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BUSINESS MODEL CANVAS- BATTLE OF A DOMINANT BUSINESS MODEL FOR ENERGY-EFFICIENT PROJECTS

The concept of dominant design has been around for almost 40 years. It was originally developed by Utterback and Abernathy in 1975 to explain how one technology can become a dominant feature in the industry. When a new technology emerges, different business players often offer a number of alternative designs. Overtime, the battle will be over where a certain technology becomes accepted as the industry’s standards. In today’s economy, the battle of dominance in market has become more complicated. The market acceptance of new technology is not determined by the competition between products and services but between business models. In many industries, the businesses that are winning the race for market’s acceptance are the ones who have built the better business model. It is the business model that makes them distinct when the technology changes. Looking on the top performing companies in any industry, Apple, Amazon, Google, P&G, GE, etc, they all have compelling, distinct and effective business models and most of them have or are creating superior business models.

 

The computer industry is a good example. At first it was all about hardware and then add-ons (graphic interfaces, peripherals, software) and then it moved into solutions. One of the examples is IBM where they sold off their personal computing business to Lenovo Group and focused on consultation. Google was once an unprofitable company.  After making little profit from selling search appliances to businesses and its own search technology to other search engines, Google radically changed its business model. In 2003, the company launched its Ad Words program which allowed businesses to advertise to people searching for things on Google.com. Certain company or business model has become dominant as they realized the growth potential of a solutions based business model.

 

 

 

However, there is another level beyond providing solutions, the company should provide a space for innovation and change.  In this case, the business model opens for a new development of applications and makes the solutions even more valuable. Using the above examples from other business case studies, in PROFICIENT we aim to explore the possible emergence of a dominant design of business models for energy-efficient projects. As in the current state, there is no single business model that is dominant the market. In fact, there are so many factors and conditions that determine the success of each business model in different country. It becomes more difficult for company to achieve success by offering product alone. As Utterback and Suarez (1993) argue that the competitive effects of economies of scale only become important after the emergence of a dominant design, finding the most visible business model will reduce the cost of market failure and enhance mass use of energy-efficient technology.

 

As a part of our research in PROFICIENT, we found that there are two competing business models that have been existing in the energy-efficient business landscape. Those models are the dominant end-users model and the dominant ESCO model. In the dominant-end user model, community (or most of the time the initial residents) contributes significantly to the design and takes an active role in managing the process.  The community sets up the organisation structure and a development team consisting of SMEs and deals with other stakeholders directly (including financial and regulation agreement). The figure below shows the central position of the community.

 

 

 

The second model, ESCOs have the biggest role in designing and executing the project. ESCOs or Energy Services Company, is a business that develops, installs, and finances projects designed to improve the energy efficiency and reduce energy and maintenance costs for housing or facilities. ESCOs often guarantee the ‘performance’ level of the project. ESCOs generally act as project developers for a wide range of tasks where they assume the technical and performance risk associated with the project. Under this business model, it is common that ESCO approach financial institutions and make a financial deal regarding the project. The figure below shows the relationship between ESCOs and other stakeholders.

 

The two competing business models provide a clear challenge for the PROFICIENT project. Understanding those two business models can only be achieved by revealing the complexity of interlinked network business players. The complexity will also increase if we introduce the dynamic nature of project management where business players often interchange their role. This also will potentially reveal the third model of business where neither ESCOs nor end-user dominate the process for a long time. The question for PROFICIENT project is    is there any future for a dominant business model that can accommodate the complexity role of end-users and ESCOs but at the same time provide a sensible platform to enhance market acceptance of the technology?

 

 

 

 

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