Innovation And Sustainable Business Development For Long Range Planning

Importance of Business Models

Discuss about the Innovation and Sustainable Business Development for Long Range Planning.

The essay highlights the concepts of business model and how a business model effectively helps in establishing business of a firm. Business model is used in explaining various aspects of the business ranging from its value proposition to the innovation process that a particular business entity wants to adapt in its business activity. The aim of this paper is to get involved in the business model conceptualization and the way a particular firm utilizes their business model to solve their static and dynamic business activities. A detailed analysis of the importance of framing a business model shall be carried on in this study. The argument will be supported by the means of real life business models that have been used by major organization in their business activities.

As stated by Kodama (2009), that a business model comprises two elements. These are a specific business system and a profit model. The aim of framing a business model is to conceptualize a picture on how a business operates in its operating environment. In addition to this, a business model also provides the opportunity of using the available resources best as per the ability of the firm (Kodama, 2009). The aim of the firm is to maximize the utilization of the resources available to them. The two components of the business model are inclined towards describing the maximum utilization of the resources and deliver the products to the consumers in a profitable manner (DaSilva & Trkman, 2014). The business system is concerned with the system of work that the organization undertakes to deliver its products, while the profit model describes how an organization shall utilize its resources to bring out maximum profit from its business activities. On the other hand, according to Zott and Amit (2010), a business model system is rather designed on three parameters. These are activity content, activity system structure and activity system governance. The business model aims at selecting a particular activity and then aimed at designing a particular structure of the business models. For example, during the financial crisis, the Banclombia has been found to adopt certain strategies and provided microcredit services to 60% of the Colombian (Saebi & Foss, 2015). Another change in business model approach has been evident by IBM. It has been found that the company shifted its business activity from dealing with hardware and became a software provider as well. In order to develop this business model, IBM has been found to improve their infrastructure. Consulting with various services, the Company has been able to mark improve their business activities by major changes in their business model (Schneider & Spieth, 2013).

Components of Business Models

There are various means of analyzing the profit margin generated by a particular firm. One of the methods of analyzing the business effectiveness is by checking it using the gross profit metric (Saebi & Foss, 2015). It is the method where the gross profit earned by the company is calculated by subtracting the cost of goods sold and the actual revenue earned by the company. In this respect Itami and Nishino (2010) has pointed out that the intension of a company always remain to maximize the profit of the company and thus, the business system is designed likewise. Other important objectives that are fulfilled by designing an effective business model are to create better opportunities for the stakeholders involved with the organization. Business model also focuses on innovation and technologies. In the view point of Carayannis, Sindakis and Walter, C. (2015), if many people are involved in the organizational activities, the scope and opportunity for better innovation increases. It has to be understood in the recent business market scenario, competition has been found to increase deliberately. Therefore, in order to combat against this increasing competition, involving in better innovative approaches is indeed an important criterion to be involved at the time of designing the business model.

Business model can be regarded as the system which is inter-related with a number of interdependent activities taking place within the organization (Zott & Amit, 2010). The business model has potential role to play in the major decision making that the entrepreneurs make to enhance their business activities. Thus, it can be said that a business model significantly help to establish value for the business (Morris, et al., 2015). However, it has been evident that the business model varies from one organization to other and the frameworks for all the business models are not same. Business model framework provides flexibility to the managers of the organization as well. It is due to the flexibility of the business framework, many organizations are found to come up with changes in their business models based on the market situation. A number of such examples can be given here.

An example of a successful business model can be given here. The success Google can be easily be given to the business model that they have designed for their firm. Google provides service to its users without charging a single amount of money. The idea of providing the users with the contents is to attract them (Kodama, 2009). With more contents available to the users, the chance of gaining their attention increases. However, the idea behind the development of the business model is to sell the space to the marketers and advertisers. Today, Google is the most liked search engine. The business model of Google has also considered the cost effective of the firm. For instance, the organization has its own in-house server system that has helped the organization to provide the service within a minimum expenditure (Kodama, 2009). However, it should also be mentioned that the business model of Google is built on both innovation and technology. Similar approaches have been made by other companies as well. No matter if it is a manufacturing company or a software development company, innovation and technological advancement is included in the business model of these firms. The complete action of the business activities depends on how the business model is framed by the company.

Real Life Examples of Effective Business Models

Another important concept of business model has been evident among the Japanese firms. The Japanese style of leadership is based on knowledge integration and innovation. Many business models are based on these two concepts (Itami & Nishino, 2010). For instance, the new knowledge creation and the vertical value chain model are the two common business models used in the Japanese companies. The vertical value chain model is most effective model and often helps in the creation of a win-win situation. A company has to continuously access the situation of the business model used in carrying out their activities. Whatever approach is taken, it should be valuable and effective to the particular organization (Itami & Nishino, 2010). The success of the Japanese companies can be easily given to the innovative framework that they use in their business system. The business models that the Japanese companies use are much different from those used in the Western countries. For example, the telecommunication company DoCoMo has been found to use the Vertical integration model in their business. This has significantly helped them to be effective enough to create their own path of integration (Kodama, 2009). This can be regarded as the basic reason behind the success of these business models.

Among the three articles on business models, the article by Kodama has been helpful to a great extent. Business models depend on the organizational activities and the market where the organization operates. The business models are designed to engage the stakeholders and increase the profit of the business (Kodama, 2009). However, the role of technology and innovation in framing the business model of an organization cannot be neglected. The advancement in the field of technology has created various options for the business to come up with better approaches and design their business model that is best suitable for the particular business. The business model also enables an organization to fight against the competitors present in the business environment (DaSilva & Trkman, 2014). It has to be understood that the corporate activities of a firm depends on the boundaries of market where it operates. Innovation can be regarded as the major driving force behind the success of a business model.

By the end of the discussion, it can be said that business models depend on various factors. It has been found that the foundation of the business model depends largely on the area where the particular business operates. For instance the business model of Western countries varies from that of the business model of Japan or other such countries. A detailed investigation on the various business models adopted by various companies in different stages of their business has been evaluated. The business model might also requires to set up new infrastructure for the firm as well but the same is made affordable by the company depending on the profitability that it earns while operating the particular business environment. An organization has to keep competitive measures to keep its dominance in the market where it operates. 

References:

Bonakdar, A. (2015). Business model innovation (Doctoral dissertation, University of St. Gallen).

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.

DaSilva, C. M., & Trkman, P. (2014). Business model: What it is and what it is not. Long range planning, 47(6), 379-389.

Itami, H., & Nishino, K. (2010). Killing two birds with one stone: profit for now and learning for the future. Long Range Planning, 43(2), 364-369.

Kastalli, I. V., & Van Looy, B. (2013). Servitization: Disentangling the impact of service business model innovation on manufacturing firm performance. Journal of Operations Management, 31(4), 169-180.

Kodama, M. (2009). Boundaries innovation and knowledge integration in the Japanese firm. Long Range Planning, 42(4), 463-494.

Morris, M., Schindehutte, M., Richardson, J., & Allen, J. (2015). Is the business model a useful strategic concept? Conceptual, theoretical, and empirical insights. Journal of Small Business Strategy, 17(1), 27-50.

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.

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. (2010). Business model design: an activity system perspective. Long range planning, 43(2), 216-226.