How can a Digital Marketing Agency achieve a Sustainable Business Model through Big Data and ...

129 Pages·2016·3.07 MB·English

How can a Digital Marketing Agency achieve a Sustainable
Business Model through Big Data and Big Data Analytics-
driven Business Model Innovations? The case study of
Branded3, a British Digital Marketing and Search Engine
Optimisation Agency

Alexandros Varangoulis

Master in Management of Technology

Faculty of Technology, Policy and Management
How can a Digital Marketing Agency achieve a Sustainable
Business Model through Big Data and Big Data Analytics-
driven Business Model Innovations? The case study of
Branded3, a British Digital Marketing and Search Engine
Optimisation Agency

By

Alexandros Varangoulis

in partial fulfillment of the requirements for the degree of

Master of Science
in Management of Technology

at the Delft University of Technology,
to be defended publicly on 24 October, 2016.

Graduation Committee

Prof.dr.ir. Marijn Janssen : Chair
TU Delft, Faculty TPM,
Section: Information and Communication Technology

Dr. Harry Bouwman : First Supervisor
TU Delft, Faculty TPM,
Section: Information and Communication Technology

Dr.ing. V.E. (Victor) Scholten : Second Supervisor
TU Delft, Faculty TPM,
Section: Economics of Technology and Innovation

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Executive Summary

Big Data is a term that has received tremendous hype and interest from the business and academic
world the last five years. Companies, nowadays, are confronted with a tremendous pool of data, which if
leveraged properly, it can lead to more personalised solutions and enhanced customer experience,
which has now become the new differentiator of brands. Promoting a brand through digital channels,
known as digital marketing, is a commonly outsourced activity to specialised digital marketing agencies.
The customer-oriented nature of digital marketing and the endless generation of data from the
consumer side render this industry a very promising area for the implementation of Big Data and Big
Data Analytics. Failure to adopt new technologies, such as Big Data, in conjunction with the volatility of
the digital marketing industry (increased competition and frequent updates in the Google algorithm
which define digital marketing success), pose serious challenges for digital marketing agencies and may
render their business models obsolete. In this thesis, and through one case study, we research on how
Big Data and Big Data Analytics can lead to a more sustainable business model with regards to the
constantly changing external environment of a digital marketing agency, as well as how the transition to
a Big Data-driven business model can be achieved through business model innovations.

Our research design includes a three-stage process, composed of a) the description of our case's current
business model b) the evaluation of the sustainability of the current business model and c) the
innovation of the current business model towards sustainability. Towards that direction, we use a
variety of business model tools, with business model stress testing (responsible for the evaluation of the
business model) and its six-step process in the foreground, the CANVAS business model ontology
(responsible for the description of the business model) serving as its first step, while business model
roadmapping (responsible for the innovation of the business model) serving as its sixth step.

In the first stage, we describe the current business model of a digital marketing agency by leveraging the
CANVAS business model ontology. In this ontology, the business model of a firm is decomposed in nine
key business model components, namely, the value proposition, key activities, key resources, key
partners, customer segments, customer relationships, channels, revenue streams and cost structure.
The main points of our analysis include that Branded3, our case study, pursues its clients' online growth
through enhanced website user experience and engagement. Its main key activities are search engine
optimisation, content marketing, online PR, and website design and development. The main sources of
revenues for the agency are yearly contracts and project-based fees.

Next, as part of the first stage, and considering that data powers two of the nine business model
components, namely, Branded3's value proposition and key activities, we explore through a
questionnaire the role of the data in the value proposition of Branded3, as well as the agency's level of
readiness with regards to Big Data initiatives. Our main findings are that Branded3 leverages a wide
range of first-, second- and third- party data from various data sources, before and during the design of
a digital marketing campaign, and that we can hardly consider the agency as a Big Data user given its
inadequacy in developing Big Data Analytics capabilities (both software solutions and skills are missing).
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The confession of the Operations Director that Big Data capabilities will be required in the future as the
agency moves more towards conversion rate optimisation and enhanced user experience, reinforces our
claim that Branded3 should make Big Data and Big Data Analytics its top priority. These insights were
served as input to our recommendations and the design of the business model roadmap in the third
stage.

Subsequently, in the second stage, we steer our focus on stress testing the agency's business model
against four selected scenarios-threats from its external environment. Towards that direction we use
the business model stress-testing tool, in which the CANVAS BM representation generated in the first
stage (excluding the role of the data) will be served as an input. The four selected scenarios are a) an
update in the Google ranking algorithm b) the implementation of a new data privacy law c) the
competition in the digital marketing industry and d) the adoption of marketing automation tools. Our
main conclusion is that the agency's business model is not sustainable, as it is highly vulnerable to the
first three scenarios and extremely vulnerable to the fourth scenario. The insights from the results of the
business model stress test were served as an input in the third stage.

Finally, in the third stage, we claim that Big Data and Big Data Analytics can help the agency confront its
business model weaknesses, and we explain in detail how Big Data and Big Data Analytics can deal with
the four selected scenarios of the second stage. However, no formula was found on how Branded3 can
deal with the extreme aspect of the fourth scenario, which includes the wide adoption of marketing
automation solutions. In addition, with the use of the business model roadmapping tool, we designed a
roadmap-blueprint with a distinct number of business model innovations that Branded3 should engage
in, in order to make the transition to a more sustainable, Big-Data driven business model. Our main
suggestions include the enrichment of the agency's value proposition with emphasis on more
customised content and more personalised user experience, the championing for a more data-driven
philosophy throughout the agency, among all the departments, the need for more key partnerships
which will expose the agency to a larger pool of second-party data, the upgrade of its IT infrastructure
with an on-premise or cloud-based Big Data platform, and the need to develop advanced analytical
skills, either by recruiting data scientists or by supporting the development of this knowledge internally.

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Acknowledgments

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Table of Contents

Chapter 1. Introduction ................................................................................................................................ 1
1.1 Scientific Problem ............................................................................................................................... 4
1.2 Research Objective and Research Questions...................................................................................... 5
1.3 Research Structure .............................................................................................................................. 7
Chapter 2. Theoretical Background .............................................................................................................. 9
2.1 Business Model ................................................................................................................................... 9
2.1.1 CANVAS Business Modeling Tool ............................................................................................... 11
2.1.2 Business Model Stress Test ........................................................................................................ 14
2.1.3 Business Model Roadmap .......................................................................................................... 17
2.2 Business Model Innovation ............................................................................................................... 18
2.3 Big Data ............................................................................................................................................. 19
2.4 Big Data Analytics .............................................................................................................................. 24
2.5 Digital Marketing ............................................................................................................................... 26
Chapter 3. Research Approach ................................................................................................................... 33
Chapter 4. Results ....................................................................................................................................... 38
4.1 Our case study: Branded3 ................................................................................................................. 38
4.2 Business Model Description .............................................................................................................. 41
4.2.1 CANVAS representation (Step 1)................................................................................................ 41
4.2.2 Data as the backbone of Branded3's Business Model (Step 1).................................................. 47
4.3 Business Model Evaluation ............................................................................................................... 52
4.3.1 Choice of Scenarios (Step 2) ....................................................................................................... 52
4.3.2 Evaluation of scenarios' impact (Steps 3, 4, 5) .......................................................................... 59
4.4 Business Model Innovation towards Sustainability .......................................................................... 71
4.4.1 Recommendations and the potential role of Big Data and Big Data Analytics (Step 6) ............ 71
4.4.2 A Roadmap for a sustainable business model through Big Data-driven business model
innovations (Step 6) ............................................................................................................................ 75
Chapter 5. Conclusions ............................................................................................................................... 81
5.1 Conclusions ....................................................................................................................................... 81
5.2 Reflection .......................................................................................................................................... 84
5.3 Limitations ......................................................................................................................................... 87
5.4 Future Research ................................................................................................................................ 88
References .................................................................................................................................................. 90
Appendix A - A model for Big Data, Business Models and Digital Marketing (Figure 5) .......................... 103
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Appendix B - Business Model CANVAS ..................................................................................................... 104
Appendix C - Branded3 First Questionnaire ............................................................................................. 105
Appendix D - Branded3 Second Questionnaire ........................................................................................ 115
Appendix E - Data used by Branded3 before and during a campaign ...................................................... 119
Appendix F - BM Roadmap for Branded3's transition to a sustainable Big Data-driven Business Model 120

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List of Tables

Table 1. BM Roadmap for Branded3: Selected BMIs .................................................................................. 77

Table 2. BM Roadmap for Branded3: Selected activities............................................................................ 79

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List of Figures

Figure 1. An overview of our research .......................................................................................................... 7

Figure 2. The CANVAS BM ontology (Envision, 2015) ................................................................................. 14

Figure 3. A stress test template .................................................................................................................. 16

Figure 4. Common digital marketing activities ........................................................................................... 29

Figure 5. A model that reconciles the concepts of Big Data, business model and digital marketing for an
agency which acts as a data user (A larger version of Figure 5 is provided in Appendix A) ....................... 31

Figure 6. The research approach ................................................................................................................ 34

Figure 7. The organisational structure of Branded3 (Source: Branded3) ................................................... 40

Figure 8. A CANVAS summary of Branded3's BM ....................................................................................... 46

Figure 9. Data served as input before and during a campaign (A larger version of Figure 9 is provided ... 50

Figure 10. Heat Map for Scenario 1 ............................................................................................................ 60

Figure 11. The impact of Scenario 1 in Branded3's current business model .............................................. 62

Figure 12. Heat Map for Scenario 2 ............................................................................................................ 63

Figure 13. The impact of Scenario 2 in Branded3's current business model .............................................. 64

Figure 14. Heat Map for Scenario 3 ............................................................................................................ 65

Figure 15. The impact of Scenario 3 in Branded3's current business model .............................................. 66

Figure 16. Heat Map for Scenario 4 ............................................................................................................ 67

Figure 17. The impact of Scenario 4 in Branded3's current business model .............................................. 68

Figure 18. An aggregate Heat Map for all four scenarios ........................................................................... 69

Figure 19. The aggregate impact of the four scenarios in Branded3's current business model ................ 71

Figure 20. BM Roadmap for Branded3's transition to a sustainable Big Data-driven Business Model (A
larger version of Figure 20 is provided in Appendix F) ............................................................................... 80
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Chapter 1. Introduction

The economic crisis of 2008 heavily affected the Small and Medium Enterprises (SMEs) all around the
world. In the EU, SMEs account for 99% of all enterprises with a total number of more than 20 million
companies and a 58% contribution in the European GDP (Envision, 2015) (Thibault, 2010). In an effort to
boost the economic performance of the European SMEs and help them recover from the economic
downturn, the European Commission launched the Horizon 2020 initiative in 2014 (European
Commission, 2010). Horizon 2020 is the biggest EU research and innovation program, providing nearly
€80 billion in funds for several projects for seven years, from 2014 to 2020 (European Commission,
2014). Part of the Horizon 2020 initiative is the ENVISION project, whose main target is to increase
awareness among the European SMEs on the importance of business model innovation (BMI) in order to
regain their competitiveness (European Commission, 2016). The objective of the ENVISION project is the
generation of a platform through which the European SMEs will have access to a library of tools and
case studies from different European regions and industries. Through these case studies, each European
SME will have the chance to decide which one of the business model patterns identified in the project
better fits their case and industry, and further explore the proposed best practices, as well as the
applications of several business model tools towards empowering BMI (European Commission, 2016).

A business model (BM) can be defined as the way through which a firm creates, delivers and captures
value (Osterwalder & Pigneur, 2009) - pp. 14. In other words, a BM reflects a firm's choices with regards
to the value proposition that it promises and delivers to its clients, the resources which will enable the
value created, the means through which the generated value will be delivered, the costs that the value
creation and delivery entail for the firm, as well as the revenues that are expected to be captured. A BM
that creates, delivers and captures value in an effective way and according to the company's strategy
orientation is important for every organization, either established or new in the industry (Magretta,
2002). The same idea or technology taken to the market through two different BMs will yield two
different economic outcomes (Chesbrough, 2010). BM tools and ontologies, such as the CANVAS BM
ontology proposed by (Osterwalder, 2004), which are included in the ENVISION project, can help us
describe a BM in terms of its main components and characteristics (more information in Section 2.1.1).

Given the vital role of a BM in a firm's strategy implementation and everyday business, it is of
paramount importance that every firm ensures that its BM is sustainable and robust. A sustainable and
robust BM accounts for a BM which can seamlessly deliver on its promises to the stakeholders in the
long run, despite any potential changes in its external environment, and a BM which is difficult to be
imitated by the competitors. The sustainability and robustness of a BM may be tested several times
during a firm's lifetime, thus implying that an environment which fosters BMI must be developed within
the company. Advances in the technological environment and changes in the regulatory and
competition environment can all constitute potential threats, and therefore drivers for BMI (Casadesus-
Masanell & Ricart, 2010). The failure of a firm to adapt to the new conditions by innovating its BM may
render the firm non competitive and may be proved catalytic for the firm's future. The BM tool of stress
testing, a BM tool also applied in several case studies of the ENVISION project, can provide valuable