Business Model Innovation
BUS305 BUSINESS MODEL DESIGN AND IMPLEMENTATION
Business Model Innovation in Digital Age
Asia Pacific College of Business and Law
Emmanuel Tenakwah
01 November 2022
CRICOS Provider No. 00300K (NT/VIC) I 03286A (NSW) | RTO Provider No. 0373
1
2
Recognition of Traditional owners and Indigenous cultures
Charles Darwin University acknowledges the traditional custodians of the land on which we’re meeting and pays respect to Elders both past and present and extends that respect to all Aboriginal and Torres Strait Islander people.
Examine the opportunities and threats of Digital Platforms
Understand the process of developing a Business Model Innovation Strategy in response to digital platforms
Examine the strategic implications of business model innovation in the digital age
3
Objectives
3
Introduction
4
– open a wide range of innovative ways for entrepreneurial leaders to conceive of, design, implement, and manage novel and transformative business models with new activities, business processes, ways of connecting activities, and/or ways of governing activities.
4
New and innovative business models explain how new entrants disrupt incumbents, and in turn offer a way for these same incumbents to invigorate their firms and mitigate the effects of disruption.
Emerging and established technologies open innovative ways for entrepreneurial leaders to conceive of, design, implement, and manage novel business models with new activities, business processes, ways of connecting activities, and/or ways of governing activities.
These technologies include 5G, artificial intelligence, the Internet of Things, blockchain, cloud computing, and connected mobility, along with real‐time digital data and data analytic tools.
Business model innovation centers on renewal and rejuvenation through opportunity creation, development, and exploitation.
5
Digital Platforms and Business Model Innovation Strategy
5
The emergence and growth of digitally enabled multisided platform business models presents several opportunities and threats.
They enable digital interactions, exchanges, and commercial transactions among multiple parties.
Expedia, Facebook, and Amazon.com are examples of how advanced computing and communication technologies created new business opportunities captured by entrepreneurial leaders.
6
Digital Platforms and Business Model Innovation Strategy
Such digital platform business models can be stand‐alone businesses, such as music streaming service Spotify and video platform YouTube, where both the financial transactions (e.g., subscribing to the service) and the delivery of the service are digital.
Alternatively, they can complement a brick‐and‐mortar retailing business; examples of this are e-commerce retail sites such as Walmart.com and Macys.com, where the financial transaction (e.g., purchasing the product) is digitally enabled but the delivery is physical.
6
Most digital platform business models are robust and scalable and offer a compelling value proposition to the stakeholders who are incentivised to participate in it.
They can be stand‐alone businesses where the financial transactions (e.g., subscribing to the service) and the service delivery are digital.
They can complement brick‐and‐mortar retailing business.
Digital Platforms and Business Model Innovation Strategy
Key considerations:
how to organize the platform and combine it with the existing business
alternative ways of monetising the traffic on the digital platform.
revenue models can be subscription‐based, advertising‐based, or commission‐based revenue models,
7
In addition to considerations about how to organize the platform and combine it with the existing business, an important aspect of a business model innovation strategy is the alternative ways of monetizing the traffic on the digital platform. The value capture of digitally enabled business models is facilitated through a range of (often novel) revenue models. Examples of different revenue models include subscription‐based revenue models, such as the New York Times' online media platform, music streaming platform Deezer, and movie streaming platform Netflix; advertising‐based revenue models, such as search engines Google and Yahoo; or commission‐based revenue models, such as different types of marketplace business models, including CtoC (e.g., LendingClub.com), BtoB (e.g., Faire.com) or BtoC (e.g., Cars.com) companies. Commissions may also be generated through affiliate marketing programs, which are realized through digital referrals to an e-commerce site or digital marketplace; one example of this is Credit Karma, a personal finance digital platform that derives commissions from credit card issuers. E‐commerce platforms use a range of revenue models, including sales revenue (e.g., Italian retailer Zegna's online site), transaction fees (e.g., parking payment app meterUp), razor/blade revenue models (e.g., the men's grooming companies Gillette and digital native Harrys.com), and more.
7
Examine the opportunities and threats of Digital Platforms
Understand the process of developing a Business Model Innovation Strategy in response to digital platforms
Examine the strategic implications of business model innovation in the digital age
8
Objectives
8
The process of developing a responsive business model
9
9
Business model innovation strategy as the pattern of choices of entrepreneurial leaders concerning
(i) the design of a new system of activities (What? How? Who? Why?);
(ii) the processes, including their antecedents, by which the new activity system is created; and
(iii) the implementation and ongoing adaptation of the activity system to ensure coherence (i.e., internal, external, and strategic fit) to sustain and improve the focal organisation’s key performance metrics.
Design of a new system of activities - starts by embracing a business model mindset.
Must be anchored on identifying clear and pressing needs in the market.
This entails recognising the perceived problems of customers, along with the needs of other potential stakeholders.
10
The process of developing a responsive business model
10
For the processes, including the antecedents, by which the new activity system is created, adopting a design perspective to business model innovation offers entrepreneurial leaders a content and process‐based lens for crafting their BMI strategy.
BMI strategy needs to aim for business models that are both legitimate and difficult to imitate.
Developing a BMI strategy needs to consider the relevant internal and external antecedents, or drivers, that affect the design of a novel business model.
11
The process of developing a responsive business model
11
12
Exhibit 10.1 suggests that business model implementation encompasses the steps involved in moving from a business model prototype to a full‐fledged, thriving organization that works well with the new business model (creating internal fit); making sure that the new business model and the organization mesh fluidly with their ecosystem (creating external fit); and adapting and aligning strategies (creating strategic fit). In other words, successful implementation implies the comprehensive creation of fit, so the new business model can be fully operational and fulfill its intended purpose for the focal firm.
12
Examine the opportunities and threats of Digital Platforms
Understand the process of developing a Business Model Innovation Strategy in response to digital platforms
Examine the strategic implications of business model innovation in the digital age
13
Objectives
13
Managerial insight, vision, and leadership play a pivotal role in developing a business model innovation strategy.
The distinctive function of entrepreneurial leaders lies in:
recognising market and technological trends
conceiving, designing, and implementing innovative, robust, and scalable business models (and revenue models that enable them to profit from their innovation) that create value for all stakeholders.
14
The strategic implications of business model innovation in the digital age
14
Essential managerial tasks to ensure the business model's viability, feasibility, and desirability include:
firmly embedding new business models into the focal firm's ecosystem,
ensuring their tight fit with the focal firm's product‐market strategy and internal organizational structure, and
providing for ongoing orchestration and coordination of activities performed by the various stakeholders.
15
The strategic implications of business model innovation in the digital age
15
The strategic implications of business model innovation in the digital age
16
16
More specifically, to successfully navigate through all the available possibilities, managers intent on (continuously) innovating their firms' business models.
Three required skills:
Business model innovation design skills and mindset
Business model innovation implementation skills
Business model innovation management skills
Business model innovation design skills and mindset
17
17
Skills such as thinking holistically, adopting a system‐level perspective, looking outside the box of your firm and industry, and engaging in logical reasoning and conceptual combination.
Focus on the problem before jumping to a conclusion observing and listening carefully and empathetically to others.
Embrace a philosophy of total value creation, which accepts that value co‐creation with others can only work if you compensate them adequately and do not just focus on value capture for yourself.
18
Business model innovation implementation skills
18
Building, negotiating, and nurturing partnerships has therefore become a competence that you need to develop and perfect.
The ability to build and project trust and credibility, which can be achieved through techniques such as symbolic management, helps with winning over partners and with acquiring many other kinds of valuable resources.
Other valuable skills include:
recognising, mitigating, and managing risks (e.g., having a business plan);
adopting and adhering to sound governance standards (e.g., having a board of directors);
identifying and adopting effective defense mechanisms; and being strategic in your choice of revenue model.
Business model innovation management skills
19
19
This skill set involves the ongoing monitoring of the activities.
It also involves the ongoing orchestration and coordination of activities performed by the various business model stakeholders, as well as the continuous adaptation of the entire system to changes in its environment.
This session has discussed the Business Model Innovation Implementation of new ventures. Specifically, we have:
Discussed start-up risks
Discussed business model implementation challenges and barriers in new ventures
Discussed how to overcome BMI Implementation Barriers in new ventures
20
Summary
20
Examine the opportunities and threats of Digital Platforms
Understand the process of developing a Business Model Innovation Strategy in response to digital platforms
Examine the strategic implications of business model innovation in the digital age
21
Objectives
21
This session has discussed Business Model Innovation in Digital Age. Specifically, we have:
Discussed opportunities and threats presented by digital platforms
Discussed the process of developing a business model innovation strategy
Discussed strategic implications of business model innovation
22
Summary
22
Three things I have enjoyed today are?
Three new things you learnt (What you didn’t know before the class)
What do you like to know more about?
23
Logging off
23
We will discuss Innovation with the Business Model Canvas.
24
Next Week
Read: Chapter 12 of the text and the weekly list of activities on learnline
24