Business Model And Disruption: Opportunities And Threats Of Smart Connected Products On Volvo Group

Defining Business Model

Discuss about the Business Model Essay for Journal of Business Venturing.

Every organization has a mandate to execute it mission to defined stakeholders. Businesses have an obligation to meet different stakeholders’ objectives and be sustainable for long term benefits. The primary objective of a business is to continuously increase returns. Organizations require a framework to follow to transform their products and dispose them in the market. A framework or structure of how a company or a nonprofit organization that creates, captures, and delivers values is known as business model (Osterwalder, & Pigneur, 2010). A business model outlines a plan for an organization on how to generate revenues in a specific marketplace. An organization’s business model has to reflect the business strategy and business innovation in order to maintain a competitive advantage in the industry (Achtenhagen, Melin, & Naldi, 2013). The following essay defines business model and disruption by reviewing its literature. The essay also analyzes opportunities and threatens that have been caused by smart connected products to a company business model. This will use Osterwalder & Pignuer (2010) business model framework for illustration

Business models have been used by businesses in the past to run their operations. The business model has evolved over the years from a simple logic of how business undertook it operations to a complex tool for creating business value. Wirtz, Pistoia, Ullrich, & Göttel, (2016) defined business model as step by step layout plan of action that a business profitably uses to operates in a specific market. Boons, & Lüdeke-Freund, (2013), outlines that business model transforms business value proposition to action. The value proposition of an organization is the statement that defines the difference that the business has to it competitors. The value statement is the competitive edge that every organization should have to differentiate itself and its products in the market. Baden-Fuller, & Haefliger, (2013), on another account defined business model as a basic means that an organization creates value and delivers value to target consumers and collection of revenues to make profits. A business model illustrates all business activities that have to be undertaken in an organization to create value and earn profit. The business model should include an organization strategy, target customers, financing, marketing strategy, projected revenues, competition, and expected expenses. Each organization is unique in its own way and therefore should use develop its own business model that strategically positions it image and value in the market. Therefore business model is an important tool to executing busiess strategy and should be designed to support the organization strategy.

Evolution of Business Model

Bocken, Short, Rana, & Evans (2013) found that business models nowadays are not durable. They noted that businesses models are highly disrupted by new technology that made the existing methods and equipments absolute. They found that artificial intelligence, communication network, and computing power as the lead innovations that disrupt business models. Innovations create new methods of production and systems of operations that increase efficiency in organizations. Casadesus?Masanell, & Zhu, (2013), noted that organizations that do not adopt new innovation risk losing their competitive edge in the market. Organizations have no control over business innovations that disrupt their business models. Businesses should invest in research and development to continuously improve their business model and operate within their business strategy. Casadesus?Masanell, & Zhu, (2013), conclude that businesses should strive to align their business model with the business strategy and accommodate business innovation to maintain their competitiveness in the market. 

The smart connected products present both opportunities and threats for Volvo Group. The smart connected products are made up physical, connectivity, and smart components that allow data exchange. In Volvo Group, the machinery and trucks are embedded with software, sensors, and connectivity allowing the automotives to exchange data with the operators, environment, and manufacturer. The advance of smart connected product has several opportunities to Volvo Group business model. First, the Volvo Group has an opportunity of using smart connected product to increase automobile safety (Porter, & Heppelmann, 2015). The company can use the smart connected product technology to advance the automobile safety measures. For example, the company can use sensors to control safety belt or install more reliable emergency breaks that can reduce chances of an accident happening and protect the driver and passengers from getting injuries. Secondly, Volvo Group has an opportunity of using smart connectivity increase automobile fuel efficiency. Fuel efficiency is an important aspect of Volvo and smart connectivity product can be used to monitor and regulate fuel to achieve high fuel efficiency. Another opportunity of Volvo Group with smart connective product is intelligent maintenance. Intelligence maintenance can monitor the automobile and suggest repair when is require and also automatically undertake some repairs (Wortmann, & Flüchter, 2015). This will increase the automobile uptime increasing benefits to the automobile user or operator.

The smart connected product also poses threats to Volvo Group. First, the smart connected product in Volvo Group present security threat. The system contains data that runs through the internet and is exposed to hacking on informational theft. Secondly, smart connected product threatens user privacy. The system violates individual privacy by interacting and conveying private information that is disclosed through a public medium. The information circulated by smart connected is therefore vulnerable and threaten the advancement of the system to improve Volvo Group business model.

Disruption of Business Models

The Volvo Group business model can be presented in Osterwalder and Pigneur Model as follows;

Key Partners Machinery Manufactures Automotive companies Suppliers Collaborators (universities and research institutions) Distribution Network Subsidiaries	Key Activities Production Marketing Post sales Manufacturing Engineering and design Distribution	Value Proposition Drive prosperity through transport solutions Self driving vehicles High quality equipments	Customer Relationship Brand awareness Trust Automation Innovation Change Performance based relationship Post sales services	Customer Segment EPC Companies Building and plant Carmakers Equipment manufacturers
Key Resources Brand 95000 employees Production facilities Intellectual property Production technology Network	Channels Authorized distributors Website Volvo museum Service centers
Cost Structure Parts Raw materials Software Production Production Distribution Components Manufacturing and assembling	Revenue Streams Sales of products Licensing Spare parts Rental Technical service Insurance and financing

The Volvo Group business model can be analyzed in several perspectives. In terms of the Volvo business model as value proposition, the business model is a rationale that the company uses to create and deliver value (Osterwalder, & Pigneur, 2010). Volvo business model organizes and manages resources to offer value. The company configures value to customers in a sustainable and systematic manner. The Volvo Group aims to drive it customers’ prosperity by crating transport solutions. This value proposition outlines the basic commitment of the Volvo Group whose mission is to create value by driving prosperity. Secondly, a Volvo company value preposition is created through high quality components and equipments. This involves providing customers with high quality products that are of high value. The company also creates self driving vehicles to make it easy for its customers to move from one point to another (Covin, Garrett, Kuratko, & Shepherd, 2015). The Volvo business model is therefore a tool for organizing how the company will create value and deliver it to customers.

The Volvo Group business model can also be analyzed as a set of capacities and resources. The business model outlines key resources that the company needs to deliver consumer value preposition. The Volvo business model outlines resources capacity to delivering consumer value. The Volvo group has 95000 employees and production faculties spread in 18 countries. The company supplies more than 190 markets around the globe. The company has production technology and has intellectual proprieties for new designs and process. The business model also outlines the company’s established network, creative team and innovative process that show business capacity to meet value preposition. Therefore, Volvo business model can be viewed as a set of capacities and resources to be used to meet value preposition of the company.

In summary, business model are important tools for creating and delivering value in an organization. Business models change to align with business strategy or accommodate business innovation. The business value preposition is the competitive advantage that an organization differentiates itself with in the market. A smart connected product presents Volvo Group with opportunity for increased automobile safety, fuel efficiency, and intellectual maintenance. Smart connected product advance also threatens Volvo information security and can violate users’ privacy. The Volvo Group business model is value proposition oriented and aims to driving prosperity through transport solutions. The company has key resources that are required for providing value proposition. Therefore, the Volvo Group business model is organized to create and deliver value to its customers.  

References

Achtenhagen, L., Melin, L., & Naldi, L. (2013). Dynamics of business models–strategizing, critical capabilities and activities for sustained value creation. Long range planning, 46(6), 427-442.

Baden-Fuller, C., & Haefliger, S. (2013). Business models and technological innovation. Long range planning, 46(6), 419-426.

Bocken, N., Short, S., Rana, P., & Evans, S. (2013). A value mapping tool for sustainable business modelling. Corporate Governance, 13(5), 482-497.

Boons, F., & Lüdeke-Freund, F. (2013). Business models for sustainable innovation: state-of-the-art and steps towards a research agenda. Journal of Cleaner Production, 45, 9-19.

Covin, J. G., Garrett, R. P., Kuratko, D. F., & Shepherd, D. A. (2015). Value proposition evolution and the performance of internal corporate ventures. Journal of Business Venturing, 30(5), 749-774.

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.

Porter, M. E., & Heppelmann, J. E. (2015). How smart, connected products are transforming companies. Harvard Business Review, 93(10), 96-114.

Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries, game changers, and challengers. John Wiley & Sons.

Wirtz, B. W., Pistoia, A., Ullrich, S., & Göttel, V. (2016). Business models: Origin, development and future research perspectives. Long Range Planning, 49(1), 36-54.

Wortmann, F., & Flüchter, K. (2015). Internet of things. Business & Information Systems Engineering, 57(3), 221-224.