Emerging Business Models in Data Management & Data Mining
Emerging Business Models Homepage
VeriChip’s Implantable RFID for Healthcare - June 2005
by Jim Coon, Kevin Fleck, Treva Kremer, and Ann Marburger
Executive Summary
VeriChip Corporation markets the world’s first sub-dermal radio frequency identification device (RFID). This invention can be used in many healthcare, emergency, financial, and security applications. Medical applications, possible since FDA approval in November 2004, are the focus of this analysis. The VeriChip Health Information System consists of the implantable chip (about the size of a grain of rice), a proprietary hand-held scanner, and a secure database containing the patient’s medical information. Target markets include trauma centers, hospitals, physician’s offices, and nursing homes, in an attempt to improve the quality and safety of healthcare recording for those with chronic health problems.
VeriChip’s strengths lie in their resources and capabilities, and their potential to develop a significant competitive advantage. Due to an existing patent for the implantable chip, VeriChip is the first to market this technology, giving them a first mover advantage. A large R&D focus will ensure that VeriChip continues to develop additional capabilities, to include medical monitoring and eventually GPS tracking. This technology has the capabilities of use to the security and finance industries (domestic and international) due to its modest cost and unique features. Significant expertise exists in research and development, as the parent company (Applied Digital) owns Digital Angel and eXI Wireless, firms that have successfully marketed animal-implantable and external RFID tags for years. VeriChip can take advantage of this access to established distribution networks. VeriChip has no direct competition, their indirect competition (substitutions) is, however, fierce and includes numerous alternative technologies that may prove perfectly adequate to customer needs.
VeriChip’s product is both innovative and controversial, which may prove to be detrimental to the firm. Hospitals need to be aggressively engaged to increase the size and viability of the VeriChip network. A focused marketing campaign must be delivered to the public to address the safety and efficacy of the implant. The company also faces concerns from rights groups, those afraid of “Big Brother” watching, privacy advocates, and identity theft concerns; all of which must be addressed directly and openly. Additionally, VeriChip must clearly differentiate their product from available substitutes if they expect to become a genuine option for the 9 out of 10 Americans who think the whole idea of computer chip implantation is “creepy”. International markets may provide better opportunities for VeriChip to establish use patterns and acceptability that can eventually ease widespread deployment in the United States.
VeriChip revenue will come from three sources: sales of the microchips, scanners, and subscription fees. Using an analogous firm, this report estimates demand for the product using three potential growth scenarios, from years 1 through 15. Based on a cost structure derived from benchmarked companies, an analysis of VeriChip’s expected profitability for years 1, 5, 10, and 15 is also provided. Under the most optimistic scenario, VeriChip will only break even after year 10, and end year 15 with positive earnings of $49,350,000. Based on a “reasonable” scenario, the break even point will occur after year 15. A “conservative” scenario suggests VeriChip will end up losing $35,250,000 at year 15.
Full Report:
http://www.geocities.com/innovating_competitively/data/Verichip.pdf
Knowledge Management
- July 2005
by Kathi Gayheart, Adam Ooten, Carri Rodabaugh & Therese Wypiszynski
Executive Summary
In the past 10 years, Knowledge Management systems have fallen short of meeting the demands of the market and the needs of customers across the world. For IM Systems Group, a company currently developing a new KM system, a great opportunity exists to begin a transformation of collaborative environment systems into a profitable and valuable product. This transformation can be achieved by altering the product so that the system collects data both automatically (passively) and through user input (actively). Moreover, the combination of passive data collection and an organization document management system increase the usefulness of this system. The strength in this model exists in allowing corporations to gather and preserve knowledge without excessive user involvement.
The external analysis demonstrates that a great potential market exists for a new innovative knowledge management system. Any corporation or organization seeking to preserve knowledge or processes can be included in the target market for this business model. The opportunities for growth are unlimited, and substitute products do not meet the customer needs as effectively as an innovative approach to KM. Moreover, while competitors exist in the KM arena, no existing product has a significant market share which would threaten new development in this market.
Internally, IM Systems Group possesses several core competencies through their previous document management and user portal experiences that will aide them in their execution of this business model. The company’s flexibility in moving to new technologies greatly assists in the ability to create this innovative system. Moreover, the company can potentially create a strategic alliance or joint venture to overcome some of their weaknesses in this area.
IM Systems Group has several strategic alternatives for executing this business model. The alternative which best fits the company’s strengths, weaknesses as well as market opportunities and threats is to create the combination product of active and passive data collection. A few execution challenges will accompany this alternative, the greatest of which is coordinating between the influential software development function and the marketing function.
With knowledge management projected to grow to a five billion dollar market by 2008, IM Systems Group must focus on expending the capital and resources on creating a product which will capture this potential profit. The main cost driver of this business model is investing in human capital to develop the new software system. Moreover, as a small, relatively unknown company, IM Systems Group must begin to work on marketing the innovative KM system regionally, nationally and internationally.
Financially this is a great market for IM Systems Group to break into. There are a few suppliers that control a majority of the market. If IM Systems Group can keep variable costs under control they have a substantial chance at being profitable with this new business model.
Full Report: 112 KB pdf format. Send e-mail to the following address to request the full report.
Secure Content-Addressed Storage and Digital Fingerprinting - June 2005
by Kiley Miller, Drew Nelson, Matt Shahady, and Randall Utt
Executive Summary
Explosive growth in the volume of digital fixed-content storage such as emails, documents and x-rays, combined with the new regulatory environment, has created an opportunity for a company such as VeriSign to capitalize on a new market for secure content-addressed storage. The high demand for a software application that enables a firm to store, track, and secure documents is a vital aspect that has not yet been mastered by key vendors throughout the fixed content market and data storage industry. VeriSign, a company that excels in the security software market, could accomplish this goal by partnering with Permabit, a company that excels in software applications for content-addressed storage systems. This partnership would add a new division to VeriSign that focuses on providing customers with a differentiated product. Secure content-addressed storage would provide enterprise customers not only regulatory compliance though record retention, but the security element would protect firms from abuse of these documents and give legal recourse to track the document history in the event of fraudulent activity.
The main objective of the product would be to combine content-addressed storage software with the required level of security to ensure customer satisfaction. Through this process, VeriSign would be able to create a new market by providing a product aimed at upgrading the current target markets hardware infrastructure. Due to the innovative nature of the product and the newness of the market, VeriSign would be able to gain a majority market share – enabling the company to enter with a skimming strategy. The majority of threats in this market would come from potential entrants or substitutes who are currently key CAS vendors. The main potential threats come from EMC, HP, Avamar, and StorageTek, all of whom have a content-addressed storage system with no security element. By evaluating the current market and potential competitor trends, VeriSign could realistically become the market leader in the secure content-addressed storage industry due to their core competency in the security software sector. In doing so, the company would have to continuously monitor potential entrants, technological changes, and emerging business models to maintain a profitable operating level and maintain a competitive advantage in the fixed content industry.
VeriSign’s low end sales are projected to be about $125 million over a five year period. The company expects to sell more each year once the product gains recognition. The revenue is attained by selling the security software package for content-addressed storage systems and providing tokens and usernames through yearly subscriptions. Some benchmark firms used for the cost analysis include Siebel, SAP, Entrust Technologies, Cisco, and Microsoft. The costs associated with creating this particular product will reach around $90 million. These costs are VeriSign’s leading risk factor while there is a benefit for the company to skim the product to give buyers very little bargaining power with an innovative product while maintaining a competitive advantage.
Full Report: 112 KB pdf format. Send e-mail to the following address to request the full report.
Google’s Mobile Search - June 2005
by Rob Danuloff, Matt Hauser, Scott Lewis, and Matt Siefert
Executive Summary
Mobile, or local search, will definitely be a significant new market which will capitalize on the strength of two very popular technology trends, the internet, specifically search engines, and mobile devices such as PDAs and cellular phones.
There are a few industry behemoths attempting to grab this market, like Microsoft, Yahoo!, and Google, as well as some smaller companies, such as Ask Jeeves and Fast Search. The firm(s) that ultimately capture this market will have a number of factors to overcome. The first is the obvious competition, which will exist between all of the various firms going after this emerging market. The second are environmental factors such as the user acceptance of the mobile search using wireless devices. Third, the firms must decide how they are going to generate additional revenues from this new market.
Mobile device users are currently able to perform mobile searches, but the market is still an emerging one. In 2004, the use of wireless devices grew by 29% across the globe. This statistic will correlate to the mobile search market, because as wireless usage increases during the growth phase of the product life cycle, mobile search is entering the introduction phase, and should follow on the heels of wireless technology. In fact the market is growing rapidly. In 2000 the prediction for one billion users by 2010 has been expedited, and now it is expected to reach one billion users by the end of 2005.
The primary customer of mobile search is the advertiser trying to get their company to be searchable by Google users. Additionally there are three interested parties, the wireless carriers, or providers of the mobile technology, the end user of mobile search, and finally, the companies that provide the hardware to the end users of mobile search.
Of the various companies going after the mobile search market, Google is relatively young, however, it is probably the best positioned to win the majority of the mobile search market. While not the shear size of Microsoft, which has many other product offerings beyond MSN search, Google has already passed Yahoo! in market capitalization, by having a reputation for being the best search engine available. The mobile search market is just emerging and the eventual size of this market is huge. If Google can grab a hold of, and grow in this market the way it has in the traditional Internet search market, it could reap significant financial windfalls, and provide Google with considerable bargaining power over advertisers.
Forecasting revenue for an emerging business is difficult when financial numbers are not available. Therefore in order to provide financials for mobile search, an analogous example was used. The sales from CDs versus purchases via music downloads was analyzed, and a percentage of 0.48% was found to be the percentage of total global music sales. Using this percentage as a gauge of an equivalent amount of mobile search usage versus PC searches, we can estimate total revenues and profits. This shows that in 2004, Google’s revenue from mobile search would be a little over $15 million. Even though this seems like a small number, the potential revenue stream to Google is huge, and could reach $2 to $3 billion.
Full Report: 153 KB pdf format. Send e-mail to the following address to request the full report.
RFID Solution Integrator - June 2005
by Tommy Appleby, Chad Garcia, Jason Scott, and Sara Shaffer
Executive Summary
This report analyzes the customer value, internal competencies, overall strategic plan and financials involved with starting a new company within the field of RFID implementation. In the external analysis, the broad target market identified includes any company with a need to manage, track, or identify inventory, assets, or other items. In the short-term, this target market can be narrowed down to small or medium sized retailers, distributors, or manufacturers seeking assistance with RFID implementation for use in trade channel compliance.
Improved employee productivity, reduced shrinkage, reduced stock outs, and improved marketing efforts are just a few of the potential benefits that a company could reap from implementing an RFID system. However, implementing a new technological infrastructure can be challenging. Besides being cost prohibitive for many companies, companies often lack the internal capability to efficiently and effectively implement the change in-house. This business model provides a solution to this problem by offering superior customer value through a one stop shop approach to doing business.
The market for RFID is small right now because the technology is only in the introduction stage, but is expected to grow rapidly as it enters the growth stage in the next 3-5 years. The market for RFID consulting is expected to grow 47 percent in 2004 and reach $2 billion annually by 2008. Purchase behavior for RFID can be affected by: technological advances, new standards, industry mandates, and adoption rates. Right now, dropping tag or chip prices coupled with strict retailer mandates are the main driving forces of RFID adoption. RFID is a disruptive technology that will have a dramatic impact on business processes and organizational efficiency.
The competition in the RFID market can be summarized by three strategic groups: hardware providers, software providers, and consulting companies. This business model is unique in that it services all the needs of the customer in one company. No other competitor offers a full service approach.
Competitive advantage exists for an RFID firm possessing valuable and rare strategic assets. The strategic assets an RFID firm must possess to achieve favorable positions include the following: (1) the ability to analyze and set strategy for firms; (2) ROI metrics achievability; (3) process re-engineering assessment; and (4) an in-depth understanding of complex technical architectures. The RFID consulting arm of the business would benefit from first-mover advantage while the RFID software arm of the business would benefit from a follower strategy. An internal SWOT analysis was completed to help determine a strategic plan for the firm as well as assessing how the firm can achieve superior customer value.
The financial analysis of this business model reveals very high expected revenues
($3.21 M) and low variable costs (37% of revenues). The financial risks associated with this business model are minimal since there are no R&D costs or inventory costs. The main cost driver in this business model will be operating expenses ($1.6M) which is mainly investments in human capital. These factors combined allow for a more profitable business model than other competitors in the RFID implementation market.
Full Report: 90 KB pdf format. Send e-mail to the following address to request the full report.
IBM’s Marvel Software for Searching Videos - June 2005
by Adam Bellin, Aude Dutertre, Devina Joshi, and Jonida Prifti
Executive Summary
IBM plans on selling this software to large companies who already have large repositories of video that need to be labeled. These large companies have not had the time or the resources to accurately catalog all of their old video footage. Marvel gives them the opportunity to label old footage and be able to search it as well, thus reducing the time spent on finding old videos.
The market conditions for the market that Marvel will compete for is contentious. The main competitor is Microsoft research who has both the financial and technological capacities to compete in this market. There are many potential entrants and numerous substitutes, such as Yahoo! or Google, which offer search capabilities of video by only searching text attached to the media files. There are a few potential buyers, and they will be willing to pay handsomely for the Marvel system.
The corporate search technology market is approximately $740 million which is Marvel’s market size. The market share for Marvel is estimated to be $33 million or 4.5%. The risks for Marvel could be high due to large sunk costs in research and development efforts and to the fact that search technology is not the first thing that comes to mind when one mentions IBM. Therefore the risk for Marvel will be higher than its benchmark firms. But IBM also gives Marvel an already established marketing and sales department and funds typically not available to startup companies.
Throughout this paper the discussion will revolve around the internal attractiveness of Marvel and the external attractiveness of the market in which Marvel will attempt to compete.
This paper concludes that if Marvel quickly enters the marketplace it can benefit from the first mover advantage. Switching costs of moving to a different search system will be high, and the desire to do so will be low, if IBM creates a high quality product, that it constantly updates. In an uncertain market, the business model that IBM has created for their Marvel software is a good one.
Full Report: 91 KB pdf format. Send e-mail to the following address to request the full report.