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The growing markets and customer segments for physical activity and wellbeing services, focusing on the role of distribution channels, revenue streams, and municipal support. It also suggests actions to be taken to develop services and create an ecosystem for research and innovation.
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Construction of Business Model for Case Kalevankangas Inka Hapuli International Business Bachelor’s Thesis Supervisor: Mikko Pynnönen Date of submission: 08 / 04 / 2020
Construction of Business Model for Case Kalevankangas Inka Hapuli International Business Bachelor’s Thesis Supervisor: Mikko Pynnönen Date of submission: 08 /0 4 /202 0
Conclusions There are potential growing markets for physical activity and wellbeing services due to the increased awareness and interest towards health and wellbeing. The aging population, growth of lifestyle diseases and polarization provide new kind of customer segments for the industry. There is a lot of competition between the sport and wellbeing resorts and each of them needs to find a way to differentiate and add value. Kalevankangas can adopt many service and product ideas from its competitors and it could learn also from the marketing and branding. At the same time it has an opportunity to differentiate by focusing on providing services the market segments that have not yet found the sport services and build a communal and innovative center of physical activity and wellbeing in cooperation with several local actors. Key words: Business Model, Business Model Canvas, Physical Activity, Wellbeing, Entreprenurial Ecosystem See: http://web.lib.aalto.fi/en/helevoc/pdf/ Language: English Grade:
Bachelor´s Program in International Business Mikkeli Campus
1.1. Background This research was conducted as part of the Kalevankangas development platform in cooperation with city of Mikkeli. Kalevankangas is a recreational area, with several outdoor activity possibilities, located close to the city centre of Mikkeli. There is also a concentration of built sport and physical activity facilities. The development plan for Kalevankangas is one of the strategic programs of City of Mikkeli, whose purpose is to develop the established services in the area and create new businesses as well. The overall goal is to utilize the full potential of the area and create new physical activity and wellbeing services and jobs. One important objective is promote the wellbeing and health of the residents. 1.2. Research Problem and Objectives The main objective of this research was to construct a tentative business model for Kalevankangas in order to provide a tool for further business design of the project. This was done by using the Business Model Canvas (Osterwalder & Pigneur, 2010) as an analysing tool. The methodology used was a constructive case study in which the goal is to create a solution or model for some specific real-life problem, which in this case is the BMC for Kalevankangas. The research topic was developed after acquiring information about the project and interviewing the key stakeholders of the project. The research was conducted by first analysing the current and future trends in the sport, physical activity and wellbeing industry in Finland in order to discover potential service needs and customer segments for the industry. Four cases of similar kind of sport, outdoor and wellbeing resorts were analysed by using BMC. These cases were then compared to Kalevankangas in order to discover ideas analysing which could work in the circumstances of Kalevankangas and which not. The case analysis offered
information about similar kind of business models and gave a chance to think about how Kalevankangas could differentiate from its competitors and what kind of business practices and services could be adopted for its business model. The final suggested business model was then discussed with the key representatives of the development project. This research begins with a literature review of entrepreneurial ecosystems and Business Model Canvas which provides the theoretical background for the thesis. After that the nature of the Finnish physical activity and sport sector as well as the current and future trends in the industry will be discussed in order to provide a contextual framework the research. Kalevankangas as an environment and the development project will be introduced in more detail in chapter 5. The case study section introduces the BMCs of the analysed case resorts and discusses their relevance for Kalevankangas. The BMC constructed for Kalevankangas and the analysis of it, introduce the main findings of this research. Finally, the managerial implications and limitations of the research will be discussed. The main research objectives were:
time replace cluster strategies, innovation systems, knowledge-based economies and national competitiveness policies, all of which it includes features. Even though the entrepreneurial ecosystem is a current research subject and a development tool with a lot of potential, it still has its challenges. In the following section, the more specific definition(s), and the structure and domains created by Isenberg (2011) will be introduced, as well as the critique and limitations of the entrepreneurial ecosystem model. 2.1.1. Definition of Entrepreneurial Ecosystems The concept of ecosystem is originally derived from biology (Pilinkiene & Maciulis,
Researchers have put great effort into defining entrepreneurial ecosystems but there is still no generally accepted definition for entrepreneurial ecosystem (Stam, 20 15). Spiegel (2017) admits that the scientific research on entrepreneurial ecosystems is still in its infancy and so far, there has been only little theorizing. One important reason for this is, that entrepreneur ecosystem research is strongly tied to a specific, geographical area and thus creates many different perspectives on best practises for each ecosystem. Stam (2015) suggests that the following could be one, widely applicable definition: “Entrepreneurial ecosystem is a set of independent actors that are coordinated and coordinate in a way that enables productive entrepreneurship.” Auerswald (2015) in turn, emphasizes cooperative and productive interactions across the organizations - start-ups and established companies, universities and other research institutes. “In a flourishing entrepreneurial ecosystem people and ideas are flowing between these organizations to set up new businesses and projects in addition to existing the ones by combining innovations” (Auerswald, 2015 ). Mason & Brown (2014) take a similar, combination approach. According to their definition, entrepreneurial ecosystem is “a set of interconnected, both potential and existing, entrepreneurs and organizations ( firms, investors, business angels, banks), institutions (universities, public agencies, financial institutions) and entrepreneurial processes ( the emerge of businesses, the number of hight growth companies, number of serial entrepreneurs and the ambitions and intentions related to the entrepreneurship), which formally and informally merge and connect, deliver and guide the performance in a local, entrepreneurial environment – where the environment means first and foremost, conditions for entrepreneurship”. Spiegel (2017) also has similar kind of thoughts. He sees entrepreneurial ecosystems as a local, environmental support for an innovative business, in which the ecosystem is described to consist of cultural aspects, social networks, investment capital, universities and active policies to support entrepreneurship.
2.1.3. Structure of entrepreneurial ecosystems According to Isenberg (2017), the entrepreneurship consists of dozens of elements that interact in very complex ways. The combinations can be very unique, but the elements can be still classified under six main domains that need to be present whenever the entrepreneurship is self-sustaining. The six domains are conductive policy, markets, capital, human skills and supports (Isenberg, 2017). Alongside Isenberg, Stam (2015) and Spiegel (2017) have also looked at the structure of entrepreneurial ecosystems. All three researchers have end up with similar kind of elements in their models and the models are overlapping at many points. In this research, I am going to use Isenberg’s six domains model to examine the elements of entrepreneurial ecosystems (Figure 1.) The six domain - diagram is a tool that presents the different domains and elements that are seen to be important in promoting entrepreneurship. All the six elements are interacting with each other. All the six domains are crucial for the long-term, profitable entrepreneurship. The research of the entrepreneurial ecosystem field has not been able to show that one of the elements is systematically more important than another but all of them are needed. In this section, these six domains are introduced and discussed in more detail.
Figure 1: Domains of Entrepreneurial Ecosystems (Isenberg, 2011) According to Isenberg’s (2011) definition, politics consists of management, leadership and administration. Leadership and management include the direct support for entrepreneurship, the social legitimacy, the affectionate attitude towards the representatives of entrepreneurship, the entrepreneurship strategies, crises and challenges. Administration consists of institutions (investments and aids), investments in research and development, start – up grants, regulations and incentives, the business- friendly legislation and administration related to work force, contracts, material rights and bankruptcies. The finance domain includes micro loans, angel investors and entrepreneur’s family and friends, venture capital, private equity (debt financing and capital investment) and stock markets (Isenberg, 2011 ). Many researches, like Pilinkiene and Maciulis (2014) or Spiegel (2017) simply summarize the meaning of finance domain to include all available sources of finance.
and accounting firms, technical support and business consultancy (Isenberg, 2011 ; Arruda, 2013 ; Pilinkiene & Maciulis, 2014 ; Spigel, 2017 ). Spiegel (2017) and Stam (2015) emphasize the role of the mentors, role models and advisors. To summarize, the entrepreneurial ecosystem is a concept, created in 2010s in academic research, but it still lacks one generally accepted definition. This suggests that more research is desired in order to gather more information of different kinds of ecosystems and to contribute the theory building in the field, as well as enable to provide more useful knowledge for practical use. Cooperation and networks and exchange of information and ideas enforce current activities and create new, but especially more high-quality and profitable entrepreneurship in a certain geographical region. 2.2. Introduction of Business Model Canvas Ecosystem-analysis provides understanding of the environment in which the entrepreneurship and businesses can flourish and grow. In order to analyse and plan the businesses operating within the entrepreneurial ecosystem environment, there is a need for a more conceptualized tool. A conceptualized tool also helps in making the communication between the parties in the ecosystem easier and more effective. Fauvel and Ching (2013) describe the need for such a tool as follows: “In the rising entrepreneurial ecosystems and communities, the communication has a very important role. People need to talk about their ideas and innovations in order to improve and develop them. In that process, you soon come up with some problems. “How do I present my idea or business model? Which parts do I need to tell so the basic story is told but boring necessities are left out? How can I give enough information so we can discuss the potential of the idea?” Osterwalder, Pigneur and Clarck (2010) introduced the Business Model Canvas to answer exactly those questions. Their motivation building BMC was to create a business model concept that everyone understands: one that facilitates description and discussion. Osterwalder et al. (2010) state that BMC allows everyone to start at the same point and talk about the same thing. Their goal was to create a concept which is simple,
relevant and intuitively understandable, while not oversimplifying the complexities of how enterprises function.” In this research, Business Model Canvas is used as a conceptualized tool in order to analyse business models of physical activity and well-being resorts and finally to help in constructing a tentative business model for Kalevankangas. BMC allows the users to get an understanding of the businesses and go through the process of making connections between what the idea and how it is made into a business. It also shows what kind of customer decisions influence the use of the systems and most importantly, it allows the users to get a clear idea of what the business will likely be. In the following section the logic and structure of BMC will be introduced and discussed. 2.2.1. Business Model Canvas in Business Logic Design Business Model Canvas is a strategic management tool to quickly and easily define and communicate a business idea or a concept. It helps the user to map, design and discuss new business models. One purpose of the tool is to describe the real business in a simplified way. The definition of business model, used as a basis for the creation of BMC, clarifies the BM concept. Osterwalder and Pigneur (2010) describe the business model as follows: “A business model describes the rationale of how an organization creates, delivers and captures value.” Osterwalder et al. (2005) also explains a business model as “a conceptual tool containing set of objects, concepts and their relationships with the objective to express the business logic of a specific firm”. Business model canvas is a graphic presentation of the target enterprise or ecosystem and it sets a framework for design work and enables the conceptualization of the business. Business Model Canvas is a one-page document which works through the fundamental elements of business, structuring an idea in a coherent way.The Business Model Canvas consists of nine “building blocks”, basic components of business model. They are put on the canvas in order to improve the visualization of the relations between each component. The product or service-related components
