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Business model innovation business model canvass essay
Description of business model
Description of business model
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Introduction
The ever-decreasing length of product lives has diminished the role of new technologies as a source of satisfactory profit and sustainability, as in today’s economies they become commoditized in a growingly fast manner. Nowadays, innovation must include business models rather than just technology and R&D (Chesbrough 2007), and with the greater frequency of disruption and dislocation in many industries, business model lifecycles are shortening as well.
Because of its intrinsic connection to the concept of a Business Model, Business Model Innovation is often a topic found deeply intertwined within strategic management, business strategy, entrepreneurship, business model design, value creation and the ideas of innovation, strategic
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Developing a successful business model is insufficient to assure competitive advantage as imitation is often easy: a differentiated (and hard to imitate) - yet effective and efficient business model is more likely to yield profits. Business model innovation can itself be a pathway to competitive advantage if the model is sufficiently differentiated and hard to replicate for incumbents and new entrants alike (Teece 2010). Moreover, studies on the topic have shown that firms that were financial outperformers put twice as much emphasis on business model innovation as underperformers (Giesen et al. 2007) and a better business model often will beat a better idea or technology (Chesbrough 2007).
The terms “business model” and “business model innovation” have since the late 1990s in the context of the information technology boom, had a surge in academic research and business management attention, and a huge volume of theory has been generated in the field that suggest different ways to be successful in applying these concepts to increase enterprise performance. This plethora of literature on business models and business model innovation creates a several problems in terms of convergence and homogeneity within the field, which will be further addressed in this
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As we can see, there are disagreements on what business model innovation is and what role it has in markets.
In a working paper from 2009 titled «Toward a Theory of Business Model Innovation within Incumbent Firms» Santos et al. define business model innovation as «a reconfiguration of activities in the existing business model of a firm that is new to the product/service market in which the firm competes» (Santos et al. 2009).
Giesen et al. (2007) try to address business model innovation with a framework based on experience, an extensive literature review and an analysis of 35 case studies. The framework identifies 3 main types of business model innovation, but doesn’t offer a conclusive definition.
Markides (2008) defines business model innovation as the discovery of a different business model in an existing
Christensen suggests a broad definition of the concept of innovation. To him, innovation refers to all changes of “processes by which an organization transforms labor, capital, materials and information into products or services of greater value” (Christensen 1997/2002) [14]. Thus, in addition to creating new processes and products, innovation also includes new types of business models. The DIT recognizes two types of innovation: on the one hand, sustaining innovations generate growth by offering a better performance in existing markets. Usually, regardless of whether they are incremental or radical, these innovations are exploited successfully by the established players in an industry and do not lead to revolutionary changes in an industry’s landscape. On the other hand, compared to existing products and business models, disruptive innovations initially have a lower performance in the traditionally most important performance criterion (such as functionality, speed, or
Innovation has rapidly assumed a position of prominence in world competition on a global scale. To compete in this environment, organizations need a level of innovation. As competition becomes more global and time-based, organizations must develop and deliver new and superior products or services in less time. The challenge for modern organizations is to revitalize them so they can successfully and continuously develop newer products and enhance business development.
Henderson reasoned that the cash required by rapidly growing business units could be obtained from the firm's other business units that were at a more mature stage and generating significant cash. By investing to become the market share leader in a rapidly growing market, the business unit could move along the experience curve and develop a cost advantage. From this reasoning, the BCG Growth-Share Matrix was born.
Today, advances in technology and design are providing many opportunities for new and existing businesses to re-invent themselves and their marketing strategies.
Blue Ocean Strategy is based on 150 strategic moves spanning more than 100 years that have been studied in over 30 industries. The authors’ objective was to compare successful companies to their less successful competitors to analyse for a trend and common strategy. The result was the blue ocean strategy, which emphasises creating uncontested markets. The book is divided into three parts. The first part of the book explains the “cornerstone” of Blue Ocean Strategy which is value innovation. Kim and Mauborgne say “[w]e call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space” (Kim and Mauborgne, 2005, 1...
For instance, Harley Davidson may be forced to change their marketing strategy due to the entrance of a new competitor into the market. Second, Harley Davidson has to learn new skills and technologies quickly. For example, technologies are changing rapidly, so it is crucial for Harley Davidson’s business plan to change or alter in order to keep up with innovation. Third, this organization has to effectively leverage its core competencies while competing with its competitors. This is, Flexibility is required for Harley Davidson to learn how to use primary value-chain activities and support functions in the way that allow the organization to produce their products at a lower cost with differentiated features compare to their competitors in the market
The book has used peer-reviewed resources to enhance the use of professional approaches to innovation and management strategies by the readers who uses the book. The authors have given different management strategies and their practical application in business fields. As the title states, a strategy in business require innovative strategies for efficient development of the firm. More importantly, the book offers modern innovative ideas that need to be integrated with management strategies to develop modern businesses. The innovative approach provides a practical guide to the management strategies easing the execution of the strategies in the respectful environment. The book has given the strong relationships between innovation and strategies. These relationships are known to increase profitability in business organizations that use them efficiently. It offers how business managers can create successful value through innovation. Value creation in companies is done through examining untapped markets, clients ' needs and investing in new businesses. Therefore, this remarkable book helps readers in innovating and managing business
When the buzzword of business model was very active and reactive during the internet boom, many individuals did not understand the concept of the proper business model for the proper business (Magretta, 2002). When not utilizing the right type of model for the organization, the model will be misused and distorted (Magretta, 2002). Understanding the traditional organization and learning organization, will allow an organization to determine which time of organization they desire the most.
Moore, G. A. (2004, Jul/Aug). Darwin and the Demon: Innovating Within Established Enterprises. Harvard Business Review, 82(7/8), pp. 86; pp. 7.
However, an important concept associated with the open innovation paradigm is the significance of business model. Shafer defines business model as a “representation of a firm’s underlying core logic and strategic choices for creating and capturing value within a value network”. Specifically, the functions of the business model are to articulate the value proposition, identify market segment, define the structure of the firm’s value chain, specify revenue generating mechanism, define cost structure and formulate a competitive strategy. The importance of business model is that it serves as an intermediate link between the technical and economic domains....
This analysis discusses four articles that examines the concept of the business model, how it complements a business strategy. They introduce frameworks to assess and categorize business models through the importance of the value proposition. In Business Models: A Challenging Agenda, Baden-Fuller and Mangematin (2013) introduce a four-prong typology to discuss the value proposition through value creation and capture and how a business model is not a complete description and is alterable. Johnson, Christensen and Kagermann (2008) focus on the understanding and analysing a business model to decide if it needs re-inventing (change) or if it can be applied to a new business. In Why Business Matter, Joan Magretta (2002) writes about testing the
Osterwalder and Pigneur (2010) described external factors of demand as the circumstances, with respect to design drivers and constraints, that reveal the business model (BM) position and provide a juncture for discerning adjustment; these factors empower the organization to deliberate on the impact of new trends, evaluate how the BM may evolve, and prompt innovation. The role of external factors serves to apprise the BM designer of trends and events significant to the organizational
Every organisation has business model to operate with, one of the function of business model is to identify what is business strategy to ensure long term growth of organisation. Baden-fuller & Haefligar (2013) defined business model as a tool that solves the problem of identifying who are the customers, delivering satisfaction align with customer demands and needs. Business models mediate the link between technology and organisation performance and by identifying the right innovation technology also one of the business strategy to ensure openness and user engagement in market. In the case of Sony Corporation, they implemented a few series of restructuring process within the organisation to ensure long term growth by focusing on high demand products, strategic business units and focus on product development aligns with current technology. These factors has forced Sony Corporation to cutting down their cost by retrenchment certain products to ensure business sustainability for future growth and profitability.
Tidd, J., Bessant J. and Pavitt, K.L.R. (1997), "Developing the framework for an innovation strategy" and "Paths: exploiting technological trajectories", chapters 3 and 5 in Managing Innovation: Integrating Technological, Market and Organizational Change, New York: John Wiley
Coyne, Kevin P., Patricia G. Clifford, and Renée Dye. Breakthrough Thinking from Inside the Box. Harvard Business Review (2007): 71-78. Print. The.