Running head: BUSINESS MODEL GENERATION EXERCISE 21
Business Model Generation Exercise 2
Lydia Wray
BUSI 690
Liberty University
BUSINESS MODEL GENERATION EXERCISE 22
Business Model Generation Exercise 2
What role should external factors of demand play in successful business models?
According to Osterwalder and Pigneur (2010), “developing a good understanding of
your organization’s environment helps your conceive stronger, more competitive business
models” (p.200). Understanding this, there are four main key external factors that play a role in
successful business models: market forces, industry forces, key trends and macroeconomic
forces. All of these factors need to be understood so that the each external force of demand can
play an essential role in the business models. The external factors are often beyond companies'
control due to their complex interrelationships, which creates sustainability pressure that can
influence the companies' survival (Ahmad, Rezaei, de Brito & Tavasszy, 2016, p. 312).
Market forces play a role by looking more at the different factors that can influence a
specific market for the firm. The different aspects of Markey forces include market issues,
market segments, needs and demands, switching costs and revenue attractiveness (Osterwalder &
Pigneur (2010). Industry forces look and take into account, competitors, new entrants within the
industry, substitute products and services, suppliers and other value chain actors and finally
stakeholders (Osterwalder & Pigneur (2010).
Continuing, key trends play a role by showing the technology trends within and from
without the given market that a business is in. In addition, regulatory trends, societal and cultural
trends and also socioeconomic trends all show how shifts in the culture or times need to be
understood. Finally, the last external factor of demand that plays in a successful business model
are macroeconomic forces, such as global market conditions, capital markets, commodities and
other resources and economic infrastructure. Ahmad et al., (2016) add to this by stating that
“each external factor may have a different relationship with the goals” (p.307).
Once a business takes the first step and sees that importance of understanding these
external factors, businesses can begin then to see what effects they have. With the ever changing
times, management can use these external factors and see which need to change to meet the
BUSINESS MODEL GENERATION EXERCISE 23
given needs of the business and which cannot. The effect of the external factors… may be
different upstream where companies have to deal more with risks related to ownership and
access to reserves compared to downstream companies (Ahmad et al., 2016, p. 312).
What is “Business Model Design and Innovation”?
Business Model Design and Innovation does more than try to develop a business model
for a business. With innovation being put into play with the business model, a company is able to
look at their given customers and their needs and can look at what changes need to be made to
the business model to allow the company to grow and prosper. Addressing sustainability
challenges both demands and brings great opportunity for innovation in all dimensions of
business (França, Broman, Robèrt, Basile & Trygg, 2017, p. 155-156). According to Osterwalder
and Pigneur (2010), a business model innovation results from four objectives which include
1)satisfy existing by unanswered market needs, 2) bringing new products to market, 3)
improving markets with a better business model and 3) creating an entirely new market (p. 244).
There are five phases of the business model design that Osterwalder and Pigneur (2010)
refer to mobilize, understand, design, implement and manage (p.248). The first phase, mobilize,
shows how a business should prepare all the elements for a successful business model design.
The next phase of, understand, describes the activities needed to gather information and identify
the needs and problems of the model. Gathering information can be done by interviewing
different experts and even researching and studying potential customers for the product.
Next, the design phase allows the business to transform their information into test viable
business model options and then selecting the best. The fourth phase, implement, refers to taking
the selected and chosen business model and actually implementing it within the field. Finally,
manage refers to how a business needs to adapt and modify the chosen business model in
response to the given markets reaction, to ensure that the business has overall success.
What are the challenges to “Business Model Design and Innovation”?
BUSINESS MODEL GENERATION EXERCISE 24
Within the ever changing business world today, many aspects of any job continue to
change and evolve within business sectors. When new products or technology come on the
market, businesses need to make sure that they are prepared with the correct tools and
strategies. According to Osterwalder and Pigneur (2010), some of the challenges that can be
seen are “finding the right model, testing the model before a full-scale launch, continuously
adapting the model in response to market feedback and managing uncertainty” (p.245). These are
only a few challenges that businesses may come across within their given markets.
Having to improve markets with trying to “improve or disrupt an existing market”
(Osterwalder & Pigneur, 2010, p.245) can be a daunting task when one has to figure out the old
versus new design and how improvements can be made. Understanding that technology
continues to advance, business models need to take those advances into consideration and put
that within their scope of change and improvement. França et al., (2017) states that “it is
necessary to appropriately define sustainability and apply concrete strategic guidelines” (p.156)
so that those given improvements are not just a quick fix that will not benefit the business or the
consumers.
In addition, Business Model Design and Innovation can be used to also help create
markets for new products that have not been launched or introduced to the population. There is
always a sense of worry and uncertainty when new designs are brought to the current market, yet
with the correct information, potential customers and identifying the needs and problems with
the design, the implementation can go rather easily. Once the five phases of design are
completed; mobilize, understand, design, implement and manage are complete, the process of
creating a new business can progress smoothly.
BUSINESS MODEL GENERATION EXERCISE 25
References
Ahmad, W. N. K. W., Rezaei, J., de Brito, M. P., & Tavasszy, L. A. (2016). The influence of
external factors on supply chain sustainability goals of the oil and gas industry. Resources
Policy, 49, 302-314. Retrieved from
https://www.sciencedirect.com/science/article/pii/S030142071630157X
França, C. L., Broman, G., Robèrt, K. H., Basile, G., & Trygg, L. (2017). An approach to business
model innovation and design for strategic sustainable development. Journal of Cleaner
Production, 140, 155-166. Retrieved from
https://www.sciencedirect.com/science/article/pii/S0959652616308010
Osterwalder, A., & Pigneur, Y. (2010). Business model generation. Hoboken, NJ: John Wiley &
Sons. ISBN: 9780470876411.
