Business Model Analysis

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Business Model Analysis Ben Bacon MBAX 6100 June
18th, 2003
Digital Metropolis, Inc. A leading interactive
agency at the forefront of new media technologies
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Opportunity/Need
Market Opportunity- Colorado is a Top 5 New
Economy State high percentage of companies
receptive to multimedia solutions for both
their internal employees (training) and external
customers (online transactions)- Favorable
trends include 80 of new US jobs are in
services - e.g. Knowledge Workers (white-collar
services type jobs) telecommuting (employees
becoming more dispersed) terrorist attacks
preventing ease of travel the emergence of
the Internet as a platform for customer
transactions- Market potential worldwide
corporate spending on e-commerce applications
expected to reach 5.7 trillion by 2006
recent survey indicates that 93 of major
corporations are considering online learning
Web-based training is growing at a rate of 95
per year and is expected to be 5.5 billion in
2003.
Market Structure- Multimedia production industry
in Colorado is dominated by 4 large players
23airmail, Texture Media, Leopard, and Digital
Metropolis (in past 3 years there has been a mass
exodus out of this industry as smaller
companies could not compete with these companies
on quality, price and service)- No standard
channels exist in this market products and
services are sold direct to business (and very
few individual customers) no intermediaries
involved in the sale- Industry has low barriers
to entry. Any designer could start their own
multimedia company startup software and
equipment could be purchased for less than 2000.
Main barrier to entry is stiff competition.
Compelling Need- Companies looking at how they
can efficiently build knowledge in their
workforce (industry/product knowledge) without
the huge costs of travel or the dryness of
printed manuals- Companies looking to create
compelling, attractive Web sites using audio,
video, graphics, etc. that will generate
leads, increase sales, simplify communication,
and create a unique online experience-
Emotional the Wow factor- Economic
productivity, cost savings- Financial ROI
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Target Market - B2B
Buying Decisions- The typical consumer for
Digital Metropolis is a Product/Marketing Manager
or Marketing VP - These buyers come from a wide
range of companies (their client list ranges from
Fortune 50 companies to local Mom and Pop
stores industries are also extremely diverse)-
Clients are usually those who like to use
technology as a differentiator in their industry
industry thought- leaders- Client contacts
usually have their own budget within a larger
corporate budget and can initially
approve/negotiate prices on-site- However,
two-thirds of purchases need to be approved at a
higher level (CFO or senior VP level) and this
process generally takes between 1-4 weeks-
Entire sales process from initial client meeting
to receipt of first check usually takes 3-6 months
Purchase Criteria- A strong, personal
relationship is the primary driver for these
types of purchase decisions- Secondary drivers
include quality of products, service during the
production phase, and trust- Target market
generally sees multimedia products as a luxury
item great to have when business is going
well, first to cut when budgets are tight-
Target market also weary of the instability of
this industry as many vendors have closed shop in
the past couple of years
Nature of Purchase- Purchases are made direct
without use of a distributor, wholesaler or
retail store- Digital Metropolis owner generates
leads through prospecting and referrals
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Product/Services Features
Product Lineup and Associated Features- As a
full-service multimedia design and production
studio, Digital Metropolis combines CD-ROM, DVD,
Print, Video, and Web technologies into
integrated marketing and training products. Below
is a closer look at the individual
products 1) CD-ROM generally used for corporate
training and development modules, digital
business cards (this makes up 80 of DMs
CD-ROM business) and trade show/conferences
kiosks. Prices range from 2,000 to 75,000.
Personal CD-ROM business cards are used to
impress clients by showing tech savvy they
link into the corporate web site and are used to
help drive sales. Training Development
CD-ROMs are delivered to create engaging,
flexible and customizable course content by
integrating audio/video. Key product
attributes durability, style, unique packaging,
status, image.2) DVD generally used as
marketing material, sales presentations. Services
include DVD authoring, CD- ROM conversion,
WebDVD, Plasma Displays Video Walls. Prices
range from 2,500 to 100,000. Key product
attributes include high tech atmosphere, style,
popularity with associates, image.3) Print
Digital Metropolis staffs a team of experienced
designers print services are typically for the
fast and/or affordable projects. Items
include brochures, ads, logos, corporate ID
packages, direct mail campaigns. Prices
typically start at 1000, dependent upon size and
quality. Key product attributes include
cost, quantity discounts, functional, layout.4)
Video DM markets this as a dependable medium for
a dynamic presentation, with multiple formatting
options. Services include video production,
video editing, video compression, AVI
Quicktime, on-site video shoots,
professional voiceovers, motion graphics, and
Quicktime VR. Prices range from 1,000 to
100,000. Key product attributes include
dependability, safety, availability (everyone has
a VCR).5) Web flexible medium for developing
sales/marketing materials, training and
development programs, corporate
communications, etc. DM promises a unique Web
presence for each client. Services include
e-commerce solutions, video editing, online
training, web site hosting, database development,
Flash Shockwave, streaming audio video.
Prices range from 1,000 to 250,000. Key product
attributes include status, image, online
transactions, operating cost reduction, promotion
of brand.
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Product/Service Benefits
Major Benefits of Products and Services- Below
is a list of benefits broken down by market, with
attention given to the type of media 1) Sales
and Marketing Materials - Multimedia
solutions (DVD, Web, CD-ROM, etc.) helps
companies achieve a competitive advantage
in many older industries (e.g. insurance,
manufacturing) - Allowing customers to
perform online transactions will result in lower
operating costs - DM creates products that
are interactive, intuitive and visually engaging,
so users stay online and complete
transactions or users become persuaded to contact
company - Companies are able to create and
deepen relationships with customers through
interactive polls and easy to access
product guidance2) Training and Development
- DMs online learning systems can allow an
organization to deliver globally accessible
learning programs in weeks, not months,
as would be the case with either text or live
classroom materials. - DMs allows
companies to run customizable reports to evaluate
the usage and effectiveness of the
multimedia training sessions (useful in
determining ROI) - Using audio and video can
promote engagement of multiple brain channels,
resulting in increased retention by the
user 3) Integrated Knowledge Management -
Corporate communication websites provide company
employees with visual, holistic views of
budgets, marketing plans, sales goals, etc.
leading to better decisions within the company
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Competitive Advantage
Competitors- 23airmail competes on quality of
design work also slightly differs on philosophy
- less consultative wants to take existing
strategy from the customer and enhance it DM
wants to take more of a role in creating the
strategy from scratch - Texture Media focuses
on enhancing the customer experience (B2C)
competes on client portfolio strength,
personal relationships - Leopard focuses on the
consultative side, competes with DM on price-
Indirect competitors individual employees
learning how to build web sites, multimedia
presentations and deliver them to their own
companies at a lower cost- Future competitors
current designers could spin-off into their own
multimedia company
Sustainability- It should be noted that all of
the above companies have the same software and
media equipment and produce essentially the
same products. Most often, competition comes down
to the personal relationships developed by the
account reps at each respective company. -
Prices are fairly stable throughout the industry.
Customers have little bargaining strength.-
There are no separate channels of distribution in
this industry. Companies prospect directly to
clients.
Digital Metropolis Resources and Capabilities-
Physical assets main office is a beautiful,
impressive loft in LoDo, downtown Denver - Human
assets DM had three designers named to the Top
100 Multimedia Producers List in 2002 its
common for multimedia companies to have 1 named
to the list, very unique and quite a
differentiator to have three employees on the
list.- DM has been in operation since 1995,
well-established contact list and impressive
client portfolio
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Conclusions
Value Proposition- By letting us understand the
way your business operates, we will be able to
provide you with customized multimedia
solutions that will greatly enhance your
marketing mix/training efforts.
Difference in Observations- Owner felt that
individual employees learning to create
multimedia solutions for their company was a
great threat to a company like DM. My opinion was
that as individuals learn to make simple Web
sites and Flash movies, they would better
understand the benefits of multimedia solutions
and promote the services of a company like
DM.- Owner also didnt seemed too concerned at
the risk of his top designers spinning off into
their own company. I disagreed. They are the
real competitive advantage this company has. The
work they do is phenomenal and truly separates
DM from the pack. Owner also seemed more focused
on personal relationships. While important,
this doesnt seem to be as sustainable over time.
Successful?- Digital Metropolis is very
successful they have grown each of their 7 years
in business, actually gaining market share in
a recession - They have excelled thanks to a
tremendous level of customer service and being
stable in an unstable industry. They do an
effective job of explaining the benefits of
digital media to their customers (a hard task
in itself). - Clients are always overly pleased
with their end product. The design work is
unparalleled and efficient in matching the
clients original objectives (e.g.- its not just
pretty, but practical too!)
Room for Improvement- Protect your advantages
by ensuring that employee satisfaction is high at
DM. - Proactively promote the benefits of
multimedia by hosting free seminars for clients
on the latest technologies- Hire an
experienced, dedicated sales representative to
drum up business currently the owners are
responsible and they arent truly salespeople.