Business model and disruption are two important components in an organization’s life. Business model is a structure that includes all the important aspects of organization’s business. These aspects are key resources and capabilities and overall environment of business. Considering the intense competition in the industry, the organizations are focusing on creating a sustainable business model that helps it in delivering effective customer value and gaining competitive edge over its competing brands (Baldassarre, et al, 2017). It states that business environment and its resources are interlinked which work together to earn more revenues and profits for the business. The goal of this paper is to give the different opinions of different authors for business model and disruption. Commonwealth Bank Australia is taken into consideration to discuss the effect of smart-connected products. It includes the threats and opportunities of smart-connected products to the Commonwealth Bank. Moreover, it consists of the business model canvas of selected business and includes two important components which are value proposition and capabilities and resources.
The term business model has been utilized in practice for last few years, but organizations develop, describe and innovate their business models subconsciously from the beginning of business. Osterwalder, et al. (2011) has introduced the business model canvas framework to include all the components of business together. In this context, the authors stated that business model canvas is a template of strategic management that is used to develop business models (Stefan & Richard, 2014). It is a visual structure that includes all the components defining product’s value proposition, customers, resources, infrastructure and finances (Osterwalder, et al. 2011). The companies can give fast response to the changes in external environment with the use of business model. It assists the organization in fulfilling the gap between strategy and process of business. According to Stafan and Richard (2014) business model is an important framework for generating funds. It includes a set of processes that a company executes, how it executes them and when it performs these activities so as to provide its customers benefits they want. It envisions the firm as a platform of decisions and their results. It includes the group of resources and processes in changing degrees of operational and detail view that result and offer value to targeted audiences (Stefan & Richard, 2014).
Looking at the competition in the industry, most of the businesses are implementing disruption in business processes. According to Christensen (2006), disruptive innovation happens when business advancement develops brand-new markets through searching new types of clients (Christensen, 2006). This definition of authors state that all the disruptors and innovators, but all innovators are not disruptors. In this context, Paetz (2014) stated that disruption is the method that change and enhance the way in which entrepreneurs think and operate their business. In an organization, disruption develops different value dimensions. These dimensions include some advantages to the customers like simplicity, accessibility, lower prices, user interface and convenience (Paetz, 2014). The characteristics of this innovation bring more depth and present the positive impact of advanced technologies. The application of disruption in innovation and technology assists the organization to gain more competitive advantage over its rivalry brands (de Jong & van Dijk, 2015).
Nowadays, disruptive technology has allowed the companies to practice the smart-connected devices in its operations. Smart connected products are the assets, products and other related things established with the sensors, processors, connectivity and software which enable the information to be exchanged between the business environment and its operators, users, producers and systems (Zott, Amit & Massa, 2011). By the use of smart-connected products, the companies make innovation in technologies which assist them to attain more opportunities in the future. These devices have been continuously changing the structure of market and offering different opportunities and threats to the companies (Christensen, Raynor, & McDonald, 2015).
As mentioned above, Commonwealth Bank of Australia is chosen for the further discussion. Commonwealth Bank is a multi-national bank in Australia that offers different services like retail and financial services, insurance, investment, institutional and business banking, broking and superannuation services (Commonwealth Bank, 2018). After successful establishment in Australia, the bank has expanded its business in different nations such as United Kingdom, United States and New Zealand. Smart-connected products play an important role in the operations and service delivery in banking organization. Considering the increased demands of customers, Commonwealth Bank has implemented smart-connected devices in its processes. There are some major innovations which are done by the team of Commonwealth Bank. These products are such as Block-chain, smart machines, big data, Internet of Things (Porter, & Heppelmann, 2014). The organization provides the debit MasterCard that helps its customers to shop and transact online (Joyce, & Paquin 2016). By the adoption of these smart-connected products, this bank has both opportunities and threats which affect the operations of bank. These products allow the bank to create new opportunities to become more competitive in the industry. At Commonwealth Bank, one of the major innovations through smart-connected products is smart-machine that helps it in delivering financial services to its customers all over the world. These machines are created with the sensors that enable this bank to gather and manage the information of customers among its all divisions (Chesbrough, 2010). It has enabled the bank to offer the retail and banking services by using smart-connected devices. It provides the customers facilities to open their bank account online.
Thus, these products are offering several opportunities to Commonwealth Bank of Australia. It is increasing its client base with a significant growth rate. Along with the opportunities, this bank is confronting many challenges because of smart-connected products (King & Baatartogtokh, 2015). One of the biggest threats is that old people are facing issues in adopting new and updated technologies in bank’s operations. They need effective training and development program so that they can understand and use new technology in banking processes (Koo, et al, 2017). So, the organization needs to make huge investment on the training. Moreover, there are various customers who are still unable to use the services of bank like debit cards MasterCard, ATMs. In addition to this, Commonwealth Bank is facing some issues related to theft of private information of customers (Cohn, Fehr & Maréchal, 2014). Thus, these threats may affect the growth and success of business in today’s competitive era.
The business model canvas of Commonwealth Bank is formed below:
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Key Partners · Credit card firms · Investors · Subsidiaries · Agreements with 2 Chinese banks (Jinan City Commercial Bank and Hangzhou City Commercial Bank) · Society · Financial clients · Financial regulatory agencies. |
Key Activities · Retail banking services · Investment and insurance services · Loan facility · Credit card facility · Risk assessment and management · Opening saving account · Customer procurement (Eckhardt, 2013) |
Value Proposition · Financial and retail banking services · The bank is popular as one of the largest banks in Australia. · Risk monitoring and control · Viable growth · The bank offers financial services to personal customers and businesses. · Management of wealth (Dijkman, et al, 2015). |
Customer Relationships · Personal contact with customers · Security to confidential information of customers. · Trust and convenience · Non-personal channels · Brand image and reputation. |
Customer Segments · Mass population · All income group people · Both males and females · Credit card users · Account holders · Government |
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Key Resources · Extensive distribution network · The organization has established more than 100 branches (Schlagwein, Thorogood & Willcocks, 2014). · Reputation of largest bank in Australia · ATM · IT capabilities · Human resources · Computers and other physical resources at bank branches. |
Channels · Website of Commonwealth Bank · Mobile Banking · Net Banking · Social media networking sites |
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Cost Structure · Salaries and wages too employees · Administrative costs · Technology development costs and maintenance charges (Porter & Heppelmann, 2015) · Financial costs · Cost of security · Interest paid · Rewards and returns |
Revenue Streams · Fees of service delivery · Financial revenues · Policy premium · Return on investment. |
The above business model canvas represents 9 building blocks. From them, two major components are value proposition and key resources and capabilities. First important component is value proposition that helps the company to overcome different challenges and position itself as a leading player in the industry (Mohelska, & Sokolova, 2016). This aspect of business model helps the firm to develop positive perception of customers towards its products. The value proposition of Commonwealth Bank is very effective that attracts more customers towards its financial services. The organization is offering various banking and retail services to Australian clients. It is delivering the value to customers as one of the largest banks in Australia and all over the world. By enticing small businesses and customers, this bank is able to manage a viable growth in international banking industry. This value proposition helps the bank in enhancing its client base and it has successfully gained more competitive advantage over its competitors (Radziwill, 2015).
Moreover, resources and capabilities of organization play an important role in the growth of Commonwealth Bank. One of the major resources is the staff of bank that delivers the satisfactory services to targeted customers. It has opened more than 100 branches which are serving customers in New Zealand, Australia, United States and United Kingdom. To adopt smart-connected products, the bank is developing its information technology capabilities. By this, it is managing the technology advancements and maintenance (De Brentani & Kleinschmidt, 2015). The value proposition and key resources of bank assist this bank in establishing a better brand image in banking sector.
Conclusion
Thus, the above analysis concludes that business model and its components support the future growth of business. Through effective management of business processes and resources, the organizations are able to stay competitive in today’s business environment. In the future, Commonwealth Bank should enhance its business model. Recognition of major capabilities and resources will support it in meeting the demands and expectations of people. Disruptive innovation can improve the service delivery at Commonwealth Bank. The organization can use its strengths and opportunities to overcome different threats.
References
Baldassarre, B., Calabretta, G., Bocken, N. M. P., & Jaskiewicz, T. (2017). Bridging sustainable business model innovation and user-driven innovation: A process for sustainable value proposition design. Journal of Cleaner Production, 147, 175-186.
Chesbrough, H. (2010). Business model innovation: opportunities and barriers. Long range planning, 43(2-3), 354-363.
Christensen, C. M. (2006). The ongoing process of building a theory of disruption. Journal of Product innovation management, 23(1), 39-55.
Christensen, C. M., Raynor, M. E., & McDonald, R. (2015). What is disruptive innovation. Harvard Business Review, 93(12), 44-53.
Cohn, A., Fehr, E., & Maréchal, M. A. (2014). Business culture and dishonesty in the banking industry. Nature, 516(7529), 86.
Commonwealth Bank. (2018). CommBank: Personal banking including accounts, credit cards. Retrieved from https://www.commbank.com.au/.
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de Jong, M., & van Dijk, M. (2015). Disrupting beliefs: A new approach to business-model innovation. McKinsey Quarterly.
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Koo, C., Ricci, F., Cobanoglu, C., & Okumus, F. (2017). Special issue on smart, connected hospitality and tourism. Information Systems Frontiers, 19(4), 699-703.
Mohelska, H., & Sokolova, M. (2016). Smart, connected products change a company’s business strategy orientation. Applied economics, 48(47), 4502-4509.
Osterwalder, A., Pigneur, Y., Oliveira, M. A. Y., & Ferreira, J. J. P. (2011). Business Model Generation: A handbook for visionaries, game changers and challengers. African journal of business management, 5(7), 8918-8932.
Paetz, P. (2014). Disruption by Design: How to Create Products that Disrupt and then Dominate Markets. NY: Apress.
Porter, M. E., & Heppelmann, J. E. (2014). How smart, connected products are transforming competition. Harvard Business Review, 92(11), 64-88.
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Radziwill, N. (2015). Value Proposition Design. The Quality Management Journal, 22(1), 61.
Schlagwein, D., Thorogood, A., & Willcocks, L. P. (2014). How Commonwealth Bank of Australia Gained Benefits Using a Standards-Based, Multi-Provider Cloud Model. MIS Quarterly Executive, 13(4).
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