Master Thesis Designing Value Propositions for Disruptive Innovations; Exploring Value Proposition Design in the Case of Electric Vehicles Author: J.G.A. (Jilles) Visser Student number: 10475699 Supervisor: dr. R. Bohnsack Date of submission: July 2, 2015 Study programme: MSc Executive Programme in Management Studies Track: Strategy Faculty: Faculty of Business and Economics Statement of Originality This document is written by Jilles Visser who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents. Abstract From disruptive innovation theory as well as from business model theory it has been argued that a good business model can compensate for the technological shortcomings that hinder further market penetration of a disruptive innovation. However little empirical research about this phenomenon exists. Because the value proposition is considered to be the central part of the business model, this thesis explores how value propositions are designed to increase the attractiveness of a disruptive innovation for the mainstream market. The electric vehicle, which is an example of a disruptive innovation, serves as the context for this study. By studying the value proposition, this thesis tries to respond to the quest to add more empirical insights from diverse disciplines about what factors contribute to success of the electric vehicle. Using a multiple case study approach, the value proposition of thirteen electric vehicles that are sold in the Netherlands and/or United States is analyzed. Firm brochures and websites are primary sources of evidence. Additional information, mostly in the form of press releases, is used to get more insight in the individual cases. Firms appear to include several tactics in the value proposition that aim to compensate for the most inferior and important performance attributes. These tactics endeavour to reduce and shift risks of ownership, extend the value beyond the core product and integrate the electric vehicle in the ecosystem. Tactics that reduce risks and extend the value of the electric vehicle are often derived from the conventional value proposition and seem to have a limited contribution to success. Nevertheless, the large majority of firms provides these tactics. Only a minority of cases actively works towards integrating the electric vehicle in the ecosystem and provides risk shifting tactics. Findings cautiously indicate that a value proposition that helps to integrate the electric vehicle in the ecosystem has a positive effect on success in the market. Keywords: disruptive innovation, value proposition, business models, electric vehicles. Acknowledgement I sincerely would like to thank my supervisor René Bohnsack for his support, knowledge and trust during the entire process of writing the thesis. I really enjoyed working together and thanks to his positivism and enthusiasm, I became in a relatively short time considerably familiar with the electric vehicle industry. Visiting the electro mobility conference in Paris was absolutely one of the highlights of this period. Discussing theory together and keeping each other up to date about developments in the electric vehicle industry were an important source of inspiration and helped me to push my limits. Table of Content 1. Introduction ......................................................................................................................................... 1 2. Electric Vehicle Background ............................................................................................................... 4 2.1 Low-emission vehicles .................................................................................................................. 4 2.2 Electric vehicles: from the 19th century towards the 21st century .................................................. 5 2.3 Meta-analysis on EV consumer studies ......................................................................................... 6 2.3.1 Importance and relative advantage of EV attributes .............................................................. 8 3. Literature Review .............................................................................................................................. 14 3.1 Disruptive innovation .................................................................................................................. 14 3.1.1 Criticism and extensions of disruptive innovation theory .................................................... 17 3.2 Business models .......................................................................................................................... 22 3.2.1 Overview of business model theory ..................................................................................... 22 3.2.2 Conclusion of business model review .................................................................................. 28 3.3 Value proposition ........................................................................................................................ 29 3.3.1 Defining the value proposition ............................................................................................. 29 3.3.2 Conclusion of review of value proposition theory ............................................................... 32 3.3.3 Values ................................................................................................................................... 33 3.3.4 Design of the value proposition ............................................................................................ 34 4. Theoretical Framework ..................................................................................................................... 39 4.1 Research question ........................................................................................................................ 39 4.2 Working propositions .................................................................................................................. 41 5. Method .............................................................................................................................................. 45 5.1 Multiple case selection ................................................................................................................ 45 5.2 Data collection ............................................................................................................................. 47 5.3 Process of coding and analyzing the data .................................................................................... 48 5.3.1 Data reduction ...................................................................................................................... 48 5.3.2 Data display .......................................................................................................................... 50 5.3.3 Conclusion drawing and verification .................................................................................... 50 6. Findings ............................................................................................................................................. 52 6.1 Classification of EV attributes .................................................................................................... 52 6.2 Reconfiguration per attribute ....................................................................................................... 54 6.2.1 Tactics for driving range ...................................................................................................... 54 6.2.2 Tactics for price .................................................................................................................... 57 6.2.3 Tactics for charging time and charging infrastructure .......................................................... 59 6.2.4 Tactics for other attributes .................................................................................................... 63 6.2.5 Reconfiguration of attributes; summary of findings............................................................. 66 6.3 Generic strategies to value proposition design ............................................................................ 75 6.3.1 Risk reduction and risk shifting ............................................................................................ 76 6.3.2 Value extension; products and services ................................................................................ 77 6.3.3 Integrating in the ecosystem ................................................................................................. 79 6.4 Differences in value proposition reconfiguration strategies between EV manufacturers ........... 80 6.5 Answer on the working propositions ........................................................................................... 88 7. Discussion ......................................................................................................................................... 90 7.1 Discussion of findings ................................................................................................................. 90 7.2 Contributions, limitations and future research ...........................................................................