BUSINESS CASE MODELING REPORT AND GUIDELINES FOR FURTHER DEVELOPMENT

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BUSINESS CASE MODELING

REPORT AND GUIDELINES FOR

FURTHER DEVELOPMENT

Project: Tackling the ''Digital Divide'' in SEE by using the capacity of DTT

networks

Acronym: SEE TV-WEB

Version A-1.0; Date: 28.11.2014

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Document name / version:

DOCUMENT HISTORY

Version Status Date Author Comments Approved by

A-1.0 Approved

version 28.11.2014

IITR, OPENLAB, UL, PTA, INTK, ETF-SA, AEM

Approved version PM, PTM

CONTENT

Index

1 Introduction ... 4

1.1 Aim of WP6 / Activity 3: Business case modelling & guidelines ... 4

1.2 What is Business Modelling ... 4

1.3 The Business Model Canvas ... 6

1.3.1 The 9 Building Blocks ... 6

1.3.2 Procedure of filling the Business Model Canvas ... 9

2 Business Model Workshops ... 10

2.1 Stakeholder analysis and deriving of requirements ... 10

2.2 Function analysis ... 15

2.3 Business model canvas ... 19

3 Concept for Business Model for TV WEB ... 22

3.1 Basic costs for infrastructure ... 23

3.2 Parameters for creating business case scenarios ... 23

3.3 Overview of likely Business cases ... 24

3.4 Business Case “Social WEB TV” ... 25

3.5 Business Case “NewsTV” ... 26

3.6 Business Case “VideoTV” ... 27

3.7 Business Case “InstitutionTV” ... 28

3.8 Business Case “FreemiumTV” ... 29

4 Guideline for further development ... 30

4.1 Technical feasibility: ... 30

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FIGURES

Figure 1: Emerging of the term Business Model in Articles ... 5

Figure 2: 9 building blocks of the business model canvas ... 6

Figure 3: The Business Model Canvas ... 8

Figure 4: stakeholder analysis ... 11

Figure 5: customer segments ... 13

Figure 6: value propositions ... 14

Figure 7: example function analysis for bottle opener ... 16

Figure 8: technical setup for WEB TV ... 17

Figure 9: function tree for WEB TV ... 19

Figure 10: business model canvas for WEB TV... 21

Figure 11: first business cases ... 22

Figure 12: Overview of likely Business cases ... 24

Figure 13: village of Labinje near Cerkno ... 25

Figure 14: the international news broadcaster Al Jazeera Balkans (AJB) ... 26

Figure 15: Video on demand: Game of Thrones ... 27

Figure 16: The elderly home “Föhrenhof St. Johann in der Haide” ... 28

Figure 17: education via TV set ... 29

List of acronyms

SEE South East Europe

PP Project Partner

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1 Introduction

1.1 Aim of WP6 / Activity 3: Business case modelling & guidelines

On the basis of activities under WP6 A1 and A2 potential business case modelling were executed The business model addresses the target audience consisting of industry, national authorities and other stakeholders, which will have to enable and foster development of new services. It touches upon their needs and concerns such as need for and/or opportunity of the proposal; alignment with general policy, objectives and strategy; priority in the allocation of limited resources; effectiveness and efficiency; level and quality of service provided; community benefits etc.

Furthermore, the model addresses most of the prerequisites to be ensured as well as main impediments for new solution, content or service introduction. The business case model includes the very essential element for further development of the project initiative - guidelines for its implementation.

Special attention was paid to identifying the range and structure of the most vulnerable groups (elderly, low-income households, households with members who are persons with disability ...) and variety of available funding schemes.

IPA-I partners contributed to the elaboration of guidelines by providing a feedback with a clear goal to address challenges faced by particular partner country related to the size and level of development of the AVMS market and its role in narrowing the digital divide after the digital switchover. The business case model and the guidelines are delivered to relevant stakeholders in each country for analysis and national implementation. This task was executed in all participating IPA countries in a following way:

- Present them on the conference

- Present summary and findings in newsletter send to relevant stakeholders - promoting them through communication events and tools.

1.2 What is Business Modelling

A business model describes the rationale of how an organization creates, delivers, and captures value, in economic, social, cultural or other contexts. The process of business model construction is part of business strategy. In theory and practice, the term business model is used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, target customers, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies. The literature has provided very diverse interpretations and definitions of a business model. A systematic review and analysis of manager responses to a survey defines business models as the design of organizational structures to enact a commercial opportunity. Further extensions to this design logic emphasize the use of

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narrative or coherence in business model descriptions as mechanisms by which entrepreneurs create extraordinarily successful growth firms.1

Business models are used to describe and classify businesses, especially in an entrepreneurial setting, but they are also used by managers inside companies to explore possibilities for future development. Well-known business models can operate as "recipes" for creative managers. Business models are also referred to in some instances within the context of accounting for purposes of public reporting.

In Figure 1 the usage of the term Business Model is shown. As can be seen since the beginning of the 90s of the last century this term is constantly increasing in usage in articles worldwide. For the EU Project SEE TV WEB it is an essential question how to generate a working business model upon the outcomes of the project.

Figure 1: Emerging of the term Business Model in Articles

1

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1.3 The Business Model Canvas

The Business Model Canvas, is a strategic management and entrepreneurial tool. It allows you to describe, design, challenge, invent, and pivot your business model.2

1.3.1 The 9 Building Blocks

The 9 building blocks are established to give an overview of the areas that have to be defined in order to elaborate a business model. The blocks are shown in Figure 2.

Figure 2: 9 building blocks of the business model canvas3

The detailed meanings of the blocks are: 4 2 See http://www.businessmodelgeneration.com/canvas 3 http://businessmodelgeneration.com/downloads/businessmodelgeneration_preview.pdf, Inquiry 13.05.2014

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 The Customer segments includes if:

o Their needs require and justify a distinct offer

o They are reached through different Distribution Channels o They require different types of relationships

o They have substantially different profitabilities

o They are willing to pay for different aspects of the offer  The value propositions are

o What value do we deliver to the customer?

o Which one of our customer’s problems are we helping to solve? Which customer needs are we satisfying?

o What bundles of products and services are we offering to each Customer Segment?

 Channels serve several functions, including:

o Raising awareness among customers about a company’s o products and services

o Helping customers evaluate a company’s Value Proposition o Allowing customers to purchase specific products and services o Delivering a Value Proposition to customers

o Providing post-purchase customer support  Customer Relationships aim for:

o What type of relationship does each of our Customer Segments expect us to establish and maintain with them?

o Which ones have we established? How costly are they? o How are they integrated with the rest of our business model?  Revenue Streams:

o For what value are our customers really willing to pay? o For what do they currently pay? How are they currently

o paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues?

 Key Resources

o What Key Resources do our Value Propositions require? o Our Distribution Channels? Customer Relationships? o Revenue Streams?  Key Activities: 4 http://businessmodelgeneration.com/downloads/businessmodelgeneration_preview.pdf, Inquiry 13.05.2014

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o What Key Activities do our Value Propositions require? o Our Distribution Channels? Customer Relationships? o Revenue streams?

 Key Partnerships:

o Who are our Key Partners? Who are our key suppliers? o Which Key Resources are we acquiring from partners? o Which Key Activities do partners perform?

 Cost Structure

o What are the most important costs inherent in our business o model? Which Key Resources are most expensive? o Which Key Activities are most expensive?

The nine business model Building Blocks form the basis for the Business Model Canvas.

Figure 3: The Business Model Canvas

In Figure 3 the Business Model Canvas is shown. All 9 9 Building Blocks are aligned on one painter’s Canvas.

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1.3.2 Procedure of filling the Business Model Canvas

First of all the customer segments are to be defined. Usually one starts with the question – who are my stakeholders? By identifying the stakeholders, the link to the customers is easily established.

The next step is to define the value propositions. In this block the benefits for the customers are described – it is important just to have the customers’ views and not the view of the own company.

After this, the customer relationship is set up. Here the question is how we want to react with the customer. Is the customer just anonymous to us and to we have not direct connect to each customer? Or do we set up our services as customized as possible?

Next step is to figure out the channels through which the customer becomes aware of our company. How does he get to know us? How do we deliver our services to him?

After these blocks it is time to define the inner key activities of the company. The questions to be answers are how can we deliver the value propositions to the customer? What are our key processes? And how can we generate a revenue stream?

In order to get the key resources done, the next question is what has to be on board of our company to manage the key activities. Here it is a question of persons, infrastructure, know how and many more positions.

The next block is the defining of key partners. In order to deliver our services, which partners are most necessary for our value chain? Here we define partners where we can have partnerships with or where we have a deep cooperation.

Looking at costs the next block is to define the cost structure. Here the most important costs are summed up.

Last but not least the revenue streams are defined. This is the reason for most business models to create profit and make the company vital. Here the different kinds of generating income for the company are derived.

We shall describe somewhere the pre-assumptions for a TV-WEB service business model which considerably determine the model; e.g.:

- The service is non-commercial (OP1) - The service is commercial (OP2)

- Driven by the interest of the government to reduce Digital Divide in the country / region / target population or improve ICT service availability - …

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2 Business Model Workshops

For the project SEE TV-WEB several business model workshops were done to go through the process of setting up the business model canvas.

In rough, the action points of getting to the concept for Business Model for TV WEB were as followed:

 Stakeholder analysis and deriving of requirements  Function analysis

 Business model canvas

The key results out of these activities are described below.

2.1 Stakeholder analysis and deriving of requirements

The first step to create a future business opportunity is to get to know the stakeholders and their needs and wants. After doing the pilot projects in several countries of the project SEE TV-WEB a good understanding of the stakeholders is established.

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Figure 4: stakeholder analysis

Figure 4 the stakeholders of the business model of WEB TV are shown. Furthermore, national regulatory authorities and ministries can be added. There are three categories:

1. The provider of technical infrastructure and services to enable WEB TV 2. The service and content providers and sources

3. The consumers of the services of WEB TV

For the first group there can be mentioned MUX operator, DTT network operators (DVB-C operator, DVB-T operator, DVB-S operator)

The second group contains stakeholder like service providers (privately owned companies) and content sources (DELO, journal 24, RTV SLO MMC, Internet portals, government, municipality,…)

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The third group are the end users and customers (not connected citizens, government, municipality connected citizens,…)

As seen in Figure 5 - focussing on the customer segments there can be three groups subdivided:  Single endusers (yellow)

 Companies and institutions that deliver content and services (blue)  Institutions that need content for their customers (pink)

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Figure 5: customer segments

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For the single endusers (yellow) the criteria are like easy –to access, each day updated content, colourful & easy navigation, only limited content and therefor targeted content. This can also be emphasized by the results of the pilot projects which had positives criteria like:

 Simple, intuitive and easy to use  Similar to daily newspapers

 Great to use during commercial breaks on TV  Good, if there are many local news articles

 For reading news together, it is better than a newspaper, because of the big TV screen For the companies and institutions that deliver content and services (blue) the highlights are access to the market, value added for existing customers, targeted local market, redirect customer to external channel.

The institutions that need content for their customers (pink) require customized content, unique content but also reaching a wide area of endusers.

2.2 Function analysis

After doing the stakeholder analysis the next step was to perform a function analysis. The function analysis intends to figure out the main functions of a service or product and then to develop the secondary functions accordingly.

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In order to do a function analysis the technical setup was drawn to create a common understanding:

TV Figure 8: technical setup for WEB TV

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Doing a function analysis for the WEB TV he following function tree was generated:

Main Functions

Secondary Functions

source content

choose right content (source)

choose right service partner

edit content

combining information

adapt content

compress content

automate editing

deliver content to network operator

programme interfaces

exchange data

publish content

broadcast content

integrate content/service providers

programme interfaces

exchange data

to do marketing

do public tasks

inform citizens

Enable service for end users

Supply end users with equipment

inform how to use existing items

provide easy usablitiy

Communicate with the audience

define region of broadcast

nation wide

regional only

EU international

Figure 9: function tree for WEB TV

2.3 Business model canvas

Using the results of the stakeholder analysis and the function analysis the business model canvas was established. The result is shown in Figure 10.

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3 Concept for Business Model for TV WEB

Based on the work of doing the stakeholder analysis, the function analysis and the business model canvas, scenarios respectively business cases were derived. Figure 11 shows a brainstorming for business cases.

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3.1 Basic costs for infrastructure

Upon a likely set up of infrastructure, staff and network needed the costs for running the TV WEB service can be calculated as beneath:

Infrastructure Costs

User part

Installation ST Box 50 - 100€/ TV set

HbbTV TV set differs

Provider part

CMS CAE (content adaptation Engine) 15.000€

The user will need an infrastructure that consists of a ST Box and the self-installation and a HbbTV set.

staff costs

2 persons / 1 full time equivalent 3000€*/ months total costs

In order to guarantee the editorial work to be done, two persons employed as one full time equivalent are needed. They do the daily update of the content, they do editorial work on the content of the content sources and they are responsible for marketing and troubleshooting.

network costs

band with 1 Mbit/sec 12.000€*/month

storage 700 Megabytes 60€

refresh time for total storage 93 min.

As a consequence to be able to broadcast content, a certain band with (here 1 Mbit/sec) and a storage for the daily content is necessary. Of course, the price varies from country to country but there might be even potential to cheaper costs because of good financial agreements.

*Reference of Slovenia

3.2 Parameters for creating business case scenarios

In order to create future business cases, trend researchers and business modelers are used to create scenarios. In these scenarios different relevant parameters which influence the business case scenario strongly are identified. Then the business case parameters are partly changed in order to come to future scenarios. Upon the setup of parameters stories for the business cases are created.

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Parameters with strong influence on the business cases are as followed:  Region parameter:

o Less developed regional parts o Nationwide

 Payment parameter: o Monthly payment o Non payment

o Setter box is for free Payment through setter boxes  Paying Customer parameter

o Elderly homes (pensions, hotels,…) o Single users

o Government  Marketing parameter

o Elderly homes resellers o Elderly homes promoters o Government

o Others do marketing  Content parameters

o Content source is free o Content source is not free  Capacity available

o Available capacity for television multiplex

o Government establishes new regulations for new spare capacity for TV Web Services

3.3 Overview of likely Business cases

This overview provides five likely business scenarios, how the TV WEB prototypes and results can be brought to market.

Name Region Payment Paying

Customer

Marketing Content Capacity Social WEB

TV

regional none government regional free New spare

NewsTV nationwide monthly Single user operator Not free multiplex VideoTV nationwide on

demand

Single user operator Not free multiplex InstitutionTV regional monthly institution E. homes Not free multiplex FreemiumTV nationwide None plus

monthly

Government, Single users

Government, operator

free New spare & multiplex Figure 12: Overview of likely Business cases

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3.4 Business Case “Social WEB TV”

The parameters for this business case scenario are:

Customer

Marketing Content Capacity Social WEB

TV

regional none government regional free New spare

The Business Case “Social WEB TV” is the initial idea of the project TV WEB. In a world where every person has a home computer, notebook or mobile device with broadband connection to the internet, the TV WEB prototypes and results would be rarely necessary.

However, nowadays the digital divide still exists and for a certain period of many more years this situation will not improve rapidly. Therefore, it is an social issue of countries governments to reduce the digital divide.

So the government is the paying customer for the TV WEB services. Its intention is to help the rural poor or not connected regions to get parts of the internet content on TV sets.

Marco is an older man in the village of Labinje near Cerkno. He is middle educated, open minded and eager to be well informed.

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Every day he uses the TV WEB services to get the latest news about the region. He uses these news to discuss in his rounds with his friends. Often it happens that his friends don’t believe him what he tells them, then he turns on the TV set and shows them the proof with the TV WEB service.

Of course the content on TV WEB is not comparable to an encyclopedia because it is free content, but newspapers local TV stations are willing to give the content for free because on the one hand it is not the latest news or on the other hand they are allowed to do some product placement within the content.

The operating team of TV WEB is paid by government because the politicians like to reduce the digital divide and because they have an additional channel to reach voters through this channel.

3.5 Business Case “NewsTV”

Customer

Marketing Content Capacity NewsTV nationwide monthly Single user operator Not free multiplex Al Jazeera Balkans (AJB) is a 24-hour international news television station broadcasting in Bosnian, Croatian, Serbian and English. The headquarters is located in Sarajevo, Bosnia and Herzegovina.

Figure 14: the international news broadcaster Al Jazeera Balkans (AJB)

They have figured out that only a small number of digital educated persons in Bosnia are really using their service in internet. A larger number of potential users is not even connected to the internet.

That is why Al Jazeera Balkans (AJB) has decided to broadcast content over the service TV WEB. The operating team is paid by the broadcasters and the content is sent nationwide. A certain capacity is reserved at TV multiplex.

The content is updated once to two times a day and is because of the actuality not free. So the broadcasting station is paying for the content source.

The end customers of the services of TV WEB content are single users or households. They pay monthly a certain fee which is quite a lot below the fees for newspapers delivered to the house. The customers like the picture and text combination and that they can store content on their ST box.

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3.6 Business Case “VideoTV”

Customer

Marketing Content Capacity VideoTV nationwide on

demand

Single user operator Not free multiplex

Anna is a young teenager that likes to watch series of here favorite TV series game of thrones. Every day the TV WEB services broadcasts a new series to here ST box. She pays for this service as a single user. On holidays she even takes here ST box to her grandparents’ house where she installs the ST box. She can watch here TV series there too because the TV WEB service is nationwide.

Figure 15: Video on demand: Game of Thrones

The broadcast is hosted by SKY europe that provides the VideoTV service in different countries in Europe.

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3.7 Business Case “InstitutionTV”

Customer

Marketing Content Capacity InstitutionTV regional monthly institution E. homes Not free multiplex The elderly home “Föhrenhof St. Johann in der Haide” is customer of the service TV Web. Johanna is a 70 years old lady who lives at the elderly home. Every day she gets up in the morning and takes breakfast. She likes talking to the other persons around and is not intending to read a newspaper alone.

Nevertheless, she likes to be informed about the latest news. Although she doesn’t like global news because she focusses more on regional news and further categories like weather, health, society and so on.

So after breakfast she goes to the television set in the social room and reads through the TV WEB pages on the TV set. She likes very much the combination of pictures and text. Especially the function of enlarging the text font is highly welcome because she sometimes forgets her glasses at the room.

The elderly home pays monthly for the TV WEB service and provides the TV WEB content on all TV sets of the elderly home.

Other elderly homes and the relatives of the inhabitants of the elderly home get informed by mouth to mouth marketing of this very nice service of TV WEB and also plan to receive this service.

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3.8 Business Case “FreemiumTV”

Customer

Marketing Content Capacity FreemiumTV nationwide None plus

monthly

Government, Single users

Government, operator

free New spare & multiplex The FreemiumTV is a special services supported by the government. Its intention is to reduce the digital divide and to let people participate in the digital world.

The government pays the basic staff and broadcast costs for the nationwide free service. Therefore it creates a new spare capacity for broadcasting and charges no fee. Topics are set to be of nationwide interest such as political news, weather, style and socials, sports and health. The government likes to keep people informed to a good level.

Thomas is 35 years old and he does not subscribe to the service for a newspaper because he gets most of needed information through the service of TV WEB.

He is even more eager to get special services like the cooking channel in order to improve his cooking skills. Every day he gets a new recipe and he stores the ones he is interested in in order to try them out on weekends.

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Another channel he has subscribed to is his e-learning course for general management. Every day for 6 months he gets a new management approach visualized. He stores the content on his ST box and can repeat the lessons whenever he wants. His aim is to prepare for a bachelor degree in general management.

4 Guideline for further development

In this chapter future working items and guidelines for further development are introduced. There are two main areas of future development:

 Technical feasibility  Economic feasibility

4.1 Technical feasibility:

From a technical perspective the basic functions of the prototype of TV WEB is working well. The next step is to launch a model business application, where the broadcast institutions of several countries participate in a follow up initiative.

The next technical issues are to establish running broadcasting services of TV WEB in several countries in Europe. This enables the project members to collect experience in broadcasting in real life and to gain competence as professional broadcasters of a TV WEB content system. Another technical point is how to setup the delivery service of ST Boxes and how to ensure the correct installation in households.

4.2 Economic feasibility

From an economic perspective, the TV WEB service needs greater and longer test try out in order to proof the business case. This can be done in further EU projects that support the initial set up of TV WEB broadcast stations and offices. A try out over a longer period can build up a TV WEB community that becomes stable customers, therefore the concept of model regions of EU funding projects can help to establish the initial infrastructure and services needed.