Business model development for NextSelect : how can NextSelect create and capture value by taking a customer-driven perspective?

Berghout, J.B.M. (2012) Business model development for NextSelect : how can NextSelect create and capture value by taking a customer-driven perspective?

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Abstract:Small software development firms are struggling to stay in business. The economic crisis we are enduring makes it harder to find and attain customers and generate sustainable revenue streams for small software companies. In this thesis a business model was developed for the small business process software development company that allows it to remain in business and generate sustainable revenue streams. Customers are very important to be able to stay in business, grow and innovate. A customer-driven approach was taken to the business model. Customers are a very important part of the business model and also very important for the innovation and growth of a small company. For this small software development industry a case study was made for NextSelect. NextSelect is a company providing fully customized software solutions for business processes. The software solutions are tailored according to the wishes and requirements of the customers. Every software solution has to be built from scratch, which is very time consuming. The customer base of NextSelect is rather small and the cash flow is unstable and irregular due to a payment system based on the hours worked. When a customer project is finished the cash flow stops essentially. If there was a larger client base this would not be a problem, however this is not the case. The financial unbalance has put the continuity of the firm at jeopardy. The financial unbalance and the time needed to develop the software solutions are the main reasons for developing the “software framework” which will allow NextSelect to build the software solutions at a faster rate and with a higher quality. To fully exploit this “software framework” in the most optimal way a business model is needed, technology on its own has no inherent value. NextSelect always had and has the focus on helping customers and by doing so making a profit. The relations kept with these customers are very important to NextSelect and should remain on a “friendly” basis. The main research question in this thesis is: “How can NextSelect create and capture value by taking a customer driven perspective?” How the creation and capturing of value by NextSelect has to be organized is what the business model provides, since a business model has a comprehensive configuration and mediating role between technological innovation and strategic outcomes. The business model has been empirically tested and validated through the use of customer development; the empirical research had eightyseven business-to-business respondents involved in the acquisition decision for business process software within their company. To be able to create and capture value by taking a customer-driven perspective, NextSelect will have to change the revenue streams to recurring streams as much as possible; customers pay a monthly fee based on the number of users of the software and the user groups. Flexibility in the payment terms is however important to be able to serve as much customers as possible, negotiations are possible based on the attractiveness of the customer to NextSelect among other factors. The customers do not become owners of the software but simply own the right to use it for the duration of the contract. The price per user per month is set around €100-€ 150; NextSelect offers high-end solutions and this should also be reflected by the price. The price is including the support and maintenance, development costs and service costs. Depending on the level of service the customer requests the price per user per month will vary, different user categories and groups are used for pricing. iv According to the relational marketing approach (and validated by the research), NextSelect should strive for long-term relationships with close involvement, but negotiations are possible, as already mentioned flexibility is important (especially when the customer base is still small). Diversity in clients requires diversity in offers to these diverse customers. This is very important for NextSelect to keep in mind. By having more options available and being flexible NextSelect is more open to different kinds of wishes and requirements from (potential) customers, making it able to reach a greater target group and generate more revenue streams than by just offering strict conditions. The use of partners will become more structured, the word-of-mouth effect is already a marketing technique that works well for NextSelect, however being present on exhibitions and the use of social media for advertisement and raising awareness are also found important. The importance of customers will be put more emphasis upon, by involving them more in the process, the perceived value by the customer will also be higher, which will make it more likely that the customer is willing to pay for the product and service NextSelect offers. From the empirical research evidence was found that in general companies value the relationship kept with the supplier and the functionality of the software higher than the price that has to be paid for the software solution. Incentive programs will also be put into place, discounts will be provided for customers that deliver new customers or request software modules to be developed that can be re-used for other customers. Customer interaction will find place through a customer portal (with an integrated customer relationship management module), involving the customer better in the whole process of NextSelect and making it able to gain more knowledge from the customer. With the growth of NextSelect and its customer base the hierarchy of the organization also needs to be more structured to handle projects efficiently and effectively.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/62540
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