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Main Findings and Discussion

This section gives an overview of the main findings and differences between mainstream, high-growth, and high-tech enterprises’ business model compounds. According to the business model and main activity, enterprises are divided into mainstream (A. Le Coq Ltd.), high-tech, (Cleveron Ltd.), and high-growth (Pipedrive Ltd.) segments.

Customer segments component is defining the different groups of people or organizations that an enterprise aims to reach and serve (Osterwalder and Pigneur, 2009). The main findings are that in the case of comparing mainstream, high-growth, and high-tech enterprises, the customer segments types are different. A. Le Coq’s Ltd. business model is focused on the mass market and does not distinguish between different customer segments. The enterprise sells mainly to business customers and its product end-users are also private customers. At the same time, the high-growth enterprise, Pipedrive Ltd., and high-tech enterprise, Cleveron Ltd., are focusing on a niche market and cater to specific, specialized customer segments. Pipedrive is focused on the business customers in the field of sales, and Cleveron Ltd. is focused on business customers in the field of package robots.

The value proposition is the reason why customers turn to one enterprise over another (Osterwalder and Pigneur, 2009). In the case of A. Le Coq Ltd., Cleveron Ltd., and Pipedrive Ltd., they all are well-known brands. Also, the brand name is protected in every case. All the enterprises value the newness but in their different levels. A. Le Coq Ltd., as a mainstream enterprise, focuses on developing new tastes and combinations of beverages. Both Cleveron Ltd., as a high- tech enterprise, and Pipedrive Ltd., as a high-growth enterprise, are the innovation leaders in their respective fields. In the case of the mainstream example, the price of the product is lower, but high-tech and high-growth examples’ prices are product feature dependent on price or subscription fees. Products’ customization is also different: Mainstream enterprises’ products are meant for everybody with low customization, but high-tech and high-growth enterprises’ products are sector-based with high customization or developed especially for a specific customer segment. Convenience and usability are the third issues. In the case of A. Le Coq Ltd., convenience is an important and specific solution in canning, distribution, and availability. But this isn’t the main component of the enterprise’s value proposition. In the case of Cleveron Ltd. and Pipedrive Ltd., convenience is highly developed and considered as a main value proposition feature.

Channels component describes how an enterprise communicates with and reaches its customers’ segments to deliver value proposition (Osterwalder and Pigneur, 2009). At the same time, it is crucial to find the right mix of channels to satisfy the way how customers want to be reached. Some differences are in the channel types like direct (salesforce, web sales) or indirect (own stores, partner stores, or wholesalers). For example, high-tech and high-growth enterprises tend to use direct channels for sales. Cleveron Ltd. is selling its package robots directly to big retail and logistics enterprises; information about the products is available on the Internet (homepage, newspaper articles, etc.). Pipedrive Ltd. offers its software through direct offers or webpage. The more traditional enterprise, A. Le Coq Ltd., uses more indirect channels like wholesalers, partner restaurants, and pubs. The same conclusion can be made about after-sales support - high-tech and high-growth enterprises, whose products are meant for a niche market, are paying more attention and provide direct post-purchase support for their customers.

Cost structure is one of the most important parts of the business model. In the comparison of mainstream, high-tech, and high-growth enterprises, it occurs that high-tech and high-growth tend to be value- driven, not cost-driven. A. Le Coq Ltd. cost structure is cost-driven, competing with other similar products in the market by price, and characterized with fixed costs (salaries, R&D, maintenance costs, rent, physical manufacturing facilities) and variable costs (raw material, logistics costs, taxes, etc.). Cleveron Ltd. and Pipedrive Ltd. business models are value-driven. Although they have fixed and variable costs, they are selling the unique value of their products or services.

Key activities component describes the most important things an enterprise must do to make its business model work. The main key activities are similar, like marketing, sales, branding, and R8cD. All investigated enterprises valued their research and development input and presented this part as one of the most important Key Activities. Differences appeared in the production, where aside physical product versus software, there were differences in high-tech-based production like Cleveron’s Ltd. robots or Pipedrive’s Ltd. software versus knowledge-based production of beverages.

Customer relationships component describes the types of relationships an enterprise establishes with specific customer segments (Osterwalder and Pigneur, 2009). Customer relationships are driven by different motivations. A. Le Coq’s Ltd. business model is driven by boosting sales (upselling), offering big discounts to new products or seasonable beverages. Enterprises like Cleveron Ltd. and Pipedrive

Ltd. are driven by customer retention, focusing on the customer and its needs. Enterprises’ relationships with particular customer segments are also different. In the case of all enterprises, there are business customers (direct) and private customers (indirect). For business customers, personal assistance is offered. In the case of technology-intensive enterprises like Pipedrive Ltd., more technological solutions are used (e.g., an artificial assistant). In the case of the Osterwalder and Pigneur business model canvas, the customer relationships and segments box do not allow to show the whole complexity between these business- to-business cases. For example, in the case of Cleveron Ltd., the customer is the retail enterprise, but the consumers are private persons/ other enterprises. The same logic applies also in the case of A. Le Coq Ltd. (customer is a pub, a restaurant, a shop; consumers are private persons) and Pipedrive Ltd. (customer is a sales enterprise; consumers are salespersons). In the case of private consumers, automated services like feedback via emails, social media, or phone are offered.

Key resources are the assets required to make a business model work and can be categorized into physical, intellectual, human, and financial resources (Osterwalder and Pigneur, 2009).

Physical resources are represented in all three cases. A. Le Coq Ltd. and Cleveron Ltd., as production enterprises, have factories, other buildings, and logistics departments. Pipedrive Ltd. has physical offices in eight cities in six different countries.

Intellectual resources such as trademarks, patents, and copyrights are used. All three enterprises have protected their IP, using different strategies. Pipedrive Ltd. is a software enterprise focusing on developing marketing and customer support sales management software. Using IP protection in software, we must understand the characteristics of the software production: (1) cumulativeness of the innovation process (Innovation in the software industry is highly cumulative and a common practice in the development of new computer programs is code re-use.); (2) short product life-cycles (As a matter of fact, most programs become obsolete in only a few years and are quickly replaced by new applications.); and (3) high level of abstraction (Software algorithms can be represented in several different ways; at the same time, two apparently different algorithms may turn out to be equivalent).

Pipedrive Ltd. has chosen to protect their IP mainly with trademark and copyright, but they also use other possibilities. The Pipedrive

Services (the web site, system, content, platform, and all content, services, and/or products available on or through the Platform), Pipedrive Materials (the visual interfaces, graphics, design, systems, methods, information, computer code, software, services, “look and feel,” organization, compilation of the content, code, data, and all other elements of the Pipedrive Ltd. Services), Pipedrive Ltd. trade names and trademarks, and any parts or elements thereof are solely and exclusively owned and operated by the supplier and its third-party vendors and hosting partners. Pipedrive Materials are protected by copyright, trade dress, patent, trade secrets, and trademark laws, international conventions and treaties, and all other relevant IP and proprietary rights laws. The research (Blind, 2007) finds out that the most common mechanisms used to protect software innovation were internal confidentiality (secrecy agreements with employees), lead time, and customer relations management. All these factors are also in the focus of Pipedrive Ltd. activities.

A. Le Coq Ltd. has a long history and traditions. For the enterprise, it is very important to have a strong trademark. A. Le Coq Ltd. is one of the most prestigious brands in Estonia. A. Le Coq Ltd. has also seven registered industrial designs. In addition to industrial design solutions, the enterprise also has its IP in the field of technologies - in 2010, the enterprise adopted a technology unique to beer production in Estonia. To maintain their market position, they have also acquired other enterprises’ IP-based beverages - for example, in the spring of 2010, the colas segment was added to the soft drinks’ product group, and A. Le Coq Ltd. began producing Royal Crown Cola, an American cola drink.

High-tech enterprise Cleveron’s Ltd. strategy is to protect all new products by IP rights to ensure the client that they are purchasing the original product. Cleveron Ltd. registered its trademark first in the European Union (EU) in 2010. It was also their first registration with the European Union Intellectual Property Office (EUIPO). A registered trademark ensures that Cleveron’s Ltd. innovative products are appropriately protected - a factor, which has become increasingly important as Cleveron Ltd. continues to enter new markets around the world. Nowadays, their IP portfolio has grown rapidly: They have filed over 100 applications in more than ten countries. They combine various IP rights, including but not limited to copyrights, patents, utility models, design solutions, trademarks, and service marks. The main IP protection rights include patents on smart locks, modular parcel terminal for sending parcels, self-service parcel terminal with optimized shelving arrangement, method for increasing the speed of discharge and insertion of postal objects in a parcel terminal.

Cleveron Ltd. has also had some problems with patents - some enterprises have tried to steal their IP and create their products with their know-how. Board members Arno Kiitt and Peep Kuld say that design cannot be protected in China. According to Chinese legislation, a copier can only be prosecuted when he or she admits to having copied a product. They also learned their lesson in Russia. It is there that Cleveron Ltd. used to have one of its first paying customers, who bought over a 100 parcel terminals. "Die collaboration ended with the Russians dismantling the machine and copying it.

HR is required in every enterprise, but people are particularly prominent in certain business models (Osterwalder and Pigneur, 2009). The importance of the quality of HR is dependent on the field of activity. For example, in high-tech and high-growth enterprises like Cleveron Ltd. and Pipedrive Ltd., experienced and highly trained experts are extremely important. For this purpose, Cleveron Ltd. established in cooperation with Estonian Entrepreneurship University of Applied Sciences (EUAS) a Cleveron Academy with curricula Robotic Software Development, where specialized employees are trained for developing robotic solutions. This initiative served two purposes. First, it enables them to educate specialized specialists for the enterprise; and second, it enables us to give something back to the entrepreneurial ecosystem. Also, high-tech and high-growth enterprises are supporting intrapreneurship, that is, entrepreneurship inside the enterprise.

Key partnerships component describes enterprise’s key partners, suppliers, and the resources that are acquired from partners, and the key activities partners do perform for enterprise (Osterwalder and Pigneur, 2009). All investigated enterprises have some similarities and some differences in this regard. Producing enterprises like A. Le Coq Ltd. and Cleveron Ltd. need raw material providers and subcontractors for smaller parts. In this case, it is buyer-supplier relationships to assure reliable supplies. An important part of the key partnerships is financial partners. For example, A. Le Coq Ltd. gains its investments from the mother enterprise, Pipedrive Ltd. from risk investors, and Cleveron Ltd. has gained some money from EU structural funds.

An important part of a business model is financial planning to find new applications for existing resources or to save costs and thereby generate additional revenue. Financial planning is closely intertwined with all areas of the enterprise on a day-to-day basis, allowing the enterprise management to agree on a strategy, set measurable goals, accountability, and plan for change. Revenue streams represent the cash an enterprise generates from each Customer Segment.

Table 4.3 shows a brief overview of enterprises’ economic performance.

Cleveron Ltd. has received several grants from EU support mechanisms in 2013-2018, and this support has been very important for developing innovative solutions. In 2018, the sales revenue

Table 4.3 Overview of Revenue Streams and Main Costs (thousands EUR)

CLEVERON LTD.

2013

2014

2015

2016

2017

2018

Sales revenue

3,980

4,219

2,511

32,578

11,222

47,686

Investments

596

13,459

802

1,356

1,893

5,825

EU Grants

346

85

50

0

80

277

Intangible assets

836

986

1,585

2,025,707

3,146

3,964

Labor costs

811

1,028

1,168

1,509,212

2,819

6,213

EBIT

1,519

1,110

88

-201,502

783

7,569

Net income

1,452

1,009

108

-212,547

724

7,622

PIPEDRIVE LTD.

Sales revenue

818

2,171

4,976

10,255

20,108

31,812

Investments

421

647

1,335

2,044

2,907

5,504

Intangible assets

594

1,064

1,838

2,969

4,566

6,288

Labor Costs

793

1,649

3,346

7,101

10,966

14,831

EBIT

-371

-520

-1,787

-3,063

-376

-1,551

Net Income

-380

-555

-1846

-3101

-479

-1,504

A. LE COQ LTD.

Sales revenue

81,259

81,962

77,100

76,926

73,948

70,377

Investments

5,463

5,942

5,691

7,012

10,985

2,259

Intangible assets

386

253

129

242

255

211

Labor costs

6,929

7,813

8,045

8,310

8,584

8,307

EBIT

15,999

16,504

15,913

15,388

14,740

14,011

Net income

13,888

14,533

14,055

13,567

12,855

12,272

increased 4.2 times (325%) to 47,685,524 EUR, which is higher than the total sales revenue for the previous ten years. The average number of employees in 2018 was 142 (2017: 87), an increase of 63% over the year. The enterprise invested a total of 5,825,178 EUR in 2018. Of this, 3,555,000 EUR was financed from own resources for the extension of the development and production building from 3,000 m2 to 10,500 m2. Today over 3,000 machines are installed, and their parcel lockers and robots can be found in over 20 countries worldwide.

The Pipedrive Ltd. team has also grown steadily over the period 2013-2018 - from 18 in 2013 to 288 in 2018. Over the same period, labor costs have increased by as much as 95%. Cash flows from investing activities have increased by 92% during 2013-2018. The enterprise’s operating loss has only increased over the period 2013-2018, amounting to -1,551,544 EUR in 2018. Pipedrive has gained more than 90 million dollars of funding from investors.

Comparing the A. Le Coq Ltd. sales revenue for the period 2013-2018, it appears that sales revenue decreased by 15%, including export to the EU countries by 18%. The economic performance of 2017 and 2018 was strongly influenced by the doubling of excise duty rates on beer and low-alcohol beverages, which led to a decline in domestic sales of these products. The average number of employees has both increased and decreased over the years - 311 in 2013 and 305 in 2018. At the same time, labor costs have increased by 18% between 2013 and 2018. Cash flow from investing activities for the period 2013-2018 decreased by -142%.

All in all, Cleveron Ltd. and Pipedrive Ltd. have grown over 90% in revenue over the period 2013-2018 and will continue to capture new markets. While sales of A. Le Coq Ltd. products have fallen by -15%, exports to non-EU countries have increased by as much as 82%. The same trend is observed for investments - both Cleveron Ltd. and Pipedrive Ltd. have attracted over 90% over the same period, but A. Le Coq’s Ltd. investments have declined (-142%). Cleveron Ltd. has also successfully applied for EU funding, and its business model analysis shows that it has probably been made possible by knowledge- based production. The business model shows that Pipedrive’s Ltd. investments are related to venture capitalists, and A. Le Coq’s Ltd. investments are originated from parent enterprise Olvi.

 
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