Disucss about the Business Model.
Business model can be defined as a plan for successful business operation, which identifies the revenue sources, customer bases, products and details of financing for an organization (DaSilva & Trkman, 2014). This study will describe business model as per the article on “The Business Model: Recent Developments and Future Research” written by Zott, Amit and Massa. The study will describe the notions like e-business archetype, business model as activity system and cost/revenue architecture. Moreover, the study will show the usage of such business models in solving inert and active business problem. Besides this, the discussion will also focus on the essentiality of change in business through the example of Planet Innovation Organization.
Business model refers to the content, structure and governance of transaction, which are designed for creating value through exploration of business opportunities. According to Casadesus?Masanell and Zhu, (2013), business model is commonly referred as the interdependent activity system, which surpasses the pivotal firm and expands its boundaries. On the contrary, Zott and Amit, (2013) brought about their viewpoint that business model defines the statement, description, representation, architecture, conceptual tool, structural template, framework and pattern of a particular business. It is the plan for a successful business operation through identifying the sources of revenue, product, detailed financing and intended customer base. The activities of organizations and its partners have huge impact on the business model conceptualization.
While considering the viewpoint of Zott et al., (2011), business model is comprised of certain elements, which are interlocked. These are profit formula, customer value proposition, key resources and key processes for creating and delivering high business value. This model seeks both capturing value and value creation through the utilization of value oriented activities, advanced technologies and effective revenue and cost structure. On the other hand, Markides, (2013) opined that model can be the reflection of organizations’ realized strategy for gaining competitive edge over the rival companies. Competitive business model goes beyond the earning profit and revenue and it highly focuses on creating high level of customer value for enhanced competitive advantage.
While considering the book “The Business Model: Recent Developments and Future Research” written by Zott, Amit and Massa, it can be seen that there are three types of business notions of enhancing business value. These business notions are e-business model archetype, business model as an activity system and revenue and cost architecture or technology management.
Contemporary business organizations are highly dedicating extreme devotion to the business model constructed on e-business. Such business model signifies undertaking business operation electrically. This also encompasses internet based business, e-commerce and e-market. Moreover, Zott et al., (2011) opined that in e-business model, companies ensure profitable dealings with their business partners and buyers over the internet. As per Schneider and Spieth, (2013), new progression in communication and information technologies has amplified the magnitude of improved business value. Furthermore, the swift development and emergence of internet as well as swift deterioration in computing and communicational cost allows the firms towards creating and delivering high value. Bohnsack et al., (2014) opined that the e-commerce, e-shops and e-communication allows direct interaction with the customers through direct product delivery to customers, direct feedback from the customers and direct communication with the customers. The digital content of e-business model has the potential to reach out to mass customers through strategic marketing and attract huge customer base towards the product or services.
Business model as activity system denotes value creation and value capture through activities. According to Zott et al., (2011), business model activity system defines set of business capabilities, which are configured towards qualifying the creation of organizational value, which will be consistent enough with either social or economic strategic purposes. As per this business model, value creation mechanism goes beyond value, which can be realized through innovation, formational of strategic network among firms, configuration of value chain and exploration of organizational core competencies. According to Bohnsack et al., (2014) business model as activity system is always concerned with creating unique value to the customers for gaining competitive advantage over the rivals. Unique features distinguish an organization from the others in the market and foster competitive gain towards increased business performance.
Business model as cost/revenue architecture can be represented as technology and innovation framework. While considering the viewpoint of Zott et al., (2011), it can be said that organizations have the ability to incorporate technological innovation and ideas according to the business model. On the contrary, Carayannis et al., (2015) discoursed that the model can signify latest innovation dimensions. These dimensions have the ability to extent outmoded process, products and organizational modernization. Furthermore, this involves new collaboration forms and mutual collaboration within the company for augmented innovation. An imperative part of business model is capturing value from initial technological stage over exposing the potential value embedded in the technology and convert them into market outcomes. Integration of new technology advances the operational and commercial activities of the business, which enhances the economic value of an organization. On the other hand, organizations can also use open innovation, where the organizations mostly look outside the organizational boundaries for leveraging external source of ideas. However, at the same time, the organizations also look for internal ideas towards advance business process.
With increasing competition in the business environment, organizations need to conceptualize and upgrade their flow of business operations through proper business model. Such models would help them in meeting the business values. Static and dynamic problems are highly ubiquitous both for small as well as large scale organizations. Business models can effectively manage the static business problems like cost structure, organizational resources and organizational structure. Business model based of cost/revenue structure assists in quantifying the available revenue source of the process of business operation (Carayannis et al., 2015). With the help of this process, organizations have the ability to incorporate proper make or buy choice for modified operational and production process. On the other hand, model of e-business contributes in innovation process, which also gains newest operative technologies, so that positive business operations are achieved. The business model based on value creation facilitates in correlating the static and dynamic business challenges like organizational structure, revenues and operational structure for gaining maximized organizational profit (DaSilva & Trkman, 2014).
Dynamic business problems are quite tough to manage, as it frequently changes with the changing market condition. Moreover, organizations always face issues in their business operations with the dynamic changes in customer trends, demand and supply for products, product diversification and government policies. Such business problems can effectively be mitigated through value creation business model and e-business model (Markides, 2013). In such business models, organizations can get direct interaction with the customers, which can facilitate the organization towards identifying customer trends and changing customer preferences.
Figure 1: Business Model Framework
(Source: Amit & Zott, 2015)
Business context assess the surrounding business environment of an organization. Moreover, business context find out the problems and scope of the business in its surrounding environment. It can involve organization itself, its stakeholders, system, process and others. In today’s first moving business environment, organizations are facing frequent changes in its business context. Therefore, competitive businesses need to keep pace with such changes in the business context for beating the market competition and gaining competitive edge. Moreover, organizational changes are inevitable for successful business. According to Carayannis et al., (2015), technology is rapidly changing in contemporary business context. In such situation, utilization of backdated technological equipments can prevent the success level of the organization. Therefore, the organizations should change their technological background for beating the competition in the market. On the other hand, Schneider and Spieth, (2013) opined that customer preferences are also changing with their changing needs and demand. Therefore, organizations should frequently change their business model with the changes of customer preferences.
While considering the impact and importance of business model, Planet Innovation organization can be considered as the best example. In the resent past the organization had to face issues related to its value chain. This is because the organization was initially dealing with local and to some extent with national organizations. Services were mostly confined under consultancy and product designing for its partners and clients. The business model that was constructed initially was quite basic and simple with limited locale, partner, client type, information technology, resource, value and channels.
Planet Innovation started to expand from the latter half of 2014, where it extended its services to international market including new innovation base in North America (Langsdon et al., 2017). Also, with the extent of services, the organization started producing innovative items for its in-house machinery. Finally, it started developing its own products into new market selling through niche marketing. Therefore, it is evident enough that the organization’s initial business model was impacted through change arising from market expansion and diversification that included plenty of new customer type, partners, customer relationship and asset management (Bohnsack et al., 2014). Organizational managers had to quantify the importance of different stakeholders, distribution channels, talent management and value proposition before developing the latest business model as shown in figure 2.
Figure 2: Hybrid Business Model Framework
(Source: DaSilva & Trkman, 2014
Conclusion
While concluding the study, it can be said that business model is a set of interdependent activities, which explores business opportunities towards gaining business profit. As per the business model book written by Zott, Amit and Massa, there are three types of business model like e-business model, business model as activity system and business model as cost revenue structure. All these models facilitate organizations towards adding competitive advantage in beating market competition. Moreover, such models help in solving both static and dynamic organizational problems. For instance, Planet Innovation uses the mixture of e-business model and business model as activity system for offering unique feature in all their product categories. Moreover, they have changed their traditional business model for gaining competitive advantage over the rival companies.
References
Amit, R., & Zott, C. (2015). Crafting business architecture: The antecedents of business model design. Strategic Entrepreneurship Journal, 9(4), 331-350.
Bohnsack, R., Pinkse, J., & Kolk, A. (2014). Business models for sustainable technologies: Exploring business model evolution in the case of electric vehicles. Research Policy, 43(2), 284-300.
Carayannis, E. G., Sindakis, S., & Walter, C. (2015). Business model innovation as lever of organizational sustainability. The Journal of Technology Transfer, 40(1), 85-104.
Casadesus?Masanell, R., & Zhu, F. (2013). Business model innovation and competitive imitation: The case of sponsor?based business models. Strategic management journal, 34(4), 464-482.
DaSilva, C. M., & Trkman, P. (2014). Business model: what it is and what it is not. Long range planning, 47(6), 379-389.
Langsdon, R., Langsdon, R., Vom, E., Joffe, M., Dopheide, S., & Langsdon, R. et al. (2017). Planet Innovation | Strategic Innovation, Advanced Product Development & Commercialization. Planet Innovation. Retrieved 31 July 2017, from https://planetinnovation.com.au/
Markides, C. C. (2013). Business model innovation: What can the ambidexterity literature teach us?. The Academy of Management Perspectives, 27(4), 313-323.
Schneider, S., & Spieth, P. (2013). Business model innovation: Towards an integrated future research agenda. International Journal of Innovation Management, 17(01), 1340001.
Zott, C., & Amit, R. (2013). The business model: A theoretically anchored robust construct for strategic analysis. Strategic Organization, 11(4), 403-411.
Zott, C., Amit, R., & Massa, L. (2011). The business model: recent developments and future research. Journal of management, 37(4), 1019-1042.
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