BUSINESS MODEL INNOVATION

Transcription

1 BUSINESS MODEL INNOVATION Innovation in Family Business Forum December 11, 2014 By Dr. Mohy Ghannoum,

2 BUSINESS MODEL - BACKGROUND Business model is an emergent concept The differences between the notions of Business Model and Strategy are debatable. 2

3 BUSINESS MODEL - BACKGROUND On one hand, strategy can be considered a high-order choice On the other hand, business models are the reflection of the firm s strategy 3

4 BUSINESS MODEL INNOVATION The greater frequency of disruption and dislocation in many industries is shortening business model lifecycles These factors require businesses to bolster and accelerate innovation. 4

5 BUSINESS MODEL INNOVATION The discipline of Business Model Innovation (BMI) offers a fresh way to think about renewing competitive advantage Strategic management has begun to consider business model as a determinant factor in the firm s performance 5

6 BUSINESS MODEL INNOVATION Business model innovations have reshaped entire industries and redistributed billions of dollars of value To confer a reliable competitive advantage, BMI must be systematically cultivated, sufficiently supported, and explicitly managed 6

7 ELEMENTS OF BMI A business model consists of four inter-locking elements that, taken together, create and deliver value. The most important to get right, by far, is the first 7

8 ELEMENTS OF BMI 1. Customer Value Proposition (CVP): A successful company is one that has found a way to create value for customers that is, a way to help customers get an important job done 8

9 ELEMENTS OF BMI 2. Profit formula: The profit formula is the blueprint that defines how the company creates value for itself while providing value to the customer 9

10 ELEMENTS OF BMI 3. Key resources: The key resources are assets such as the People, Technology, Products, Facilities, Equipment, Channels, and Brand required to deliver the value proposition to the targeted customer 10

11 ELEMENTS OF BMI 4. Key processes: Successful companies have operational and managerial processes that allow them to deliver value in a way they can successfully repeat and increase in scale 11

12 ELEMENTS OF BMI Key Resources Customer Value Proposition Business Model Innovation Revenue Model Key Processes 12

13 ELEMENTS OF BMI These four elements form the building blocks of any business. The Customer Value Proposition and the Profit Formula define value for the customer and the company. Respectively; Key Resources and Key Processes describe how that value will be delivered to both the customer and the company 13

14 FUNCTIONS OF BMI 1. Articulate the value proposition 2. Identify a market segment 3. Define the structure of the value chain required to create and distribute the offering, and determine the complementary assets needed to support the firm s position in this chain. 14

15 FUNCTIONS OF BMI 4. Specify the revenue generation mechanism(s) for the firm 5. Describe the position of the firm within the value network linking suppliers and customers 6. Formulate the competitive strategy by which the innovating firm will gain and hold advantage over rivals 15

16 BMI IS IT A MUST? More companies than ever are encountering the need to redefine their strategies as the world continues to speed up and industry turbulence becomes the norm and not the exception 16

17 BMI IS IT A MUST? Enterprises should re-evaluate their business models and re-configure themselves. Enterprises that do not conduct such an assessment and change have limited chance to persevere in the market 17

18 BMI IS IT A MUST? Business model innovation is especially valuable in times of instability. BMI can provide companies a way to break out of intense competition., 18

19 BMI HOW IT WORKS? Every successful enterprise has a successful business model. However, there is not any everlasting business model. With developing technology to meet increasing customer demands, enterprises are urged to change their business models 19

20 BMI HOW IT WORKS? It is apparent that enterprises engaged in business model innovation are more successful than enterprises engaged in product and process innovation 20

21 BMI SUCCESS STORIES Google figured out how to parlay its search technology into a highly disruptive advertising model by which companies bid to tie their advertising to specific search terms. Recently, Google s free, flexible Android operating system has helped new competitors like Samsung from South Korea and ZTE from China offer devices that are both low priced and highly functional. 21

22 BMI SUCCESS STORIES Amazon s core e-retailing model has turned the retail world on its head. It has subsequently launched three successive disruptive business models. Its Prime subscription model now provides close to $1 billion of revenues. With its Kindle e-reading platform, the company happily sells low-cost devices and makes money on content. And through its Amazon Web Services business, it has built a multibillion-dollar business by turning its internal technology prowess into a powerful cloud-computing service. 22

23 BMI SUCCESS STORIES Its QQ instant-messaging service and WeChat SMS service aren t particularly interesting. But it follows a business model that is distinct from competitors Instead of seeking wide audiences to get advertising revenue, it built a multibillion-dollar business out of micro-transactions, such as charging consumers to upgrade the look of the avatar that appears on their chat service 23

24 BMI SUCCESS STORIES 24