Business models may soon need to be revisited. Just over a decade ago several industries followed and shared the existing business models for their business strategy. The pace of technology, unpredictability of consumer behaviour, economic instability and the resultant drastic changes are leading to times where the existing business models may no longer work and you need a new business model innovation with the possibility of coupling different business models.
Q. The question is when and how should we invent new strategic business models in the first place?
Q. And if you really come up with the business planning, will you be able to execute them with practical results?
Q. Can the vision be really translated into reality through these models?
IBM’s studies on when and how to innovate business models reveal the following:
As per IBM’s study there are both external and internal factors that determine remodeling of one’s business strategy. In order to know whether there is a need to innovate a business model, you could consider these factors:
Value chain: Have there been shifts in your value chain such as the introduction of ‘direct’ models or value migration along the value chain?
New entrants: Are new market entrants introducing models that would disrupt your industry?
Competitors: Do you see competitors introducing innovative propositions or models impacting your business?
Customer preferences: Are customer preferences for goods, services or channels changing?
Customer segments: Do you see new customer segments emerging that would require delivery of different products, services or delivery through new models?
Technology: Are there disruptive new technologies emerging?
Regulatory/legal: Has there been significant change to your regulatory environment, either by industry or geography, that impacts your current business model?
Environment: Are there social and environment sustainability factors that impact your current model?
Product/service innovation: Are you taking a new product or service to market that requires a new set of skills, capabilities and processes which leads to a new value proposition and pricing strategy?
Performance: Are you in a period of declining or negative growth relative to your industry?
Resource availability: Are you delivering economic returns that provide the financial resources to make bold moves? Can you leverage the right skills and capabilities?
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Based on research IBM believes that there are three A’s that are essential tools to determine the success of design and innovation.
- Aligned – Leverage core capabilities and enforce consistency across all dimensions of the business model, both internally and externally, that build customer value
- Analytical – Use information strategically to create foresight, and prioritize actions while measuring and tracking for rapid course correction
- Adaptable – Link innovative leadership with the ability to effect change and create operating model flexibility
Alignment refers to the organisation being aligned with meeting the customer value amounting to its internal alignment while the open and collaborative business model that essentially has close involvement with partners, suppliers and customers constitutes what is called the external alignment. One must analyse and consider if an organisation ensures internal alignment in all aspects of pricing model, operating model and your role in the industry; whether there are avenues of external partnerships as per the business model and if your new business model can allow for a leverage of your existing assets.
Analytical: This is synonymous to “leveraging business intelligence for greater insight”. This stage involves understanding customers, markets, channels and competitors on better information to create advantage in innovative and unique ways.
Adaptability: Adaptability of a business model is a measure of the effective combination of leadership and change capabilities throughout the organisation apart from the operating models that enable dynamic course correction and rapid execution.
IBM finds these three A’s as very crucial elements for building and sustaining successful business models for innovation. This apart the leaders must possess the requisite skills of innovative leadership to move over the existing industry standards, the ability for successful decision-making for a breakthough innovation, and most importantly a dynamic course correction to test the effectiveness of business model in market.
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There is a greater need to invent or revisit the existing business models owing to the ever changing market and consumer preferences. We have visited IBM’s suggestive strategic modeling for business development. What are your initiatives as a small and medium enterprise? How do you begin doing this? Identify your niche, your requirements, the customers and the way forward to come with the right business plan.