How can traditionally manufacturing-focused companies digitize their business models to remain competitive in their industries? - A case analysis on the basis of the Robert Bosch GmbH and their IoT platform ‘Smart Home’ Group Composition: Philipp Herr Jan Kahrs Program: Management of Innovation & Business Development Assignment: Master Thesis Course Code: KAN-CMIBO1000U Examiner: Jens Frøslev Christensen Co-Examiner: Jens Gunst Date: 15-05-2017 Institution: Copenhagen Business School Number of Pages: 97 Number of Characters: 181.035 Abstract The increased relevance of digitalisation changes the way companies conduct business across many industries. New innovative market players are forcing incumbent manufacturing companies to reconfigure their business models in order to stay competitive and avoid a commoditized status. A proactive approach to business model innovation offers the potential to trigger substantial growth and to secure competitive advantages. As of today, literature does not pay much attention to the integration of IoT platform business models within traditionally manufacturing focused companies. A study is needed to analyse this pursuit of digitalisation. The research is based on a comprehensive literature review and a case study, conducted with the German OEM Robert Bosch GmbH. Its newly developed IoT platform ‘Smart Home’ enables Bosch to interact with their customers across the whole product lifecycle and to gain valuable data, which results in tailored additional integrated services and improved new product development. The analysis is composed of an in-depth business model change study and a critical evaluation of Bosch’s smart home platform dynamics and positioning within a company overarching connected home ecosystem. Keywords: digitalisation, Internet of things (IoT), business model innovation, digital platform strategies, servitization Table of Contents Abstract ..................................................................................................................................... I Table of Contents ..................................................................................................................... I List of Figures ........................................................................................................................ III List of Tables .......................................................................................................................... III List of Abbreviations ............................................................................................................. III 1. Introduction .......................................................................................................................... 1 2. Problem Statement ............................................................................................................... 5 3. Literature Review ............................................................................................................... 11 3.1 The Digital Economy Era ..........................................................................................................11 3.1.1 Digitalisation - Definition .....................................................................................................12 3.1.2 Internet of things (IoT), Big Data & Ecosystems .................................................................13 3.2 Strategic Perspective ..................................................................................................................15 3.2.1 The Business Model ..............................................................................................................15 3.2.2 Business Model Innovation and the Business Model Canvas ..............................................15 3.2.3 IoT-Business Models ............................................................................................................18 3.2.4 Platform Strategies ................................................................................................................20 3.3 Integrated strategic Approaches ...............................................................................................24 3.3.1 Servitization & Open Service Innovation .............................................................................24 3.3.2 Collaborations and Customer Co-Creation ...........................................................................26 3.3.3 Technological Innovation and Disruption ............................................................................28 3. Methodology ....................................................................................................................... 29 4.1. The Research Philosophy .........................................................................................................31 4.2. Methodological Choice and Coherence in Research Design & Strategy .............................32 4.3. Data Collection and Sampling ..................................................................................................33 4.4. Limitations of Theory and Interviews .....................................................................................36 5. General Background .......................................................................................................... 37 5.1 Industry Introduction ................................................................................................................37 5.1.1 Household Appliances ..........................................................................................................37 5.1.2 The Connected Home Market ...............................................................................................38 5.2 Company Introduction ..............................................................................................................39 5.2.1 Robert Bosch GmbH .............................................................................................................39 5.2.2 Bosch Home Appliances GmbH & Home Connect ..............................................................40 5.2.3 Bosch Smart Home GmbH ...................................................................................................41 5.3 Other Selected Players in the German Connected Home Industry .......................................42 5.3.1 Google, Inc. ...........................................................................................................................42 5.3.2 Amazon.com, Inc. .................................................................................................................43 5.3.3 Deutsche Telekom AG ..........................................................................................................44 6. Analysis ............................................................................................................................... 44 6.1 Business Model Canvas Transition from Manufacturing Focus towards Smart Home .....44 6.1.1 Value Proposition .................................................................................................................45 6.1.1.1 Integrated Digital Services ........................................................................................................... 48 6.1.1.2 Integrated Product Servitization .................................................................................................. 50 6.1.2 Customer Relationships ........................................................................................................55 6.1.3 Distribution Channels ...........................................................................................................57 6.1.4 Customer Segments ..............................................................................................................59 6.1.5 Key Partnerships ...................................................................................................................61 6.1.6 Key Resources ......................................................................................................................65 6.1.7 Key Activities .......................................................................................................................67 6.1.8 Revenue Streams & Cost Structure ......................................................................................69 6.2 IoT Platform Dynamics and Positioning ..................................................................................71 6.2.1 Product versus Industry Platform .........................................................................................72 6.2.2 Network Effects ....................................................................................................................75 6.2.3 Convergence .........................................................................................................................77 6.2.4 Coring and Tipping ...............................................................................................................80 7. Discussion ............................................................................................................................ 82 8. Conclusion ........................................................................................................................... 93 9. Limitations & Future Research ........................................................................................ 95 References .................................................................................................................................