Effects of New Business Models on Organizations in the Field of Student Tutoring

Table of Contents

I List of Figures

II Abstract

1. Introduction
1.1 Research Question
1.2 Research Problem
1.3 Research Relevance
1.4 Research Method
1.5 Sections of the Thesis

2. Relevant Theory about New Business Models
2.1 Introduction
2.2 Three Pillars of New Business Models
2.2.1 Electronic Information
2.2.2 Electronic Relationships
2.2.3 Electronic Transactions
2.2.4 Conclusion
2.3 The Impact of E-business
2.3.1 Data Warehousing
2.3.2 Short Term Focused Strategies
2.3.3 Yield Management
2.3.4 Risk Management
2.3.5 Influence on Daily Operations
2.3.6 The Role of the Client
2.4 Changes in Knowledge Management
2.5 From TQM to BPR
2.5.1 TQM
2.5.2 BPR
2.5.3 Consequences of the Change
2.6 New Business Model Innovation
2.6.1 Change of Organizational Culture
2.6.2 Strategy Development and Change
2.7 Future developments of New Business Models
2.7.1 From E-business to M-business
2.7.2 Digital Convergence
2.7.3 The effects of Digital Convergence

3. New Business Models at Sylvan Learning Systems
3.1 The Company Sylvan Learning Systems
3.1.1 Company Structures
3.1.2 E-Sylvan
3.2 Perspectives
3.3 Conclusions

4. New Business Models in the Field of Student Tutoring
4.1 E-Learning
4.1.1 Functioning of E-learning
4.1.2 Advantages of E-learning
4.1.3 Problems of E-learning
4.2 The Traditional Student Tutoring Sector
4.3 Changes in the Traditional Student Tutoring Sector

5. Critical Analysis

6. Review and Conclusions

7. Future Research Direction

III Bibliography

I List of Figures

Figure 1: T he Results of the Crash in the Year 2000

Figure 2: The Three Pillars of New Business Models

Figure 3: Data Warehouse

Figure 4: Risk and Return

Figure 5: Transition from Incremental to Radical Change

Figure 6: The Cultural Web

1. Introduction

The thesis will concentrate on New Business Models while focusing on the field of student tutoring. In the following chapters, the most important aspects of the research problem, the research question, the research relevance and the research method will be answered. Furthermore, the sections of the thesis will be presented as well as the reasons for choosing these sections.

1.1 Research Question

The research question, which is supposed to be answered, is the following one: In how far do New Business Models have an effect on organizations in the field of student tutoring? In order to come up with an answer to this question, one will have to find out first the relevant aspects of New Business Models and question what New Business Models look like and how they affect business in general.

The reasons for choosing the main question are the following ones: First, it refers to a very actual topic, which can be also projected on the present challenge of many organizations in different fields. Going one step further, it offers conclusions about the near future of business, which is relevant to most organizations. Achieving this, it can give answers concerning much discussed, actual problems and it also builds the connection between theory and practice offering an academic challenge as well as coming up with concrete results for the real business life.

In order to answer the research question in an adequate way, the relevant theory of New Business Models will be explained first. This will be done with the help of deeper analysis of theoretical approaches concerning the background as well as an analysis of New Business Model innovation, which finally leads to conclusions on future developments. Following the example of the student tutoring company Sylvan Learning Systems and the analysis of New Business Models in the field of student tutoring will support the analysis, showing how it can be applied to real business life and giving an answer to the research question. This will be more specified in the following critical analysis and in the resulting conclusions.

1.2 Research Problem

After the analytical part of the thesis, which is the description of the relevant theory about New Business Models, the reader will have the necessary background information. Still, the research question of the effects of New Business Models on the field of student tutoring will have to be answered. In order to do this in an adequate way, empirical research will have to be done and the results will have to be analyzed. Doing this, the research problem will be to measure these effects in order to be able to state if it is strong or not and in how far it influences the student coaching sector.

1.3 Research Relevance

Knowing about the research question, the relevance of the research has to be stated. Concerning this, it can be said that New Business Models affect the whole business world in general and basically they stand for a long term process taking place over the years in today’s business world. Doing the research within the sector of student tutoring, however, will provide the reader with a more concrete example of the application of New Business Models and its effects while giving him or her inside information about this sector at the same time. On the one hand, this allows application of the theory in the real business world and on the other hand it provides the reader with inside information about a specific field of business, allowing him or her to understand it in a better way and to draw conclusions for other fields of business as well. Furthermore, the research provides the reader with an example of a traditional field of business and the influences of the New Business Models on this field. This builds a contrast to the much discussed New Business Models in the modern field of business and shows how traditional business can be changed and influenced as well, also providing the reader with a basis for the eventual further research in this direction.

1.4 Research Method

As the research has the goal to find out about the situation in the field of student tutoring, the research method has to be adapted to this. In concrete, this will look as follows.

First, there will be an analytical part about the relevant theory of New Business Models. This will be done by the reproduction of the most important theoretical aspects, which are relevant for solving the research question. Therefore, in this part no new research has to be done. The work will concentrate on finding out about the relevant theory based on readings of scientific publications^[1] and reproducing the theory in order to give the reader an overview as well as the necessary background information. In the following part, however, the theory will be applied to the real business world, while focusing on the field of student tutoring. For this reason, the research object will be the company Sylvan Learning Systems, which is situated in this field. The research to be done will be of empirical nature. In order to gain the relevant information, contacts with the company have been made and several employees as well as managers will be asked for inside information of the company. In addition to this, it will be asked for information material about the company in order to gain further insights. This material will be analyzed and in addition to this, the assembled information will be categorized and the relevant aspects will be filtered out. Finally, it will be presented to the reader in a summarized form. This will provide him or her with a detailed description of the field in question and of the company. Within this analysis of the field of student tutoring and the company Sylvan Learning Systems, the theory of the first part of the thesis will be applied directly to the presentation of the assembled information. The next step will be the critical analysis. For this part no further research will have to be done, as it refers to the information, which has been given before. Finally, the last steps of the research will be found in the drawing of conclusions from the presented results and the explanation of the future research direction. This will be based on the empirical and the theoretical research as well. In addition to this, once again the theoretical material will be used by reproducing the relevant aspects in order to come up with a final conclusion.

1.5 Sections of the Thesis

In this chapter, the single sections of the thesis will be described. The first part of the paper will be the explanation of the relevant theory on New Business Models, which will be applied later on. After having given a detailed introduction providing the reader with the methodology of the work (including the chapters ‘Research Question’, ‘Research Problem’ ‘Research Relevance’, ‘Research Method’, and ‘Sections of the Thesis’) and giving him or her a general overview on the topic, the next step will be the explanation of concrete aspects concerning the relevant theory on New Business Models.

Followed by a short chapter called ‘introduction’, this will be done with an explanation of the model of the ‘Three Pillars of New Business Models’, giving a more concrete introduction to the topic and presenting the basic aspects of New Business Models. Therefore, each of the pillars will be explained in the chapters ‘Electronic Information’, ‘Electronic Relationships’, and ‘Electronic Transactions’. Finally, a short conclusion concerning this will lead to the next chapter, which deals with the role of the so-called e-business and its influences on New Business Models. This chapter is called ‘The Impact of E-business’ and it will be divided into the chapters ‘Data Warehousing’, ‘Short Term Focused Strategies’, ‘Yield Management’, ‘Risk Management’, ‘Influence on Daily Operations’, and The Role of the Client’. In each of them a short description of the different impacts of e-business will be given and the theoretical aspects will be presented in a summarized form. The next chapter will focus on the ‘Changes in Knowledge Management’, which is, because of its influence, another relevant theory on New Business Models. In the next chapter - ‘From TQM to BPR’ - the role of Business Process Reengineering in New Business Models will be explained, and its characteristics will be shown. At first, this will lead back to the management fad of Total Quality Management, which will be described in the first chapter called ‘TQM’. Having this as a background, the next chapter called ‘BPR’ will explain the management technique of business process reengineering before drawing conclusions in the following chapter, which deals with the ‘Consequences of the Change’. Having provided the reader with these aspects, the questions of how to apply these models to the real business and how to make them work in practical life will be asked. The answer to this will be presented in the chapter called ‘New Business Model Innovation’. At first, this will be done by the analysis of the implementation concerning the ‘Change of Organizational Culture’. Concerning this aspect, organizational culture itself will be analyzed in short before showing the difficulties in changing this culture. This will be followed by the explanation of the ‘Strategy Development and Change’ when innovating and implementing a New Business Model. For this reason the aspect of strategy will be analyzed with the help of the theory about different types of change. Finally, the last chapter of this second part of the thesis will be a short excursion to the ‘Future Developments of New Business Models’, which has its relevance in the fact that New Business Models are of a fast changing nature and therefore the presence of a New Business Model can be seen in its future as well, as it will be explained later on. Included in this chapter will be an outlook on the development ‘From E-business to M-business’ as well as a more detailed analysis of the phenomenon of ‘Digital Convergence’ and ‘The Effects of Digital Convergence’ on the business while concentrating on the most important ones only.

Having finished this analytical part of the thesis, the next part will be the practical example of ‘New Business Models at Sylvan Learning Systems’. The presented results will be based on empirical research and the theory of the first part of the paper will be applied. At first, a presentation of the company will be given in the chapter called ‘The Company Sylvan Learning Systems’. For this reason the ‘Company Structures’ will be explained, leading to the explanation of the platform of ‘E-Sylvan’, which is a New Business Model having its origins in the company of Sylvan Learning Systems and which was sold later on to another company. In this chapter, the business model itself will be explained, before in the next chapter the ‘Perspectives’ for further developments as well as the resulting ‘Conclusions’ about the presented results will be explained.

After this, the following part of the thesis will be the explanation of the ‘New Business Models in the Field of Student Tutoring’, while again referring to the results of the empirical research and applying the theory explained in the first part to this field as well as using the results from the example of the third part of the thesis. The first chapter of this fourth part will explain the term of ‘E-learning’, which will be supported by showing the ‘Functioning of E-learning’, as well as the ‘Advantages of E-learning’ and the ‘Problems of E-learning’. Next, ‘The Traditional Student Tutoring Sector’ will be explained by giving the reader a short overview about the historical development and the present situation. Taking this as a basis, the two aspects of e-learning and the traditional education sector will be combined, coming up with the results about the most important ‘Changes in the Traditional Student Tutoring Sector’ and - referring again to the research question - showing the different impacts of New Business Models on the sector of student tutoring.

Next, the fifth part of the paper will be the critical analysis, in which it will be shown, in how far the explained theory from the second part matches the aspects explained in the third and fourth part.

In the sixth part a short review will be made before coming up with conclusions on the work and presenting the final results concerning the research question.

Last, the seventh part will deal with the future research direction, in which the possibilities for future research - both for the interested reader as well as the author of the thesis - will be explained.

The reasons for choosing the sections of the thesis are the following ones: Describing the problem in general before coming up with a concrete example helps to achieve the best possible understanding of the connection between theory and praxis. Furthermore, the theory is supposed to focus only on the most important aspects concerning this topic. This allows applying all of them to either the company example in third part of the thesis or to the practical analysis of the student tutoring sector. At the same time, however, different perspectives will be given, be it from the organizational point of view, or from the technical point of view or from the economical one. By doing this, the wide field of New Business Models will be reduced to a straight line of argumentation, which allows the presentation of a clear result and the provision to the reader of the necessary information. This makes it possible to come up with a conclusion, in which the most important results are summarized while giving a clear answer to the examined question at the same time.

Concerning the single chapters, the focus was laid upon the logical connection between them when choosing the structure. Therefore each chapter, which comes up with new aspects, is connected to a new chapter, in which these aspects are explained, as long as they are relevant to reach the goal of the research and to answer the main question in a satisfying manner.

In order to complete the thesis, a list of the figures used in the thesis will be added. Furthermore, the complete bibliography including all sources (books, Internet pages and additional material) will be indicated.

2. Relevant Theory about New Business Models

2.1 Introduction

Since the beginning of time, human beings have always been involved in doing business in many different ways. Old ways of doing business were modified and new ones created. In recent history, business has become a science of its own and as we know it today, it is a highly complex field influenced by many different factors. From this point of view, New Business Models have existed since the beginnings of business. During time, they have been replaced by other New Business Models and by this they have lost their position becoming old business models. In this thesis, however, the focus will be laid on the New Business Models of today’s business world and of the near future.

As many times before in history, the business world finds itself in a time of change. However, the actual situation is a different one. New technologies - the Internet in the first place - have changed the foundations of business in a radical way never known before. A new chapter of business, the so-called e-business (finding itself in the transformation to m-business^[2]), has been opened and the speed of change has reached a new dimension. On the other hand, the economy is still an industrial one and its foundations remain the same. The physical aspect of business cannot be replaced just by using the Internet as a platform for doing business. “There is no new economy but there is something very new in the real economy.”^[3] Furthermore, it has to be regarded that the so-called new economy had a severe crash already. The enthusiastic expectations for the future of business have led to a tremendous crisis. A so-called market bubble mechanism has taken place. Investments were made, but the profits were not created from the real earnings of the organizations. The P/E ratios were very low, still profits were taken from reselling the investment to other buyers. This mechanism worked out until it was laid open to the public. After this decisive moment, at which prices had reached their top level, the investments declined to a very low value immediately because there were no more potential buyers and therefore the last possibility of making profit vanished. In the following chart some examples of the tremendous results of the crash in the end of the year 2000 can be seen.

illustration not visible in this excerpt

Figure 1: The Results of the Crash in the Year 2000; Compare Fingar, Aronica (2001): The death of e; page 23.

Taking this as a background, it becomes obvious that the new economy must not only be seen from the point of view that can be defined as the beginnings of e-commerce. It is rather a very complex structure, from which almost no company can exclude itself, if it wants to stay in the market. On the other hand, being present on the Internet does not guarantee success. Companies have to adapt their ways of doing business to this and almost all kinds of businesses have to be very flexible, while “only the hyper-efficient and hyper-effective business models will win in the digital world of business“^[4]. In the following, the theory about New Business Models will be analyzed in a more concrete way, while giving answers to questions like how these business models should look like, how they are adapted to the described developments, and how they can affect the success of companies in the new economy.

[...]

^[1] Compare chapter III of this paper; Bibliography.

^[2] Compare chapter 2.7.1 in this paper; From E-business to M-business.

^[3] Fingar, Aronica (2001): The death of e; page 23.

^[4] Fingar, Aronica (2001): The death of e; page 280.