This PPT deals with the the role of business model in managing change in an organization. This is an MBA note for students at the Azman Hashim International Business School, UTM, Malaysia.

1. BUSINESS MODEL
AND
VALUE
PROPOSITION IN
CHANGE
MANAGEMENT
1
By Dato’ Dr Anuar Md Nor,
Visiting Faculty, Azman Hashim
International Business School, UTM,
Malaysia
14/06/2023

2. Usually, while appreciating change, a
manager will reflect on the forces of
change impacting the organization and
become aware of the mental models that
are driving the organization.
• A key mental model that the managers need to be
aware of is the soul or essence of the organization.
14/06/2023 2

3. In simple terms;
What does the organization
stand for?
What does it mean to the
customer?
What does it represent for its
employees?
14/06/2023 3

4. For business
organization,
the term value
proposition
captures this
idea
14/06/2023 4

5. • In business organizations, the
task of appreciating change also
involves becoming aware of the
organization’s value proposition
and a related concept called
business model.
14/06/2023 5

6. The concept of a business model
offers a powerful way of
analysing the fundamentals of
an organization’s performance
• Any organization, new or
established, needS a business
model to survive.
• Joan Magretta of HBS points
out, a good business model
answers two fundamental
questions relating to any
business:
• Who are our customers?
• What do they value?
14/06/2023 6

7. Or to put
differently, a
business model
tells a manager
how the business
can make money.
14/06/2023 7

8. If we accept the premise that businesses can only
generate profits by providing customers with value at
an acceptable cost, then a business model signifies
the underlying economic logic of an organization.
• In other words, a business model reveals the
profit engine that drives the business.
• Business models are important because in
times of change, the underlying economic
logic of an organization may need to be re-
evaluated.
14/06/2023 8

9. As industries evolve and dominant designs
emerge, the business of surviving organizations
become entrenched.
In fact, the industry may be characterized by
just a few business models.
As industries evolve, new business models may
emerge to challenge existing business models.
While the survival rate of new business models
is not high, occasionally they may come to
dominate the industry by a creative re-
organization of the underlying economic logic.
14/06/2023 9

10. Value Proposition
14/06/2023 10

11. A value proposition is generally a clear and succinct
statement (e.g., 2-4 sentences) that outlines a company’s
unique value-creating features.
• The secret of a good value proposition is having a tangible
difference in a characteristic of an organization’s product or
service—one that is actually matters to the customers.
14/06/2023 11

12. Three aspects constitute a firm’s
good value proposition:
a. Customer objectives
b. The firm’s offer, and
c. Differentiators
The customer objectives refer to the
specific needs that a customers are
aiming to realize.
This part of value proposition
addresses these objectives in the
customers’ language.
The firm’s offer refer to what the firm
is presenting to fulfil these objectives.
Differentiators refer to how the firm’s
offer stands out in comparison with
the competitors’ offers
14/06/2023 12

13. A value proposition
is the foundation
of a business model
14/06/2023 13

14. Identifying the business model
• Business models can be seen as stories that explain how an organization
works.
• Therefore, a business model is like writing a new story.
• All stories are variations of old ones reflecting same universal themes
that underlie all human experience.
• Similarly, all new business models are variations on the generic value
chain that underlie all businesses.
14/06/2023 14

15. All activities
associated with
making something,
and
All activities
associated with selling
something.
14/06/2023 15

16. A business
model is not
the same as
strategy
14/06/2023 16

17. • A business model explains how the
different pieces of business fit
together.
• It does not consider competition.
• A competitive strategy, on the other
hand, explains how you will do
better than your rivals.
• However, if your business model is
based on a sound value proposition,
it will have a differentiator that tells
your customers how your offerings
are different from other options.
• In this sense, a good business model
can also be a winning strategy.
14/06/2023 17

18. When business models don’t work, it is because
the story doesn’t make sense or the number don’t
add up (Magretta).
• This is because it is not enough that your business model tells a
good story.
• It should also be profitable.
• A number of new businesses fail because they have interesting
business models that ae just not profitable.
14/06/2023 18

19. In order to pass the
numbers test, business
model must address
the following factors:
1. Revenue sources
2. Key expenses
3. Investment sizes
4. Critical success factors
14/06/2023 19

20. Factors Explanation Questions
Revenue sources Revenue sources are made up of revenue streams.
Organizations can have single or multiple revenue
streams based on different revenue models.
 How many different revue
streams will the business
model generate?
 What are the source of each
revenue stream?
 What is the relative size and
importance of each revenue
steam?
 How quickly is each revenue
stream likely to grow?
Key expenses Key expenses are based on cost drivers that affect
total costs
 What are the primary cost
drivers?
 Are these expected to change
over time?
Investment size This is the amount of cash required before a firm
achieves a positive cash flow.
 What are the cash
requirements in the present or
new business model?
Critical success
factors
This refers to an operational function or
competence that a company must possess in order
for it to be sustainable and profitable
 What are the critical success
factors in the present or new
business model?
Evaluating a Business Model
14/06/2023 20

21. The table can be
used as a
framework to
analyse the need
for change in an
organization
14/06/2023 21

22. Outcomes of
appreciating
change
14/06/2023 22

23. In the first phase of appreciating
change, the management of an
organization contemplating
change needs to identify its
business model and the
underlying value proposition.
This business model needs to be
compared with the dominant model of
the industry.
14/06/2023 23

24. Specifically, the organization
needs to address the following
questions:
a. What are the industry dynamics?
b. What stage of evolution has the industry
reached?
c. Is the industry likely to experience new
technology cycles or changes in institutional
rules?
d. Will these affect the dominant design?
e. Is our business model appropriate for the industry
in its present stage of evolution?
f. Do we need a radical change in our business
model?
g. If the answer to above is no, do we need
refinement of our business model?
14/06/2023 24

25. While appreciating change, key managers in an
organization would have come to an in-depth
understanding of their industry dynamics and their
organization business models.
• The critical questions they have to address are:
-Whether this business model needs to change,
and
-If the business model needs changing , does it
require radical change (a completely new
business model) or incremental change
(refinement of the existing business
model?
14/06/2023 25