Discuss about the Business Models for Communications of the ACM.
Most global companies use business models and standards in pivoting the business operations. A business model refers to the conceptual structure designed by the management to support business viability, aid the achievement of set purposes, and assist in implementing the laid down strategic plans (Saebi & Foss, 2015). Business models represent all business policies, procedures, and processes on the company’s customers, customers demands, and the affordability of products by the clients (Amit & Zott, 2012). A business model documentation plays a significant role in maintaining corporate goals focus, reviewing operational processes, and establishing congruence between the two. This essay aims at explaining what gets involved when a manager conceptualizes business model systems, the use of business models in resolving dynamic and static problems, the use of business models in firms partnership, and how business models assist managers to innovate.
The conceptualization of business models as systems plays a significant role in the achievement of corporate organizational goals. The availability of sophisticated technologies within a firm helps a manager conceptualize and build new business ideas on matters to deal with cost structures. The success of the business model of a company gets determined by the ability of managers to apply the new technologies in solving business challenges (Chesbrough, 2013). Also, the core capabilities of a company are involved when a manager is conceptualizing business models for a manager can conduct cost versus benefit analysis and invest more resources in a more profitable project (Teece, 2010). Further, innovators need to understand the business alignment of a firm to relate the existing and future business directions of the company in a more accurate manner. Again, the conceptualization of business models requires innovators to have a clear understanding of the firm’s customer needs, how to execute completion capabilities of the idea development, as well as the business value in a mechanism that will create value for the firm (Zott, Amit, & Massa, 2011). The manager needs to have a proper understanding of the distribution channels used by the company when delivering its goods and services to the customers.
Business models as systems are used by managers and businesspeople in solving both the static and dynamic problems in the business environment. The most common static problems faced by businesses include uncertainty, diversity of customers behavior, the complexity of market structures, supply chain issues, unpredictable investment rates, and demographic changes (Cohen & Kietzmann, 2014). The dynamic problems that business face include globalization, government regulatory policies, technological advancements, overload of information, and problem-solving issues. When solving these challenges, business models assist managers in developing cause and effect analysis strategies, conduct sensitivity analysis, identify business risks, and brainstorm formalized structure. The reduced levels of customer satisfaction challenge are solved using business models through establishing demand and supply patterns based on consumer purchasing rates and patterns (Cohen & Kietzmann, 2014). Managers use business models in studying investors approach when making decisions of shares price and equity contribution to ensure that they are attractive to customers.
Business models as systems are used by managers in understanding how different firms partner and create viable business links. Real entrepreneurs are not risk averse; they always take risks. For a business to thrive, a business partnership is essential. When running a business, there is increased access to wider range of business networks and financial resources. When business managers design business model systems, the core capabilities and operational patterns of the firm get incorporated (Dhar & Varshney, 2011). The use of trade models in analyzing the demand and supply patterns enables a company to understand the most reliable supplier and client. Firms with excellent corporate reputation are the best for businesses to partner with since they prove to be more reliable in the delivery of goods and services (Mason & Spring, 2011). Business models serve as a model for a company to analyze employees demands and foster collaborative trade unions who can raise their grievances to the employers in one voice.
Business models as systems can be used in understanding both the company’s and competitors’ innovation processes. The innovation of new ideas enhances business feasibility in the most prospective manner and enables the company to come up with new competitive ideas in the industry (Zott & Amit, 2010). When companies do not innovate, they fail. Most companies design graphical representation of the competitors to monitor the progress of the firm’s innovative ideas in comparison to the advancement of the competitors. The business models as systems help innovators bridge the gap between the competitor and their respective companies to enable businesses to expand. The moment a company understands the source of the performance gap between their competitors, they can formulate new innovative ideas to address the unmet customers demands (Casadesus-Masanell & Ricart, 2011). To this extent, business models as systems are used in the innovation of new products that are requested in the newly identified and exploited market opportunities. Investment of more resources in the innovation of customer oriented products established a competitive advantage for a firm.
Kodama’s (2009) lays down a new knowledge integration model for creativity, innovation, human network dynamism, and knowledge integration architecture process. The knowledge integration framework integrates heterogeneous knowledge within and without the jurisdiction of the firm that originates from business dynamic vertical and horizontal corporate changes. Kodama (2009) argues that the vertical integration model of value chain promotes companies initiative in the designing of the high quality of products and services in the most competitive manner. Internal business knowledge favors knowledge integration through the establishment of internal and external knowledge networks. The corporate strategy of a firm is enhanced by the management’s ability to conceptualize the core frameworks and boundaries formed by the company.
Zott and Amit’s (2010) argues that business models are interdependent systems of activities transcending the entire firm’s span of boundaries. The focal business model of a company is exploiting business opportunities through value creation among the involved partners. The operations of a firm transcend the firm focal boundaries in a broadened span and help businesses appropriate the value of share created by its activities in a uniform manner (Zott & Amit, 2010). Zott and Amit (2010) argues that the essence of designing a business model system is integrating together business activities that are provided to the internal team, suppliers, customers, and other trading partners.
As per Itami and Nishino (2010), business models comprise of a business system and a profit model. However, the profit oriented model gains higher recognition and profile since every business has the primary goal of maximizing profitability. These two elements of business models cannot work if applied at the same time in one company and this means that businesses should adopt the most viable model as per the market needs and corporate company goals. The internal and external operations of a firm depend on the market system and the profit model of the company, and therefore managers should be sensitive in choosing either in the two.
Itami and Nishino (2010) article proves to be more reliable in helping managers understand business models as a system. Most companies operate to make profits, deliver quality services and products to both the internal and external stakeholders, and capitalize their market position and presence. The profit model enables companies to monitor market demand pattern of changes and understands more about its businesses in comparison to the competitors. Therefore, the profit model is more glamorous for it has a direct link to the primary goal of a firm and accelerates the ability of a business to learn the current and future market needs.
In conclusion, business sustainability has increasingly become a paramount factor to consider when companies are designing business plans. Business models have helped enterprises maintain focus on the corporate goals as well as review operational practices. The introduction of excellent business patterns in the operations of a firm in the market leads to disruptive innovation. Therefore, every company should use business models when solving static and dynamic issues, in the change processes, and when partnering with new firms in the industry, they operate.
References
Amit, R., & Zott, C. (2012). Creating value through business model innovation. MIT Sloan Management Review, 53(3), 41.
Casadesus-Masanell, R., & Ricart, J. E. (2011). How to design a winning business model. Harvard business review, 89(1/2), 100-107.
Chesbrough, H. (2013). Open business models: How to thrive in the innovation landscape. Harvard Business Press.
Cohen, B., & Kietzmann, J. (2014). Ride on! Mobility business models for the sharing economy. Organization & Environment, 27(3), 279-296.
Dhar, S., & Varshney, U. (2011). Challenges and business models for mobile location-based services and advertising. Communications of the ACM, 54(5), 121-128.
Itami, H. (2010). Killing Two Birds with One Stone: Profit for Now and Learning for the Future. https://www.elsevier.com/locate/lrp, page 364-369.
Mason, K., & Spring, M. (2011). The sites and practices of business models. Industrial Marketing Management, 40(6), 1032-1041.
Mitsuru, Kodama, (2009). Boundaries Innovation and Knowledge Integration in the Japanese Firm
Saebi, T., & Foss, N. J. (2015). Business models for open innovation: Matching heterogeneous open innovation strategies with business model dimensions. European Management Journal, 33(3), 201-213.
Teece, D. J. (2010). Business models, business strategy, and innovation. Long range planning, 43(2), 172-194.
Zott, C., Amit, R. (2010). Business Model Design: An Activity System Perspective. Journal of Management, 216-226
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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