1. Professor Feng Li, PhD, FBAM Cass Business School
Research Seminar at Kent Business School
Kent University, 4 February 2015
Digital Transformation of Business Models in the Creative Industries: The Emergence of the Portfolio Model
Professor Feng Li, PhD, FBAM
Cass Business School
City University London
© Feng Li, 2015

2. Introduction Introduction Why the creative industries
A holistic business model framework
Emerging trends
The portfolio models
Discussions
© Feng Li, 2015

3. My Research Focus
Strategic and organisational changes facilitated by digital technologies in different sectors and domains
How firms manage the transition to new digital technologies, new business models and new organisational forms
Research projects on ‘Sustainable and Scalable Business Models in the Digital Economy’
Addressing ‘Societal Challenges’ by following robust business principles (ageing, social inclusion, sustainable development)
SiDE, SALT, LimbsAlive, NEMOG …
© Feng Li, 2015

4. What are the creative industries?
‘What began as an opportunistic yoking together of art and industry in cultural policy for purposes of advocacy and investment has now been enthusiastically adopted by politicians, analysts and educators around the world as an umbrella term covering all or some of the arts, media and entertainment industries and associated branches of the knowledge economy.’ (Bilton, 2007: xvi).
© Feng Li, 2015

5. The creative industries
An umbrella term for those industries ‘based on individual creativity, skill and talent and have the potential to create wealth and jobs through developing intellectual property’
13 sub-sectors explicitly identified
A significant and rapidly growing segment of the economy
© Feng Li, 2015

6. Sectors of the creative industries1
Advertising 8
Film and video 2
Architecture 9
Music 3
Art & antiques markets 10
Performing arts 4
Computer & video games 11
Publishing 5
Crafts 12
Software 6
Design 13
Television and radio 7
Designer fashion
 14
 Others
Source: UK Department of Culture, Media and Sports (DCMS)
© Feng Li, 2015

7. Why creative industries?
An ideal domain for systematic examination of the digital transformation of business models
Full range of organisations - from large multinationals to micro-businesses
Full range of activities –
digital native sectors (such as digital games) where many new business models are developed and adopted
traditional sectors that have been significantly affected by digital technologies (e.g. Publishing , design and music)
areas where the full impacts of digital technologies are still to emerge (e.g. fine art, cultural heritage)
© Feng Li, 2015

8. This research Systematic literature review
Two strands of empirical research
Primarily qualitative to identify emerging trends
Initial ideas in a pilot project
Primarily funded by the Research Councils UK (RCUK) under SiDE (£12.6m)
Follow up project – NEMOG (£1.2m)
© Feng Li, 2015

9. A holistic analytical framework of business models
© Feng Li, 2015

10. The case studies © Feng Li, 2015 Mini Case Studies Main Case Studies
Mini Case Studies
Main Case Studies
Total Number of Cases 30 50
Advertising - 3
Architecture 2
Art and antiques markets 4
Computer and video games
Crafts 1
Design 5
Designer fashion
Film and video
Music 11 9
Performing arts
Publishing
Software
Television and radio
Others (e.g. Museums)
Sizes (No. of Employees)
<10 13 23
11-50 12
51-500 6
>501
Market Orientation UK 28
European
Global 22 10
© Feng Li, 2015

11. How digital technologies changed business models?
30 Mini Case Studies
50 Main Case Studies
Enhance
Extend
Transform
Value proposition
Product offering
3 (10%)
14 (47%)
13 (43%)
32 (64%)
17 (34%)
1 (2%)
Market segment
2 (7%)
12 (40%)
16 (53%)
18 (36%)
0 (0%)
Revenue model
5 (17%)
7 (23%)
18 (60%)
37 (74%)
10 (20%)
3 (6%)
Value Architecture
Value sensing
1 (3%)
26 (87%)
24 (48%)
20 (40%)
6 (12%)
Value creation
15 (50%)
10 (33%)
40 (80%)
9 (18%)
Value distribution
9 (30%)
20 (67%)
26 (52%)
4 (8%)
Value capture
24 (80%)
12 (24%)
Functional Architecture
Product innovation
34 (68%)
Infrastructure mgt
30 (60%)
19 (38%)
CRM
27 (90%)
25 (50%)
5 (10%)
© Feng Li, 2015

12. Emerging trends Exclusivity through personalisation
Association and brand extension
Pay as much as you like and dynamic pricing
‘Wisdom of the crowd’
Significant changes in -
Revenue models in value propositions
Value sensing and value capture in value architecture
Customer relationships management in activity architecture
© Feng Li, 2015

13. Three levels of changes
Digital information and interaction
Digital extension of traditional business models
Digital transformation of traditional business models
Limited evidence on the emergence of unprecedented, genuinely novel business models
© Feng Li, 2015

14. Digital transformation of business models
Original objective: To identify new or radically reconfigured business models enabled by digital technologies
Key finding: Digital technologies primarily used to reconfigure key components of traditional business models, or deploy other types of business models to supplement or replace traditional business models
Reconfigured or ‘other’ business models are often not new or novel - clear antecedents can be found elsewhere.
The digital transformation of business models is not necessarily about creating radically novel or new business models that did not exist before, but in allowing organisations to deploy a wider range of business models than previously available to them
© Feng Li, 2015

15. What is a NEW business model?
Unprecedented new idea – very rare
Unprecedented context – borrow ideas from one area and apply in new areas
Unprecedented impact – modify and scale up a business model to produce significant impact
Unprecedented combinations – the portfolio models?
© Feng Li, 2015

16. The portfolio models: Four variants
The market portfolio model - deploy two or more business models to tackle different markets or market niches (e.g. design)
The product portfolio model - new niche products from different stages of work-in-progress (e.g. digital arts)
The product-service portfolio model – sell experience as well as final product (e.g. the 360 room)
Multi-sided business model - interactions with multiple stakeholders upstream, downstream and horizontally in a complex value network or eco-system (ebay, alibaba, 360 degree contract etc.)
© Feng Li, 2015

17. Different levels of integration
A loose collection of discrete business models
The hybrid models where some key components are shared
Full integration of multiple business models as new business model
© Feng Li, 2015

18. Financial sustainability & stakeholder credibility
Maximising revenues from different markets or market niches, different stages of work in progress, or multiple sides of the market - reduces risks and increases resilience
Previously insignificant markets or market niches grow in business volume and the traditional main market declines, the nature of the business is transformed
Increase stakeholder credibility
© Feng Li, 2015

19. Conclusions
Pervasive change of business models in the creative industries
All layers and all components of value proposition, value architecture and activity architecture
All sectors of creative industries in different types of organisations
Significantly affect financial sustainability and stakeholder credibility
© Feng Li, 2015

20. Conclusions …. cont
Not about creating radically new or novel business models that did not exist before
Enable the deployment of a wider range of business models than previously available
Traditional business models adapted and applied to different ranges of products online
Increasing adoption of the portfolio model across different sectors
© Feng Li, 2015

21. Future research
Define conditions when particular business models can be deployed - long term financial sustainability and stakeholder credibility
Methodological challenge - very early stage of development with limited empirical presence
Policy interventions and incentives
© Feng Li, 2015

22. Any questions? Thank you! Feng.li.1@city.ac.uk Acknowledgements:
We acknowledge the financial support by the Economic and Social Research Council [ESRC Grant number RES : Identify and Promote Sustainable Business Models in the Creative Industries]; and The Research Councils UK Digital Economy Programme [grant number EP/G066019/1 - Social Inclusion through the Digital Economy].
© Feng Li, 2015