent of Firm B).
Added to the above factors, cases identified the importance of professional team for sales and marketing as an internal capability. All firms have professional business developers with extensive experiences in the field. As a result, sales and marketing tools (like social media marketing) utilize by the firms to attract more international market opportunities.
“We are a private company that was founded by the main researchers who are behind the product.
And also we have a couple of international business experts. like myself, for example, I have more than 15 years of expert experience on building and managing international software teams” (CEO of Firm C).
On the other hand, empirical results do not confirm the relationship between entrepreneurial factors and network capabilities of the company and the speed of internationalization. In all cases, respondents agreed that internationalization is largely depend on the business model or the solution more than the entrepreneur characteristics (foreign language knowledge, foreign education, living abroad). However, both case A and C confirm the importance of using references from known
63
people when searching local partners (through social networks LinkedIn). In addition, both CEOs of A and C argue that participating trade fairs, exhibitions are relevant to build networks and finding good partners. Those strong ties of relationships with partners will create more business opportunities in foreign markets which enables expand in to new markets rapidly.
“being our most favourable partner would be a publisher, like a bigger publisher in the market, who wishes to kind of like win the digital market for themselves” (CEO of Firm A).
On the other side, to answer how firm will position itself competitively, the sustainable competitive advantage of the company needs to be understood. Firm A did not provide a concrete answer for their competitive advantage specifically. But CEO argued that novel concept of efficient e-learning materials for both Finland and target foreign markets is kind of a factor help to positioning themselves in the market.
Firm B argued differently that pedagogical expertise, mobile and usability expertise comes together create competitive advantages in both home market and in international market while firm C confirm that “proven impact” of the solution makes them competitively higher position when compare similar kind of suppliers in the market. On the other hand, high quality and mobile functioning features of the solution is highlighted by case D and E as a critical factor for compete with similar products.
By analyzing the interview data, it is understandable that sources of competitive advantage i.e internal capabilities led to internationalization in many ways. For instance, firm B argue that
“product-market fit” is the key factor to grow in international markets rapidly. Added that tighter focus to specific market allows them to grow faster instead of having several products in several markets.
“So making the best product for that particular segment…….and I think perfectly match the product with specific market” (Head of Talent of Firm B).
In contrast firm C argue that although there are plenty of gamification apps, their competitive edge is “proven impact” of learning experience which similar players cannot guaranteed through their
64
existing solutions. This concept helps firm to establish in foreign markets easily and rapidly providing a solid answer for niche market.
“we still haven't found and school in the world that might not be able to benefit from a solution like this” (CEO of Firm C).
As a gaming app providers, case D and E argue that competitive advantage is created from specific feature of their product and value created in it.
“let's say one of the best shooting game some mobile controls and aim assist functionalities is still better what others have…..” (CEO of Firm D).
“the game needs to offer meaningful, deep content or experience for several months also, that if those things happen, then the game can be super big” (CEO of Firm E).
Value capture (revenue and growth) aspect of the business model
Value capture aspect of a business model includes sources of revenue and cost structure of the firm, margins and financial aspects (Richardson, 2008). Therefore, the designing revenue model and economic model is key factor for every company in order to achieve success in the market.
All cases confirmed the importance of having sustainable income for growth and design revenue models to ensure income from both home market and the foreign markets.
Accordingly, all cases follow an acceptable revenue model which is replicated in multiple markets.
For instance, firm A uses “licensing model” and “commission model” to earn money from their product. Case B follow “subscription based model” and “fixed price model” for their solutions. At the same time case C use “subscription model” and the local partner work on an agreement with the schools ensure that firm C receives income.
Case D and E follow different revenue model from other cases because of specific nature of the product. These firms follow free model because market has shifted from premium model to free to play model very heavily. For instance, these games are freely available at digital platforms.
However, firm’s revenue consists of rewarded ads and in-app purchases.
“in- app purchases are the most important, but of course, you have to design them well……being too greedy to players appreciate that they get value when they pay and don't feel that they are
65
milked for money……. if players feel positive, they are willing to pay but they not forced to pay”
(CEO of Firm D).
On the other hand, Osterwalder and Pigneur (2005) and Morris et al. (2015) added the new market opportunities, new revenue streams, and growth strategy of the firm is another way of capture value.
Concerning the new market development, all respondents confirm that Finland is small and insufficient market to grow. As a result, they are motivated to provide solutions to other markets.
Therefore, reaching to a critical market is key factor for a company to expand. It is also emerged from the interview data that tighter focus strategy would be benefited to grow faster within a shorter period of time rather than focusing several markets. For instance, target the small market first and grow gradually is best option for a company.
“So in that sense, it's easier for us to work with these smaller countries that actually have taken very big steps in digitalization their educational systems” (CEO of Firm A).
“We have to focus our resources to be able to, to kind of move quickly and, and make the best product for that market and for that need” (Head of Talent of Firm B).
Contrast, case C argued differently on new market development strategy. The building of trusted partner network, and there by expanding to new markets was highlighted by the firm. At the same time, the argument of having physical offices in foreign locations as a growth strategy has denied by all respondents because of digital nature of the products. Nevertheless, interview data was not supported with the new market development or attracting new customer segments for case D and E because those products launched on a global scale focussing specific player profiles.
Therefore, it is clearly evident all cases have developed a business model in logical way and adds the internationalization strategy as a main part of their business model. For instance, designing a scalable digital offering that can be approached in several markets suits with the revenue models acknowledged in both domestically and internationally. Those factors can be replicated in different foreign location while lowering entry barriers.
Accordingly, table 2 provides the comparison of business models of case companies from the value aspects.
66
67
68
Table 2 – Comparison of case companies’ business model from value perspective (based on Morris et al., 2015 and Richardson, 2008)
69
The scalability and replicability aspect of the business model
Empirical results also identified another broader concepts of business model and rapid internationalization. Previous literature recognized the scalability and replicability of business model as an influencing factor for venture growth (Amit & Zott, 2001; Rappa, 2004; Bouwman &
MacInnes, 2006).
Accordingly, firm can achieve scalability in different ways (ex: offering new products, technology, strengthening partner network, strong sales and marketing). The interview data of five Finnish digital firms provide the evidences of how they achieve scalability in different ways within their business structure. For instance, firms can achieve scalable growth in terms of attracting more users to their platform. As a result, the more users will attract from both local and foreign markets
Accordingly, firm can achieve scalability in different ways (ex: offering new products, technology, strengthening partner network, strong sales and marketing). The interview data of five Finnish digital firms provide the evidences of how they achieve scalability in different ways within their business structure. For instance, firms can achieve scalable growth in terms of attracting more users to their platform. As a result, the more users will attract from both local and foreign markets