The term Business Model is used a lot in modern days. It might sound complex but it is important to understand what actually a business model is. Business model gives an explanation of how an organization operates. It is basically a part of an organization’s business strategy (Amit & Zott, 2012).
The essay mainly highlights the concept of a business model and what is involved when referring to the notion of an e-business archetype, business model as activity system and cost-revenue architecture. The main objective of the essay is to understand the concept of business model and how it can be used to explain value concept, appropriation and the innovation process at firms in real life.
The essay mainly throws light on the concept of business model, how the conceptualization is used to analyze and solve static and dynamic problems. It includes the designing and re-designing problems of business model. Further, it mentions the concept of business context and the notion that change in business in inevitable, with some real life examples.
Business model generally refers to the rationale of an organization’s operation and how it creates, captures and delivers value in the context of economy, cultural, social or others. The process by which a business model is constructed is a part of its strategy. The term is used to represent formal and informal aspects of a business, which includes the purpose, trading practices, target customers, infrastructure, offerings, sourcing, strategies, organizational structures, operational processes, cultural policies and business process. It can be defined as the abstract depiction of an organization’s business strategy, be it textual, graphical or conceptual. A business model helps an organization to achieve its objectives and strategic goals (Schaltegger, Lüdeke-Freund & Hansen, 2012).
Business model as an activity system content is referred to the activity selection procedure, that is, those activities which are performed. For instance, in addition to other retail bank’s activities, Bancolombia adopted several new activities in order to provide with microcredit to Colombians who do not have accessibility to banking services. The bank trained its management team and hired new staffs to perform the new set of activities and linked those with the existing ones. It helped in developing new ideas and strategies for the bank (Bocken et al., 2014). Activity system also describes how an activity is linked and therefore gives a brief idea about its importance in the existing business model, whether peripheral or supporting in nature. Business model as a cost revenue architecture refers to adoption of cost effective procedures for predictable and sustainable revenue growth. In early 90s, when IBM was affected by some serious financial crisis, it switched its peripheral activities by shifting from a supplier of hardware to service provider. IBM started launching new set of activities in IT maintenance, consulting and more services and by the year 2006, it achieved sustainable revenue growth from the new set of activities, which barely existed earlier (Amit & Zott, 2012).
Organizational changes in dynamic perception occur when the consumers’ attitude change, which directly or indirectly affects the organization. Moreover, it takes time to change the whole corporate culture in order to keep pace with the customers’ changing attitude, and at times it becomes costly. It requires new and modern ways to operate as well as adoption of new and innovative strategies (Bock et al., 2012). When the organization is static in nature, then the revenue growth is less without any changes in the existing technology. There is less probability in adopting new measures and strategies. Hence, the industry remains stable with less demand growth and incremental changes. An organization’s business model can help in analysing its static and dynamic problems (Casadesus-Masanell & Tarzijan, 2012). It helps in making rational and consistent decisions by identifying the best way to use the right opportunity. It helps in identifying the potential positive and negative long term impacts as it is extremely adaptable in dynamic environment. It lessens the risk factors of the organizational changes by implementing new and innovative strategies and helps in solving the sustainability issue (Mokhlesian & Holmén, 2012).
Designing and re-designing of business models can also lead to several problems. Firstly, rapid changes cannot be easily and instantly adopted by an organization’s publics. Secondly, changes in business models result in a whole new set of company strategy. Therefore, it requires time to adopt and get accustomed with the changes. This can affect the organization as the customer’s behaviour will also change (DaSilva & Trkman, 2014). Thirdly, new design of business models can lead to issues related to adoption of new technology and corporate culture, also coping up with rapid market and social changes get difficult. Fourthly, it may create certain problems which will affect diverse group of individuals and raise question on the company’s efficiency (Schneider & Spieth, 2013).
Business context can be referred to a context where of a special sort of vocabulary is utilized. This can be a large business community, an individual entity or some specific project or initiative. Change in any business organization is inevitable. The “We have always done it in this way” have marred many organizations’ progress and growth. Today, organizations are adopting new measures and strategies to face the dynamic environment (Storbacka et al., 2012). In order to survive in modern day’s global market, organizations need to readily adapt the changes in the marketplace and be more flexible. Change is the new constant and therefore, it is necessary for the organizations to adapt and pay more attention regarding the social and psychological aspects of the change. It helps in enhancing the company’s service range and also provides variety of experiences, skills and points of view. It helps the company to meet the needs of business strategy and of customers more adequately (Osterwalder & Pigneur, 2013).
Companies which encourage changes can inspire all of its employees to perform better and to their best. More effective execution of business strategies is possible, which in turn results in profit and return of investment. The economy is becoming increasingly global which is leading to an increasingly diversified workforce. An organization’s competitiveness and success, fully depends on its ability to manage the changes in its workplace. Hence it is important to evaluate the organizational policies and plans as fast as possible, keeping in mind its future (Storbacka et al., 2012).
For instance; the company, Shell, in the year 2004, faced a crisis in the oil reserve management which affected the company’s share price. It led to the departure of the company’s oil group chairman. The new chairman believed that the company needs a transformation in its existing processes and structure, for its survival. A new series of strategies and standard policies were identified which was much impactful for the company’s operating units. The change in the program was much successful as everyone was up for the changes and adopted the new ones. Everyone was involved and shared their piece of advice, which led to the company’s benefit. Moreover, the company made sure that its external publics were aware of the changes and why it was required. The changes helped in the company’s growth and progress, what they actually aimed for (Schneider & Spieth, 2013).
To conclude, in this dynamic, globally active and hyper competitive world, adopting innovative and new strategies is very important. Innovative organizations are more likely to have innovative cultures and people have an innovative mindset. Every organization can become innovative by adopting new ideas and opinions and the way they approach to innovative problems. Dynamic capabilities of a company are beneficial as it helps in contributing to its development and progress. The firm’s position in international chain value will constrain its opportunities for entrepreneurship and innovation. However, the national context of a company is influential; it doesn’t determine the direction and rate of the firm’s innovation.
References
Amit, R., & Zott, C. (2012). Creating value through business model innovation. MIT Sloan Management Review, 53(3), 41.
Bock, A. J., Opsahl, T., George, G., & Gann, D. M. (2012). The effects of culture and structure on strategic flexibility during business model innovation. Journal of Management Studies, 49(2), 279-305.
Bocken, N. M. P., Short, S. W., Rana, P., & Evans, S. (2014). A literature and practice review to develop sustainable business model archetypes. Journal of cleaner production, 65, 42-56.
Casadesus-Masanell, R., & Tarzijan, J. (2012). When one business model isn’t enough.
DaSilva, C. M., & Trkman, P. (2014). Business model: what it is and what it is not. Long range planning, 47(6), 379-389.
Mokhlesian, S., & Holmén, M. (2012). Business model changes and green construction processes. Construction Management and Economics, 30(9), 761-775.
Osterwalder, A., & Pigneur, Y. (2013). Designing business models and similar strategic objects: the contribution of IS. Journal of the Association for information systems, 14(5), 237.
Schaltegger, S., Lüdeke-Freund, F., & Hansen, E. G. (2012). Business cases for sustainability: the role of business model innovation for corporate sustainability. International Journal of Innovation and Sustainable Development, 6(2), 95-119.
Schneider, S., & Spieth, P. (2013). Business model innovation: Towards an integrated future research agenda. International Journal of Innovation Management, 17(01), 1340001.
Storbacka, K., Frow, P., Nenonen, S., & Payne, A. (2012). Designing business models for value co-creation. In Special Issue–Toward a Better Understanding of the Role of Value in Markets and Marketing (pp. 51-78). Emerald Group Publishing Limited.
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