GENERAL RESEARCH Mobile business models: organizational and financial design issues that matter Mark de Reuver & Harry Bouwman & Timber Haaker Received: 22 August 2008 /Revised: 9 December 2008 /Published online: 24 January 2009 # The Author(s) 2009. This article is published with open access at Springerlink.com Abstract Designing viable mobile services and business models that capture value for all the organizations involved is a challenge. There are many design issues that can be taken into account, and it is often unclear what their ultimate effect is on the performance of a business model. This paper offers a framework for relating critical design issues to success factors and tests the causal relationship between these core concepts in the organizational and financial domain of mobile business models, based on an international survey among 120 practitioners and experts in the mobile Internet services domain, most of them from EU countries. According to our findings, addressing organiza- tional design issues (i.e. partner selection, governance and relation management) leads to an acceptable division of roles among actors, while addressing financial design issues (i.e., pricing, division of investments and costs among partners) results in risk levels that are perceived to be acceptable. The level of profitability that is perceived to be acceptable is influenced indirectly by these design issues, because the relationships are mediated through the risk level that the actors involved perceive to be acceptable and through the way the roles are divided among the actors. Keywords Business models . Mobile services . Success factors JEL Classification L96 . Telecommunications Introduction Business models for mobile Internet services can only be viable in the long run if they manage to capture value for all the actors involved. Typically, the relevant resources are divided among operators, content providers, application developers and other players. Due to the conflicting strategic interests of partner organizations, capturing (network) value for business actors is a complex issue. The actors involved often operate in different industries (e.g. network operators, financial institutions and retailers) and have their own strategic interests (e.g. generate traffic, extend services to customers, generate transactions). Knowledge on how to balance require- ments and strategic interests effectively is extremely scarce in existing business model literature (Hedman and Kalling 2003 Seddon and Lewis 2003). In this paper, we adopt a design research perspective. To develop insight into how organiza- tions can design ���balanced��� business models, designers need to understand the design issues involved and their interde- pendencies. As yet, the vocabulary needed for design research, specifically with regard to designing business models, is not available. The same holds for insight into the causality between the design issues on the one hand, and performance of services and the business models that support these services on the other hand. This paper adds to this vocabulary by striving to develop a meta-theory on business model design and making causality between core concepts explicit. One of our core concepts is that of ���critical design��� issues. A critical design issue is defined as a variable that is Electron Markets (2009) 19:3���13 DOI 10.1007/s12525-009-0004-4 Responsible editor: Rolf T. Wigand M. de Reuver (*) : H. Bouwman Delft University of Technology, Delft, The Netherlands e-mail: g.a.dereuver@tudelft.nl H. Bouwman e-mail: w.a.g.a.bouwman@tudelft.nl T. Haaker Telematica Instituut, Enschede, The Netherlands e-mail: timber.haaker@telin.nl

perceived (by practitioners and/or researchers) to be of eminent importance to the viability and sustainability of the business model under examination and it can be seen as a variable that can be manipulated by the afore-mentioned practitioners and/or researchers. The issues involved include organizational issues, including selecting partners and in- stalling governance mechanisms, and financial issues, for instance investment planning and revenue sharing models. With regard to (mobile) business models, existing studies list a range of design issues or parameters (e.g., Ballon 2007 Methlie and Pedersen 2007 Osterwalder and Pigneur 2002). To our knowledge, there is no existing framework or empirical research in which the causal relationship between these design issues and the performance of business models has been tested on the basis of a large-scale, quantitative approach (Methlie and Pedersen 2007). Furthermore, there are no standard tools to measure the performance of business models. In our view, the perfor- mance of a business model involves several aspects and it can be broken down into a number of success factors, which can be defined as ���the limited number of areas in which satisfactory results will ensure that the business model creates value for the business network��� (adapted from Rockart and Bullen 1981). The underlying assumption is that multiple actors have to work together in the mobile business domain to realize a business model that is feasible and viable for the shared network-based activities as well as the individual businesses. In a business network, firms will on the one hand work together to create value based on their common interests, while on the other hand competing to capture value based on their individual interests (Brandenburger and Nalebuff 1997). While some authors, for instance Porter���s five forces model (Porter 1985), emphasize the competitive element involved, others focus more on the cooperative element, for example industrial marketing and purchasing (e.g., Axelsson and Easton 1992). In our approach (Bouwman et al. 2008), we draw a distinction between success factors with regard to network value, and success factors with regard to customer value. In this paper, we focus on network value, which has to do with balancing the competitive and collaborative aspects, with the aim of realizing acceptable outcomes for the participating firms, in particular those that provide essential resources and capabilities. With regard to business model performance, we use the perceived acceptability of specific success factors involved as a proxy. If a business model fails to perform adequately in the eyes of the actors involved with regard to a specific success factor, the related critical design issues ought to be reconfigured. In this paper, we test the causal relationships between the critical design issues and success factors with regard to mobile business models. More specifically, we examine the impact of organizational and financial design issues on the success factors that ultimately explain the value captured by the organizations offering a given service. We do so by analyzing the results of a survey among 120 practitioners and experts in the mobile Internet services domain, mainly from Europe and more specifically from the Netherlands. In ���Theory and approach���, we address the theoretical back- ground of business models and address our design approach. In ���Method���, we present our research method and the way we measured the constructs. ���Results��� contains the results of the data analysis based on structural equation modelling. In ���Limitations���, we address the limitations to our research and ���Conclusions��� presents our conclusions. Theory and approach Business models In recent years, research in the area of business models has shifted from defining business models, via exploring business model components and classifying business models into categories, towards developing descriptive models (for an overview, see Pateli and Giaglis 2004). First of all, it is important to define what a business model is. We follow the definition suggested by Chesbrough and Rosenbloom (2002), that a business model is a blueprint for the way a business creates and captures value from new services or products. As such, a business model describes how a company or network of companies aims to make money (network value) and create consumer value (customer value) from a specific service offering (Bouwman et al. 2008 Haaker et al. 2006). A central element is that a viable business model should create both customer value and network value. A business model contains several basic components. Many researchers (Afuah and Tucci 2003 Bagchi and Tulskie 2000 Klueber 2000 McGann and Lyytinen 2002 Tapscott et al. 2000 Timmers 2000 Weill and Vitale 2001) focus on business model elements, such as service and product innovation, the actors involved and their relation- ships, information and application architectures, and informa- tion and value exchange. According to Alt and Zimmermann (2001), there are a few elements that are common in business model definitions: mission, structure, process and revenues. Based on what a company has to offer, who it targets, how the proposition can be realized and how much can be earned, Osterwalder and Pigneur (2002) distinguish four basic elements: (1) product innovation (2) customer relationship (3) infrastructure management, and (4) financials. In a meta- study of existing literature, Morris et al. (2005) identified 24 different business model components. In a similar study, Shafer et al. (2005) identified 42 different business model components that can be clustered into four generic compo- 4 M. de Reuver et al.