Strategic Development of Business Models Implications of the Web 2.0 for Creating Value on the Internet

There is virtually a consensus that, to remain competitive, firms must continuously develop and adapt their business models. However, relatively little is known about how managers can go about achieving this transformation, and how, and to what extent, different types of business models should be adapted. To illustrate the differential effect of environmental changes on different business model types, this article draws from the '4C' Internet business model typology to elaborate on how a recent wave of changes on the Internet the emergent Web 2.0 phenomenon is affecting each of its four business model types. We argue that Web 2.0 trends and characteristics are changing the rules of the 'create and capture value' game, and thus significantly disrupt the effectiveness of established Internet business models. Since systematic empirical knowledge about Web 2.0 factors is very limited, a comprehensive Web 2.0 framework is developed, which is illustrated with two cases and verified through in-depth interviews with Internet business managers. Strategic recommendations on how to what extent different Web 2.0 aspects affect each business model type are developed. Executives can use the ideas and frameworks presented in the article to benchmark their firm's efforts towards embracing the changes associated with the Web 2.0 into their business model. (C) 2010 Elsevier Ltd. All rights reserved.