Factors that add value through lock-in – Business Y

There are four factors that add value through lock-in for business Y. The first factor ‘collaboration’ consists of two subfactors that represent how business Y keeps third parties attracted as participants of their business model. To be more specific, the first subfactor comprises that business Y has to consider barriers for potential partners to collaborate. For example, some of business Y’s customers are afraid of becoming customer as they feel this would indirectly strengthen their competition. This is because potential customers know that eighty percent of the customer base consists of an affiliate business of business Y. In other words, if potential customers would place an inquiry at business Y, then business Y could theoretically replicate the particular product for the affiliate business which would be substantial loss for the business that has invested into it. Furthermore, the second subfactor is estimating if the potential partner has matching values. Businesses are more likely to keep partners as participants of their business model if they for example both value trust and integrity. Put differently, these matching values increase the likelihood of a long-term collaboration between partners. This is in particular important with regard to global collaborations because these involve long distances. However, when businesses know they can trust each other, they are less likely to terminate the collaboration as they know it is going to be difficult and another long process to find a trustful partner. As a result, both businesses are locked in each other’s business models. The following quote emphasizes that business Y appreciates it to collaborate with partners who have similar values:

“In this collaboration I found the most important that we spoke the same language, that we were both willing to collaborate and also trust. With language I also mean expertise as this is also a language.” – Director at business Y

The second factor comprises adding value by adopting regulations that stimulate employees’ participation in (improvement) processes. Business Y does this by setting targets with an incentive in the form of a particular financial benefit for employees. When employees achieve these targets, they will get the financial benefit (bonus) at the end of their fixed-term contract. As a result, employees will be less likely to resign before their contract expires as this would imply that they do not get their bonus. In other words, the employees are locked in the business model of business Y as they do not want to miss out on their bonus. At last, improving employees’ participation can be done by ensuring healthy competition amongst colleagues. Especially targets are introduced in a business, the competition amongst colleagues is going to increase. It is the manager’s task to keep this competition healthy as employees should for example not sabotage machines which a colleague is going to use.

44 The third factor comprises that value can be derived through lock-in capabilities when business Y expands its product offerings. More specifically, a business could expand its offerings with products that reflect a basic necessity of life. For example, business Y creates mould for plastic packaging for the food industry. They know that in this market there will always be demand for their products. So, by strategically offering these products, they are more likely to sustain.

The fourth factor ‘socioeconomic sustainable aspiration’ can be described with two subfactors that add value through lock-in capabilities. A business can for example focus on offering qualitative products with the intention to become the only supplier who can deliver this particular product. As a result, this company gains a competitive advantage as customers are dependent on this business when they have to procure this particular product. In addition, customers know that procuring a less qualitative product comes with additional costs in a later stage. To be more precise, if for example a mould is of less quality it is likely that it has to be repaired more frequently and therefore it will involve more costs. As a result, the customer is probably going to procure a mould at a business that can offer the best value for money. Following this line of reasoning, it could feel counterintuitive that business Y is offering qualitative moulds. This is because creating qualitative moulds impairs the amount of repairing activities they could have potentially done. As a result, their income streams will be negatively affected by this. However, it is also likely that this negative effect is mitigated by the fact that business can ask a higher price for qualitative products. Also, offering qualitative products has a positive effect on customer satisfaction and for that reason future income streams are likely to be secured.

“It is true that we are one of the few mould makers in Russia that can deliver moulds with these quality requirements.” – Director at business Y

The other subfactor is that business Y uses its lock-in capabilities by focusing on costs. More specifically, focusing on costs could make it possible to reduce the costprice and thus the selling price of a product. In other words, if creating a product costs fewer resources then business Y can pass on this difference into a discounted selling price. As a result, business Y might be able to offer qualitative products for a lower price than its competitors. This increases the likelihood a customer remains locked in business Y’s business model. Table 13 represents a summary of the (sub)factors that add value through lock-in for business Y.

Table 13 – Factors and subfactors that add value through lock-in for business Y

Factors Subfactors

Collaboration Consider barriers for employees

Estimating if partner has matching values

Regulation To stimulate employees’ participation in improvement processes

Augmentation To expand product offerings

Socioeconomic sustainable aspiration

Through offering quality Through focusing on costs

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