Classroom Companion: Business

19.1 · Modeling Concepts

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mature and become adopted by the population, novel business models that build 
on these technologies are created; for example, a completely new market for app 
design emerged after the 4G mobile technology was introduced in 2010. This may 
lead to market disruption where new business models may replace existing ones or 
create entirely new markets (Christensen, 
1997
). One example is the app market 
just mentioned. Another example is the music industry which has been radically 
changed after the introduction of small and powerful music devices (e.g., the iPod) 
and online streaming services (e.g., Spotify).
 
► Example 19.1 Funcom’s Business Model
Funcom is a Norwegian company developing video games, known for titles such as 
Anarchy Online (2001), Age of Conan (2008), and The Secret World (2012). At its peak 
in 2008, Funcom had over 680 employees in several countries. The company focused on 
developing big games with large budgets, thereby competing with successful and market- 
leading games such as Blizzard’s World of Warcraft.
The year 2012 was critical for Funcom. The company launched the game The Secret 
World with little financial success. Funcom had to cut its staff by several hundred people. 
The Secret World did not attract as many players as expected. One of the most important 
reasons for this was the choice of business model. The Secret World was initially using a 
subscription-based business model. This was, in part, inspired by the success of the busi-
ness model of Blizzard’s World of Warcraft. Blizzard had already used the subscription- 
based business model successfully from the launch of World of Warcraft in 2004. 
However, in 2012, many computer gamers switched to a free-based business model used 
on most games available on social media networks such as Facebook. Users did not 
accept to pay a monthly fee for playing a game anymore. In the end, Funcom had to 
change the business model on The Secret World from subscription-based to buy-to-play 
to align with market and user trends.
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Recent years have witnessed an increased complexity of business model designs. 
This is primarily due to globalization and widespread competition, more complex 
and refined technologies, extensive use of ICT, and more complex organizations. A 
digital company need not own the goods they are selling as exemplified by the busi-
ness models of eBay, Airbnb, and Uber. The business model of these companies is 
to offer a platform for mediation between buyers and sellers of tangible or intan-
gible goods—eBay does not own any of the physical goods they are selling even 
though millions of items are sold through eBay every year. Airbnb is the world’s 
largest hospitality service without owning any hotels or property. Uber provides 
ridesharing services without owning any cars.
The business of connecting customers or different user groups is perhaps the 
most important contribution of ICT in business modeling. This has similarities to 
the transition from business models for value chains to business models for value 
networks. While the best way to model companies in the industrial economy is the 
value chain, the best way to model companies in the digital economy is the value 
network (see 
7
Chap. 
8
). The business model of a company may also need revi-