Business Model Innovation
Hunnysid
Week8..pptxBUS305 BUSINESS MODEL DESIGN AND IMPLEMENTATION
Implementing Business Model Innovation in Established Firms
Asia Pacific College of Business and Law
Emmanuel Tenakwah
18 October 2022
CRICOS Provider No. 00300K (NT/VIC) I 03286A (NSW) | RTO Provider No. 0373
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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.
Understand Business Model Implementation
Understand business model implementation challenges and barriers in established firms
Understand how to overcome BMI Implementation Barriers in Established Firms
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Objectives
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Introduction
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It requires careful management of people and processes within and across firm focal boundaries.
It involves challenges around creating external fit (e.g., breaking with old partners and onboarding new ones) and strategic fit (e.g., investing in new capabilities required to support the new business model and divesting from old ones that are no longer essential).
The firm must ensure the new business model fits with its existing strategy (competitive and corporate), with its internal organization, and with its ecosystem.
Implementing business model innovation is a highly complex and comprehensive change management.
BMI implementation is about the choices that need to be made to ensure that the new business model can be fully operational and fulfil its main objective in the specific context of the focal firm.
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Business Model Innovation Implementation
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These choices can be broadly grouped around the following questions:
How should the firm be (re‐)organized internally? In other words, how can internal fit be created between the focal firm's business model and its internal organizational design?
How should the focal firm, and its new business model, be embedded into its ecosystem?
How can strategic fit be created? How can fit be achieved among the focal firm's business model, its competitive strategy, and its corporate strategy?
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Business Model Innovation Implementation
These choices can be broadly grouped around the following questions:
How should the firm be (re‐)organized internally? In other words, how can internal fit be created between the focal firm's business model and its internal organizational design?
How should the focal firm, and its new business model, be embedded into its ecosystem? For example, which specific external stakeholders (customers, partners, suppliers) should be enlisted, and how can positive relationships with them be created, managed, and maintained? In other words, how can external fit be created between the business model and its ecosystem?
How can strategic fit be created? That is, how can fit be achieved among the focal firm's business model, its competitive strategy, and its corporate strategy? This entails considering the product‐market positioning of the focal firm (with its new business model) against existing and potential competitors (e.g., product differentiation vs. cost leadership), its market entry strategy (e.g., timing and location of entry, international expansion), and its corporate strategy (e.g., degree of diversification and scope of the firm).
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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.
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Understand Business Model Implementation
Understand business model implementation challenges and barriers in established firms
Understand how to overcome BMI Implementation Barriers in Established Firms
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Objectives
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The chief barriers to business model change in established firms:
resistance to change
organisational inertia
Business Model‐Specific Barriers
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Implementation Challenges in Established Firms
implementing business model innovation is a highly complex and comprehensive change management task that requires careful management of people and processes within and across focal firm boundaries. It certainly involves challenges around how to create external fit (e.g., breaking with old partners and onboarding new ones) and strategic fit (e.g., investing in new capabilities required to support the new business model, and divesting from old ones that are no longer essential). However, the chief barriers to business model change in established firms – resistance to change and organizational inertia – refer to the creation of internal fit, as further explained and elaborated below.
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Active refusal by specific individuals to support the implementation of the new model, such as by withholding resources, engaging in political campaigns against the new model, or boycotting its implementation:
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Resistance to change
Resistance to change from business model innovation in established firms refers to the active refusal by certain individuals to support the implementation of the new model, such as by withholding resources, engaging in political campaigns against the new model, or otherwise boycotting its implementation. Such active resistance from organization members may stem from: (i) lack of familiarity with the new model, along with its low perceived legitimacy; (ii) potential cannibalization of the mainstream business; (iii) perceived threat for one's own career and/or envy; (iv) probable lack of efficiency of the business model innovation; or (v) uncertainty about its scalability (i.e., growth potential) and future profitability.
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Resistance to change
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Resistance to change from business model innovation in established firms refers to the active refusal by certain individuals to support the implementation of the new model, such as by withholding resources, engaging in political campaigns against the new model, or otherwise boycotting its implementation. Such active resistance from organization members may stem from: (i) lack of familiarity with the new model, along with its low perceived legitimacy; (ii) potential cannibalization of the mainstream business; (iii) perceived threat for one's own career and/or envy; (iv) probable lack of efficiency of the business model innovation; or (v) uncertainty about its scalability (i.e., growth potential) and future profitability.
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(i) lack of familiarity with the new model, along with its low perceived legitimacy;
(ii) potential cannibalisation of the mainstream business;
(iii) perceived threat to one's career and/or envy;
(iv) probable lack of efficiency of the business model innovation; or
(v) uncertainty about its scalability (i.e., growth potential) and future profitability.
Organisational Inertia
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A second barrier to creating internal fit, organizational inertia, refers to the forces that constrain the mindset and behavior of firm managers, motivating them to keep doing what they have done in the past.11 It refers to passive resistance to BMI implementation from organization members, which may be rooted in:
Past investments in assets, capabilities, routines, relationships, and contracts that are difficult to redeploy or unwind, and that therefore create strong path dependencies;12
An organizational culture that does not support experimentation with new business models, and which may even be characterized by a deep‐rooted fear of failure;
A strong “dominant logic” of the existing business model within the focal firm that imposes cognitive constraints on managers, preventing them from switching collectively to a new mindset and embracing a new model.13
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The forces that constrain the mindset and behaviour of firm managers, motivating them to keep doing what they have done in the past:
Past investments in assets, capabilities, routines, relationships, and contracts that are difficult to redeploy or unwind and create strong path dependencies;
A culture that does not support experimentation with new business models and which may even be characterized by a deep‐rooted fear of failure;
A strong “dominant logic” of the existing business model within the focal firm imposes cognitive constraints on managers.
Characteristics and systemic, boundary‐spanning nature of business models create additional challenges that must be addressed.
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Business Model‐Specific Barriers
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Business Model‐Specific Barriers
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(i) high complexity and number of changes due to internal and external interdependencies,
(ii) lack of specific business model know‐how,
(iii) lack of able and willing leaders who can drive business model change within the focal firm, and
(iv) confusion or lack of agreement about the right model going forward.
Understand Business Model Implementation
Understand business model implementation challenges and barriers in established firms
Understand how to overcome BMI Implementation Barriers in Established Firms
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Objectives
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It requires a sound, case‐specific analysis to identify the “problem behind the problem,” such as why exactly middle managers resent the introduction of a business model innovation.
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Overcoming barriers to BMI implementation
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Successful business model innovation requires:
Strong and decisive leadership.
Specific attitudes and skills among the firm's managers and employees.
A high degree of involvement from top management is indispensable given the potentially profound, strategic, and wide‐reaching consequences of business model innovation for the focal firm.
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Addressing Leadership and Knowledge Gaps
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Firms need to systematically identify, educate, and empower internal leaders, specifically with respect to their openness to considering innovation in a broad sense (and not just in terms of technology, product, or process innovation).
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Addressing Leadership and Knowledge Gaps
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Soft skills (e.g., communicating, convincing, coercing) and structural measures (e.g., adjusting incentives, hiring outsiders, and creating separate organisational units).
Separate the new business model from the old one structurally or spatially through distinct organisational arrangements, organisational members, geographic locations, and/or physical infrastructure.
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Anticipating and Overcoming Resistance to Change
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The main recommendation from the business model literature is to experiment continuously with new business models.
Some ways to experiment include “probing” (attempting to “experience the future” by visiting “lead locations” or establishing development centres in cities that are “innovation hotspots”), local experiments and in‐market tests, and corporate venturing.
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Countering Organisational Inertia
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This session has discussed the Business Model Innovation Implementation. Specifically, we have:
Discussed Business Model Implementation
Discussed business model implementation challenges and barriers in established firms
Discussed how to overcome BMI Implementation Barriers in established Firms
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Summary
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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?
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Logging off
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We will discuss the process of Implementing Business Model Innovation in New Ventures. We will cover the following:
Business model implementation challenges and barriers in start-ups
Managing business model implementation risks in start-ups
The sharks’ dilemma start-ups face
The roles of governance and leadership in business model implementation
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Next Week
Read: Chapter 11 of the text and the weekly list of activities on learnline
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