8. Business model innovation (Section C)
8.2 Assessment of Lynk & Co business model to fit the Danish consumer
The author has developed a Business Model Canvas in order to visualize the current business model to better asses the fit toward the Danish consumer (A. Osterwalder and Y.
Pigneur, 2010).
The above visualization of the existing business model of Lynk & Co should provide the reader with an overview of how Lynk & Co aspires to create and capture value at markets.
As previously stated the traditional thinking in the automotive industry has been by distributing the cars through importers at markets and they would sell the car with a narrow margin. Aftersales services were often where the most revenue could be earned (Appendix 2, Interview with Jan Walsøe).
Lynk & Co wants full ownership and share of revenue by owning the full distribution through online sale and wholly owned showrooms in big cities, including Copenhagen, Denmark.
- Crowdsourcing of ideas through consumers (Co:Lab)
- Component suppliers - Volvo and Geely on various elements such as Power train R&D from Geely and Volvo exploitation of dealerships in regard to maintenance purposes of Lynk & Co cars.
- Innovative untraditional thinking people - Partnerships - Capital from Geely - Technology - European R&D/innovation hub.
- IP Licensing - Salaries - Marketing - R&D - Production
- High-tech hybrid/EV’s with flexible ownership options.
- Easier everyday life for consumers through the use of tech.
- Digital-ecosystem and own Appstore to increase customization. (opensource). - Lowering costs of ownership by offering sharing function through digital sharing key.
- Worlds most connected car. 24/7 connected car with a bundling of digital features.
- Quality car at a medium price.
- Limited product range - Collaborative mindset
- Exceptional online ordering and support system.
- Customer relationships through fully owned showrooms in big cities - On-demand call service in car.
- Co-creation (Co:Lab)
- Online sales through website.
- Fully owned showrooms in big cities (FDI) - Raise awareness through digital media and offline events.
- Exploiting technologies from partners
- Substantial investments in Go-To-market Go-To-marketing initiatives - Standardized products to lower cost of production.
- Urban and young consumers (first priority) Mass market (Secondary) - Value digital features and are participants in the sharing economy.
- Engage in strategic alliances to leverage technological elements.
(Open innovation) - Increase brand awareness through marketing initiatives.
- Leverage ideas from innovative internal processes.
Key resources
Variety of options:
- Subscription - Membership - Private ownership of car
Variety of options:
- Appstore - Maintenance - Sale of consumer data to 3rd party.
Figure 14 - Business model canvas of Lynk & Co. Source: Own visualization based on Alexander Osterwalder og Yves Pigneur theory, 2010
Findings from desk research, interviews and an online survey, show that the Danish consumers may be reluctant to buy cars online. 43% of respondents from the conducted survey cannot imagine buying a car online.
On the other hand, having a showroom may ease the uncertainty coupled with buying online (Appendix 4, Kristian Mehlsen).
In regard to the revenue stream of Lynk & Co, the untraditional approach offering a full-on digital strategy is backed up by FDM Director Torben Kudsk; “Heading for a future with less revenue to gain in the aftermarket, connectivity and data will be the future cash cow for the car industry” (Appendix 3, Torben Kudsk, Q3).
The fact that Danish consumers are used to dealing with Appstores in general and digital solutions, indicate lower barriers for the consumer, when Lynk & Co aims to gain revenue through these new channels.
Lynk & Co has managed to act on the increasing mobility and sharing trend by offering the digital sharing-key and the previously mentioned subscription/membership model.
The chart on the next page underlines the trend of Danish consumers’ willingness to engage in a subscription-based model and not owning a car themselves (Conducted survey, appendix 8, Q22).
By taking a closer look, the second lower green bar, show respondents that do not own a car, are willing to engage with a car brand that offers subscriptions (ibid). New consumer segments that were out of reach due to various reasons such as e.g. too expensive,
Figure 15 – “Can you imagine buying a car online” - Appendix 8, Q18
problems with parking and alike, can now be reached without the consumer having high costs of ownership compared to privately owning a car.
This chart also shows that existing car owners have a willingness to engage in this kind of subscriptions. In other words, by offering a subscription solution and being first to market as a car brand, Lynk & Co is likely to gain competitor market share.
As one Danish consumer says; “Compliance with European GDPR and the sharing of my driving data with third party could cause a problem in term of government regulations.
But I am very intrigued” (Conducted survey, appendix 8, Q17). Findings across primary data gathering indicate that GDPR may pose as a threat to Lynk & Co’s digital offerings.
Lynk & Co’s emphasis on “digital first” has aspired a digital ecosystem that acts as the centre of Lynk & Co’s features besides transportation. Therefore, it is crucial to investigate the GDPR implications to Lynk & co.
Having a strong internal innovation culture and process in place may provide Lynk & Co with fast consumer derived feedback through its idea hub named Co: Lab (Appendix 1, Q6). This type of feedback process is rarely seen in the automotive industry in Denmark.
Lynk & Co can use this process to get a feeling of local demands and due to that potentially develop a Global strategy in the future (Kotler, 2009).
Figure 14 - Question 22 of conducted survey, 2019, appendix 8.
The respondents that own a car
The respondents that don’t own a car
Sources close to Lynk & Co indicate; “Volvo aims to compete with premium German brands, whereas Lynk & Co will aim slightly lower. We will have the same quality, more tech, but the price will be lower” (autoexpress.co.uk, 2018).
The fact that Lynk & Co brings a car brand to the Danish market offering a quality car at medium price (SUV at 375.000 DKK price point), although still cheap for a SUV, may be a good valuation due to Danish consumers’ willingness to pay up to 500.000 DKK for a car (Conducted survey, Q24).
Lynk & Co has a collaborative approach when bringing new improvements to the product. It is estimated that this will be valuably for Danish consumers, since consumers are interested in getting the best possible products with the newest technology.
As Marketing Manager, Sebastian Hammer, Lynk & Co states; “We believe there is coming a shift from an industrial competition-minded market to a collaborative-minded
postmodern paradigm. No company is an island, and we want to invite the best-in-class in and empower them to do great things with us” (Appendix 1, Q11).
Furthermore, the collaborative mindset affects the time-to-market positively, which means Lynk & Co can offer technological features and innovations faster.