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Configuring envelopment over time in order to achieve business model innovation in digital platform companies : a comparison of Amazon and Yahoo

Paramsothy, Anojan (2015) Configuring envelopment over time in order to achieve business model innovation in digital platform companies : a comparison of Amazon and Yahoo.

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Abstract:The digital platform industry is subject to a very dynamic environment due to the continuous emergence of new technology that trigger business models to change over time. However, literature does not provide a clear answer on how to innovate business models over time. Eisenmann et al. (2010), attempt to address this question by identifying three types of ‘platform envelopment’, whereby the attacker tries to overcome platform specific barriers like network effect and high switching cost. Yet, he fails to consider the dynamic factor of digital platform companies leaving it unclear how platform envelopment evolves over time. Therefore, the purpose of this study is to fill this gap by identifying how business model innovate, by means of platform envelopment, over time. In doing so, envelopment patterns of Amazon and Google, with respect to their new value propositions, were scrutinized from 2006 to 2011. Thereby, the envelopment patterns reveal an extended envelopment typology, which adds a timely dimension to the envelopment typology of Eisenmann et al. (2010). This typology also inspired to develop the ‘platform envelopment lifecycle matrix’, which shed light on how to employ platform envelopment over time in order to achieve growth. Thereby, the matrix identifies that platform companies undergo two distinct stages – ‘growth stage’ and the ‘maturity stage’. The ‘growth stage’ stresses the importance of ‘get big fast’ while staying focused in the core markets and in the ‘maturity stage’ digital companies engage in dispersed diversification. The main contribution of this paper lies in providing strategic directives in how to evolve business model innovation in highly volatile digital platform companies by means of platform envelopment.
Item Type:Essay (Bachelor)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:International Business Administration BSc (50952)
Link to this item:http://purl.utwente.nl/essays/67859
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