Discussion about E-bay in Paul Trott Book of Innovation management. Group members consist of Tumenast Erdenbold, Thint Khine and Riri Kusumarani. Course offered by Professor Munkee Choi in ITTP,KAIST

1. ITP 800 : Technology Commercialization
Case Study Chapter 14 : EBay
Group 4 : Riri, Tint, Erdenebold
Case Study Questions :
1. eBay is one of the only major Internet­based firms to consistently make a profit
from its inception. What is eBay’s business model? Why has it been so
successful?
Connecting the individual buyers and sellers online and taking a cut of the transaction is
eBay business model. Ebay receives its income from charging sellers a small fee to
display items and then also taking a small percentage of the winning bid. Also it receives
a small cut of the money from the buyers who use Paypal. Although making money for
every single item and transaction is very small, millions of transactions can bring multi
million dollar income to ebay. Additionally they innovated their business model by
providing new services such as fixed price and half price sales.
2. Other major websites, like Amazon.com and Yahoo, have entered the auction
marketplace with far less success than eBay. How has eBay been able to maintain
its dominant position?
eBay was one of the first auction online markets and it bought up many others around
the world. Ebay focused to try to maintain the spirit of the traditional community of
traders and it is the community of traders that has driven the new service development.
eBay does not need to spend large sums of money trying to understand what the
customers want because the customers constantly request and suggest changes.
The purchase of Paypal was a significant investment and successful move because it
receives a small cut of the money from the buyers who use Paypal. The purchase of
Skype has to deliver communications among the seller and buyers without any extra
cost.
3. Why did eBay ban the leaving of negative feedback on buyers? What has been the
impact of this change?
It is customers right to say what they felt negative about the items they bought to sellers.
But sellers who did not like any form of criticism shouldn’t give back any retaliation to the
buyers. That’s why eBay ban the leaving of negative feedback on buyers from May
2008.
Trading volume was declining at this time. ebay felt the buyer has the power that should
be appreciated and the business could have collapsed if they left. ebay put in additional
tools to protect sellers and promote a fair marketplace as well.

2. The impact of this changes led to build fair marketplace where buyers can give negative
feedback and also sellers can report problems with buyers and even block them.
By doing so ,ebay can maintain royalty buyers satisfactions and this could partially
contribute to the continued growth of ebay.
4. Ebay makes every effort for conceptualise its users as a community (as opposed
to, say, ‘customers’ or ‘clients’). What is the purpose of this conceptual difference
and does ebay gain something by doing it?
Constant modification of services is one of the key success of eBay. Customers are
flocked in a community making them feels like eBay is also part of their life. Instead of
pondering research to know what customers need, eBay take benefits from community
suggestions for future development and changes.
5. Ebay has long been a marketplace for used goods and collectibles. Today, it is
increasingly a place where major businesses come to auction their wares. Why
would a brand name vendor set up shop on ebay?
It’s estimated that there are more than 100 millions active users of eBay (statista 2016).
This huge amount of users are also potential buyers which can generate profit to
business owner. eBay also erases geographical boundary as any potential buyers in
southern part of the earth can connect and make trade with those sellers in northern
part. These benefits will help any vendor regardless their brand name strength to get
more buyer which will later bring profit.
As for brand name vendor, eBay can serve as cheap marketing platform which helps
generating revenue in the long run.
6. Many analysts have argued that by moving to fixed­price sales eBay is risking
alienating its traditional community of garage/ carboot traders. How can eBay stop
becoming just another site for selling?
Managing Ebay Meg Whiteman after transformed eBay from a purely domestic group
that held 300 categories into a global enterprise, operating in 18 countries and offering
16,000 categories, also she expanded the range of goods sold from mainly collectibles
including used cars, motor­cycles, computers, time­share holiday homes and even golf
tee­off times.
However ebay risks alienating its customers and the whole ebay community by
introducing fixed­price sales. And this move away from auction and into mainstream
sales goes against the principles which ebay established. Ebay has community which
has millions of members around the world and they are defining the business models. If

3. this community control and change, then they could influence eBay stop becoming just
another site for selling.
7. Given the growth opportunities available to eBay, which ones and in which order
should it develop?
As defined in the case study, VOIP, the online payment system (Paypal) and the eBay
community should create new experiences and encourage new developer solutions at
the intersection of the three businesses. How open the enlarged business is to the
innovation in the developer community could well determine its success.
There is a shared opportunity for the company and independent developers. eBay will
undoubtedly find ways to achieve a return on the huge investment it has made in Skype,
but the rewards could be all the richer if it opens the platform to outside influences. It is
worthy of note that what was a weakness for eBay – its technology – has now become a
strength.
Discussion Questions:
1. Discuss the differences between product innovation and service innovation.
Traditionally, the literature has viewed services as different from products. This is
because innovation theory has been developed around science and technological
development.
The intangibility of services clearly makes it difficult for the traditional view to embrace or
understand innovation within services.
Characteristics of services are identified as intangibility, heterogeneity and simultaneity,
i.e. the three key characteristics that distinguish services from products, with interaction
with the consumer the key distinguishing characteristic in service development.
Also additionally, according to Manchester business school presentation figure 1,
products innovation are manufactured by factory as final good to consumer, while
service is planned in back­office and directly delivered through front office of company to
consumer as service which included action and transformation.

4.
Figure 1.
2. What are the factors that have led to the increase in services?
Outsourcing has become very widespread in the last decade and has moved on from
limited applications where peripheral business functions are outsourced to much more
vital business functions being outsourced today, such as IT support.
Expected gains (factors) derived from outsourcing (from literature)
. The reduction of operational costs (Lacity, 1993)
. The ability to transform fixed costs to variable costs (Alexander5 and Young, 1996)
. The ability to focus on core competencies (Qinn, 1994)
. Access to the industry­leading external competencies and expertise (Kakabadse,
2002)
There seems little doubt that the growth in services is linked to this enormous growth in
outsourcing, with many firms now buying in services that were previously undertaken
in­house.
3. How has new technology contributed to the growth in services?
The growth in information communication technologies during the 1980s and the
development of the internet in the 1990s and into the twenty­first century has led to
enormous sums of money being spent by firms in order to ensure that they are equipped
to compete.

5. In addition, the introduction of some of these business systems, such as enterprise
resource planning system, have led to significant reductions in costs and improvements
in efficiency.
The development of internet­based firms, such as eBay's, is clear evidence of innovation
outputs within services­even if technology is a key antecedent.
If one then adds to the Knowledge­Intensive Business Services (KIBS) the huge growth
in entertainment industries including the gaming industry (Xbox, Nintendo, PlayStation,
PC games, etc.), the new online gambling industry (Party­Gaming, Gaming Corporation)
and the more recent social networking industry (Myspace, Bebo and Facebook etc.), one
begins to recognize just how much change and growth there has been to economies
over the past 10 years.
4. Discuss how some new services have created new business models.
New services were taught to create new business models mainly because there were
technologies behind them. Technologies, for example : internet, is able to transform
conventional way of doing something into a new service innovation. Let’s take ebay for
example. Most people already know the concept of auction, but eBay brings auction to a
new level by implementing technology in it. That’s how we now know the concept of
online auction. Business models that were created by the discovery of new services
seek not only to augment existing models, but also to amplify new strength in the new
models.
5. Explain why manufacturing firms are increasingly involved in offering services.
Discuss some examples .
The extension to which a manufacturing firms are moving toward services is also known
as servitization (Crozet 2015). This strategy aims to either substitute or complement
existing business models of current firms.
We argued that the reasons behind servitization is because of the need to strengthen a
company’s value chain to customer along with the need to gain competitiveness in
global economy. Servitization also can act as a backup plan if manufacturing industries
is not showing good performance for the company. So if all fails, a company can still rely
on its service offerings.
A good example for this is Apple as a company which produce smartphone then later
move towards service firm by offering online services through its appStore and iTunes.
As we can see today, Apple is inseparable from appStore. This is the result of well
planned integration of service and manufacturing side.

6. Another example is in Automobile industry : Toyota. Toyota is well known for its
capabilities in producing vehicles and later shift towards service by offering after­sales
service for their customers.
6. Explain the key roles played by the consumer in new service development.
The consumers play the key roles in new service development as the contributors,
co­producer and co­creators by giving their request, feedback and suggestions. By
allowing consumers to innovate on their own or by spending time with them and actually
taking part in activities with them, deep insights and new ideas of service development
can be emerged. Companies that engage in collaborative innovation with customers can
expect improved customer satisfaction, customer loyalty, and profit margin as well.The
new services have been developed by responding constantly to what the consumers
have wanted.
In ebay case study, ebay focused to try to maintain the spirit of the traditional community
of traders and it is the community of traders that has driven the new service
development. eBay does not need to spend large sums of money trying to understand
what the customers want because the customers constantly request and suggest
changes.
The first intended business model was to make up of a community and this vision has
helped shape the business later. Also It is clear that new technology is providing a
driving force for new services.
7. Explain how various groups of people in the organisation might use a service
blueprint.
Service blueprint is the first and foremost customer­focused technique or tool, allowing
firms to visualize the service processes, points of customer contact, and the physical
evidence associated with their services from their customers’ perspective for service
innovation. Various groups of people from the design, delivery, and support of the
service in the organization should be involved in the blueprinting process for a particular
service. This provides the greatest opportunity to capture diverse perspectives
concerning how a
service currently is or a new service should be experienced by consumers and executed
by the firm.
Various groups of people throughout the organization can use a service blueprint to look
at any customer facing process ( internal or external ) from different points of views. To
deliver new, high value service offerings, they can figure out what the customer
experience will be and how to make that happen. Also, Blueprinting can help make the

7. necessary discussions among organizational groups and have a better understanding of
their roles to deliver new better services.