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The Sustainability Of Business Models

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This presentation provides some insight in the ...

This presentation provides some insight in the
business model concept and the factors influencing its sustainability. Some hands-on tools are shown to (1) identify a firm\'s business model, (2) analyse the influence of market developments on the business model, and (3) assess the sustainability of the business model in order to remain competitive on the market.

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The Sustainability Of Business Models The Sustainability Of Business Models Presentation Transcript

  • The Sustainability of Business Models Influence of company and market developments on a firm’s business model Jules J. Verlinden – © 2010
  • Welcome Objective ► To explain how to be sustainable in your business ► Use the Business Model concept as assessment tool ► To indicate the role of innovation The Sustainability of Business Models - Jules J. Verlinden Slide 2
  • Business Model - Definition cause-and-effect relationships and internal consistency of strategic choices A representation of a firm’s underlying core logic and strategic choices for  creating and capturing value within a value network raison d’être why your suppliers, partners, company exists distribution channels The Sustainability of Business Models - Jules J. Verlinden Slide 3
  • Business Model - Components What makes up a business model? Strategic Choices Value Network Customer/Market Suppliers Value Proposition Customer Information Capabilities/Competences Customer Relationship Competitors Information Flows Output Product/Service Flows Strategy Branding Capture Value Differentiation Cost Mission Financial Aspects Profit Create Value Resources/Assets Processes/Activities The Sustainability of Business Models - Jules J. Verlinden Slide 4
  • Business Model - Types The typology of business models is expressed in 4 design themes. Novelty Product or service innovation Efficiency Value Lock-In Reducing costs Creation Retain stakeholders Complementarities Bundling of activities or resources The Sustainability of Business Models - Jules J. Verlinden Slide 5
  • Business Model - Examples Based on strongest apparent theme Novelty Value Lock-In Efficiency Creation Complementarities The Sustainability of Business Models - Jules J. Verlinden Slide 6
  • Business Model - Summary Novelty, Lock-In, Complementarities, Efficiency STRATEGIC BM THEME Customer, pricing, TACTICAL BM COMPONENTS competitors, etc. OPERATIONAL FIRM’S ACTIVITIES Your day-to-day work The Sustainability of Business Models - Jules J. Verlinden Slide 7
  • Business Model - Application The business model serves as a unifying unit of analyses to: Analyze your current business practice Capture value creation from multiple sources Assess dynamics in the environment of your company The Sustainability of Business Models - Jules J. Verlinden Slide 8
  • Business Model - Dynamics Why consider dynamics? ,,The practices and business models that constitute advantages for today’s  most successful companies confer those advantages only because of  particular factors at work under particular conditions at this particular time” Static business models do not hold over time. The Sustainability of Business Models - Jules J. Verlinden Slide 9
  • Sources of Business Model dynamics There are 3 sources of dynamics:  1. Organizational life cycle (internal) 2. General and task environment (external) 3. Business Model originated (subdynamics) These dynamics influence your business model theme or components The Sustainability of Business Models - Jules J. Verlinden Slide 10
  • Internal dynamics – Organizational Life Cycle Existence Marks the beginning of organizational development, with a focus on  (entrepreneurial  identifying a set of customers. or birth stage) The  environment  is  considered  un‐analyzable  and  self‐enacted  or ‐ created. Survival Encompasses  the  development  of  distinctive  competencies,  with  a  (collectivity) focus  on  growth  by  generating  enough  revenue  to  continue  and  expand operations.  The environment is considered analyzable. Success  Represents  formalization  and  control  through  bureaucracy,  with  a (maturity) focus on protecting what has been gained. The environment is considered analyzable. Renewal Displays  the  desire  to  return  to  a  leaner  time,  with  a  focus  on  (elaboration) innovation and creativity and the needs of customers. Decline Characterizes  the  erosion  of  organizational  viability  due  to  a  desire  for  power  and  influence  in  earlier  stages,  with  a  focus  on  centralizing control and decision‐making. The Sustainability of Business Models - Jules J. Verlinden Slide 11
  • External dynamics – Business Environment GENERAL BUSINESS DRIVERS World population / World energy demand / Energy supply / Climate change GENERAL  TASK  ENVIRONMENT ENVIRONMENT Government / Demo‐ Industry sector / Raw  graphics / Economics  materials / Human  / Technology resources / Market YOUR  COMPANY! The Sustainability of Business Models - Jules J. Verlinden Slide 12
  • Subdynamics – Business Model originated Need causes First mover novelty Novelty advantages Efficiency Value Lock-In Creation Improved Complementarities Attract and retain decision making customers The Sustainability of Business Models - Jules J. Verlinden Slide 13
  • Role of Innovation Why innovate? Company  life cycle To Improve business practice General/Task  environment To continue business and seize business opportunities Subdynamics To increase your value creation potential The Sustainability of Business Models - Jules J. Verlinden Slide 14
  • Business Model sustainability Failing to meet changing customer needs in changing markets, or successful copying  by competitors can render a firm’s strategy and business model as obsolete. Company  life cycle General/Task  YOUR  environment BUSINESS  MODEL Subdynamics Change A business model that is being improved continuously remains hard to imitate, thus unique, thus sustainable. The Sustainability of Business Models - Jules J. Verlinden Slide 15
  • Business Model sustainability How to make an existing business model more sustainable? 1. Identify your business model (if applicable) 2. Identify the sources of dynamics 3. Assess their impact on your business model 4. Improve business practice 5. Check and benchmark The Sustainability of Business Models - Jules J. Verlinden Slide 16
  • Further reading In The Sustainability of Business Models, a comprehensive overview of the state-of-the- art literature on business models is presented. Using various views on this popular concept, and supported by case studies, some hands-on tools are developed to (1) identify a firm's business model, (2) analyse the influence of market developments on the business model, and (3) assess the sustainability of the business model in order to remain competitive on the market. The Sustainability of Business Models - Jules J. Verlinden Slide 17
  • More information Interested to know more? Jules J. Verlinden M.Sc. jjverlinden@gmail.com nl.linkedin.com/in/jjverlinden The Sustainability of Business Models - Jules J. Verlinden Slide 18
  • Copyright & References Copyright © Jules Verlinden 2010 No part of this publication may be reproduced or transmitted,  in any form or by any means, electronic, mechanical, photocopying, recording,  or otherwise, without prior written permission of Jules Verlinden. References Alt R. & Zimmermann H.D. 2001, “Preface: Introduction to Special Section – Business Models.”, Electronic markets, vol. 11, no. 1, pp. 3‐9.  Amit R. & Zott C. 2001, “Value Creation in E‐Business.”, Strategic Management Journal, vol. 22, pp. 493‐520.  Barringer B.R. & Ireland R.D. 2008, Entrepreneurship: successfully launching new ventures, Pearson Education, USA: New Jersey.  Christensen C.M. 2001, “The Past and Future of Competitive Advantage.”, MIT Sloan Management Review, Winter 2001, pp. 105‐109.  Daft R.L. 2001, Organization Theory and Design, South‐Western Publishing, USA: Mason.  Ghaziani A. & Ventresca M.J. 2005, “Keywords and Cultural Change: Frame Analysis of Business Model Public Talk, 1975‐2000.”, Sociological Forum, vol. 20, no. 4, pp. 523‐ 559.  Hedham J. & Kalling T. 2003, “The business model concept: theoretical underpinnings and empirical illustrations.”, European Journal of Information Systems, vol. 12, pp.  49‐59.  Magretta J. 2002, “Why Business Models Matter.”, Harvard Business Review, May 2002, pp. 86‐92.  Mazzucato M. 2006, Strategy for Business: A Reader, SAGE Publications, UK: London.  Mitchell W. & Coles C.B. 2004, “Establishing a continuing business model innovation process.”, Journal of Business Strategy, vol. 25, no. 3, pp. 39‐49.  Osterwalder A. 2004, The Business Model Ontology ‐ A proposition in a design science approach. Doctoral thesis, School for Higher Commercial Studies, Canada: Montreal.  Osterwalder A., Pigneur Y & Tucci C.L. 2005, “Clarifying Business Models; Origins, Present, and Future of the Concept.”, Communications of the Association for Information  Systems, vol. 16, pp. 1‐25.  Porter M.E. 1996, “What is Strategy?”, Harvard Business Review, November‐December 1996, pp. 61‐78.  Sandberg K.D. 2002, “Is It Time to Trade In Your Business Model?”, Harvard Management Update, January 2002, pp. 3‐6.  Schweizer L. 2005, “Concept and evolution of business models.”, Journal of General Management, vol. 31, no. 2, pp. 37‐56.  Shafer S.M., Smith H.J. & Linder J.C. 2005, “The Power of Business Models.”, Business Horizons, vol. 48, pp. 199‐207.  Voelpel S.C., Leibold M. & Tekie E.B. 2004, “The wheel of business model reinvention: how to reshape your business model to leapfrog competitors.”, Journal of Change  Management, vol. 4, no. 3, pp. 259‐276.  Willemstein L., Van Der Valk T. & Meeus M.T.H. 2007, “Dynamics in business models: An empirical analysis of medical biotechnology firms in the Netherlands.”,  Technovation, vol. 27, pp. 221‐232.  Zott C. & Amit R. 2007, “Business Model Design and the Performance of Entrepreneurial Firms.”, Organization Science, vol. 18, no. 2, pp. 181‐199.  Zott C. & Amit R. 2008, “The fit between product market strategy and business model: Implications for firm performance.”, Strategic Management Journal, vol. 29, pp. 1‐ 26.  The Sustainability of Business Models - Jules J. Verlinden Slide 19