This presentation is an introduction of business model innovation (BMI), specifically, the cases of BMI in project based organizations, such as construction contractors.
2. Learning Objectives
2
Business Model/Innovation
• What is BM?
• BM canvas
• BMI
Project-based organization
• What is PBO?
Case studies of BMI in PBOs
• Prefabricated construction
• Capsule hotel
• BIM 360
3. Business Model Definition and Functions
• “A business model articulates the logic and
provides data and other evidence that
demonstrates how a business creates and
delivers value to customers.” (Teece, 2009)
3
5. Uber BM
5
Key
partners
Key
activities
Value
propositions
Customer
relationships
Customer
segments
Key resources Channels
Cost structure Revenue streams
•Design of service
and app
•Easy to order cab
and short waiting
time
•Affordable prices
•Cash free
•Easy to make
additional money
•Mobile app
•Website
•Dynamic pricing
•Pay per ride charges
•Drivers
•Payment
processors
•Mapping data
providers
•Local
authority
•Platform
development
•Driver
recruitment
•Driver payment
•Customer
support
•Uber platform
•Pricing
algorithm
•Routing
algorithm
•Platform development
•sales & marketing
•Passengers
•Drivers
•Social media
•Customer
feedback
•Salaries
6. Why a Good Business Model Matters?
6
• Clarify
-Your key customers-who they are, what they need
-What you offer them in the marketplace-your unique value
proposition
-The infrastructure you need to deliver your offer-your
activities, resources and partners
• Help you develop
-Your revenue and cost structure
(McNall, 2013)
7. Business Model Innovation
A business model innovation is the change of an
existing business model or the creation of a new
business model that better satisfies the needs of
customers than existing business models.
7
9. Why Business Model Innovation
Matters?
•It represents an often underutilized source of
future value
• Competitors might find it more difficult to
imitate or replicate an entire novel activity
system than a single novel product or process
• Because business model innovation can be
such a potentially powerful competitive tool,
managers must be attuned to the possibility of
competitors’ efforts in this area
9(Amit and Zott, 2012)
10. Business Model Innovation (Uber)
10
Key
partners
Key
activities
Value
propositions
Customer
relationships
Customer
segments
Key resources Channels
Cost structure Revenue streams
•Design of service
and app
•Easy to order cab
and short waiting
time
•Affordable prices
•Cash free
•Easy to make
additional money
•Mobile app
•Website
•Dynamic pricing
•Pay per ride charges
•Drivers
•Payment
processors
•Mapping data
providers
•Local
authority
•Platform
development
•Driver
recruitment
•Driver payment
•Customer
support
•Uber platform
•Pricing
algorithm
•Routing
algorithm
•Platform development
•sales & marketing
•Passengers
•Drivers
•Social media
•Customer
feedback
•Salaries
11. Project-based Organizations
•A variety of organizational forms that involve
the creation of temporary systems for the
performance of project tasks (Sydow et
al.2004)
•A fast and flexible mode of organizing
knowledge resources
•Intent to speed up work by diminishing
hierarchy and bureaucracy
•Allow for low-cost experiments
11
12. Project-based Organizations
•Found in a wide range of industries
• Consulting and professional services e.g.
architectural design
• Cultural industries e.g. film-making
• High technology e.g. software
• Complex products and systems e.g. construction and
transportation
12(Sydow, Lindkvist and DeFillippi, 2004)
13. Organizational Structure of a Construction Firm
13
General Manager
Other
functional
divisions
Operations
Human
resources
etc…
Project
Executives
Project
Managers
Project
Engineers
Project
Superintendents
Logistics
Business
development
/Marketing
http://www.turnerconstruction.com/
14. Levels of BMI in Project-based Organizations
14
Project Firm Inter-firm
15. Prefabricated Construction (Project Level)
15
30-Story hotel (T30) built in 15 days (Wuhan, China), 2011
https://www.youtube.com/watch?v=rwvmru5JmXk
16. Capsule Hotel (Project Level)
The global capsule or
pod hotels market was
worth $159 million in
2016. (WiseGuy
Research Consultants,
2017)
16
-Yotel, London
-Nitenite, Birmingham
•“Customers do not mind small rooms provided
they are in a prime location”. (The Economist,
2007)
17. Building Information Modelling
•BIM is changing the culture between the client
and the rest of the supply chain: from the
adversarial business practices to a
collaborative approach
•The key to realising this vision is to create
simple, effective cooperation among the
design, construction and operations aspects of
the infrastructure lifecycle.
17
21. Assignment
•Carillion
-Analyze the business model using business model
canvas
-discuss the relationship between its business model
and the problems it is facing?
-if you were the CEO of Carillion, what you would do
to save Carillion?
•Develop your own business model
-if you want to start a new business, determine your
business model
-what innovation you can make?
21
22. References
• Amit, R., & Zott, C. (2012). Creating value through business model innovation. MIT
Sloan Management Review, 53(3), 41.
• Nagji, B., & Tuff, G. (2012). Managing Your Innovation Portfolio: People throughout
Your Organization Are Energetically Pursuing the New. But Does All That Activity
Add up to a Strategy? Harvard Business Review, 66-73.
• Sydow, J., Lindkvist, L., & DeFillippi, R. (2004). Project-based organizations,
embeddedness and repositories of knowledge. Organization Studies, 25(9): 1475–
1489
• Teece, D. J. (2010). Business models, business strategy and innovation. Long
range planning, 43(2), 172-194.
• The Economics. 2007. Thinking Small. http://www.economist.com/node/10150321
• Whitley, R. (2006). Project-based firms: new organizational form or variations on a
theme?. Industrial and corporate change, 15(1), 77-99
• Wise Guy Consultants PVT. Ltd. (2017). Capsule Hotels Global Market 2017 Key
Players,Share, Trend, Segmentation and Forecast to 2022.
https://www.einpresswire.com/article/395772393/capsule-hotels-global-market-
2017-key-players-share-trend-segmentation-and-forecast-to-2022
22
24. Examples
• Newspapers-> websites
• Amazon: from books to everything
• Some construction contractors: from
construction to construction management and
engineering consulting services
• Prefabricated construction
• Building information modeling
• …
24
25. Types of PBOs
25(Whitley, 2006)
Separation and
stability of
work roles
Singularity of goals and outputs
Low High
Low
Organizational
PBOs producing multiple
and varied outputs with
different and changeable
skills and roles, e.g. strategic
consultancy
Precarious
PBOs producing risky,
unusual outputs with
varied and changeable
skills and roles, e.g.
biotechnology
High
Craft
PBOs producing multiple,
incrementally related
outputs with distinct and
stable roles and skills, e.g.
furniture and machinery
Hollow
PBOs producing single
outputs and coordinating
tasks through
standardized, separate
and stable roles and
skills, e.g. construction
Editor's Notes
Good afternoon, everyone. I am Yuting Chen, I am currently a postdoc fellow in the University of Toronto. It is very pleased to meet u all Today. Can anyone hear me clearly?
Today, I am going to give you a lecture about business model innovation in project based organizations. If you have any questions during the lecture, just ask directly. Before the lecture, I want to ask if any one wants to start a new business some day or anyone who already did it? Raise you hand please. Very good. Then you must feel lucky to attend the lecture today, because business model is really important for starting a business.
In this lecture, you will learn what is business model, and how to analyze business model using a business model canvas. You will also learn what is business model innovation and how to achieve business model innovations. In the end, definition of project-based organizations will be given, and some business model innovation cases in project based organizations are given.
The first question is what is a business model. A business model is about how a company creates value for itself, while delivering products or services to customers.
It has two major functions. that is value creation and value capture. For value creation, a company can provide some products or services to customers. Value capture means a company can earn a profit from the product or service. As shown in the cartoon, the aim of any business is making profit, money equals to happiness. Business model can help you decide whether a business is feasible or not.
Business model canvas is a widely used tool to analyze the business model. The most important part is value proposition, that is what you can offer to customers. For example, the shoe company which is a Canadian shoe company provides good quality shoes with cheaper price. Then after you have some great ideas in mind, you need to think about who are your customers and why they want to buy your products/services. And then, you need to consider how you are going to deliver your products/services to your customers, that is channels. Ok. So now you have product idea, you know who are your customers, then you need to think about how you are going to keep and grow your customers, that is customer relationships. And then you need to consider how you are going to make money from your products/services, that is revenue stream, which is related to financial viability. The next step is to be aware of what kind of infrastructure you need to provide the products/services, including key partners, key activities and key resources. And then after knowing all of the instrastrucure you need, you can estimate all the cost and expenses and then you can estimate your profit. Finally, you will decide whether your business idea is feasible or not.
This is why business model is so popular now, because it is a powerful tool to analyze your business.
In this slide,I will use Uber as an example to show you how to use business model canvas. Uber is a technology company which provides a service to help customers order a cab faster and cheaper. It has taken $12 billion over 15 rounds of investment, and has a reported valuation of nearly $70 billion. To provide the service, It developed an app which can be easily installed on the mobile phone.
Did anyone use Uber before? And can anyone tell us why you used Uber instead of taxi? Yes. Great.
What uber can offer to customers includes a design of service and app, and it is much easier to order cab and shorter waiting time. And the price is cheaper than taxi. It is cash free. And it is easy to make additional money for drivers.
The second question is who are ubers’ customers？ Both passengers and drivers.
And then channels, which means how uber deliver its service to its customers? That is the mobile app and website.
And then customer relationships, which means how uber get, keep and grow its customers? it may includes social media, advertisement, customer feedback.
And the revenue streams, which means how uber makes money? Part of it is the dynamic pricing. Which means if the demand is high, and drivers are less than the demand, then price will go up.
And then its key resources, which means what uber need to run its business model? It includes a platform, pricing algorithm, and routing algorithm,
And then its key partners includes drivers, payment processors, mapping data providers, and etc.
Key activities including platform development, driver recruitment, etc.
Cost structure : includes the cost of platform development, sales and marketing, and employee salaries.
Ok. So far, we have learned what is business model, which is about how a company creates value for itself while delivering products and services to customers. And we also know how to use busness model canvas to analye business model.
Then the next question is why we need a business model? It is because a good business model can describe all the pieces of a business. From key customers, to what you can offer to the customers, and to the infrastructure you need to deliver your offer, and finally the revenue and cost structure.
Before we enter a new business, it is really important to figure out all the important things. Otherwise, we need to wait. As shown in this cartoon, some one thought he has found a new market, however, it is just him actually.
Next is about business model innovation. A business model innovation is the change of an existing business model or the creation of a new business model that better satisfies the needs of the customer than existing business models.
This cartoon has shown very funny things. Actually in old times, people did use squared wheels for some time. Then people realized a round wheel is much much better. Thus, we can see that innovation is really important. In addition, the two guys in the cartoon refuse to do any changes, which implies that peoples’ attitudes toward innovation is also very important.
Some researchers have used this figure to define the innovation stages. The horizontal axis is resources and products, and the vertical axis is market and customers. The first stage is core which is optimizing existing products for existing customers, and the second stage is called adjacent, which means expanding from existing business into “new to the company” business.. And the last stage is defined as business model innovation. Which means developing breakthroughs and inventing things for markets that never exist before. So according to this, Uber is definitely a business model innovation. Similar cases include Walmart which is focused on supply chain innovation, and skype. Without skype, I cannot provide the lecture without going to Manchester. Skype is definitely a business model innovation when it was developed.
Then the next question is why Business model innovation matters to managers, entrepreneurs and academic researchers.
First, because it represents an often underutilized source of future value. In the uber case, the drivers are actually part of the underutilized source of value. Second, competitors might find it more difficult to imitate or replicate an entire novel activity system than a single novel product or process. Since it is often relatively easier to undermine and erode the returns of product or process innovation, innovation at the level of the business model can sometimes translate into a sustainable performance advantage. Third, because business model innovation can be such a potentially powerful competitive tool, managers must be attuned to the possibility of competitors’ efforts in this area.
Back to Uber case, what kind of innovations it made? Which block of the business model canvas you think the innovations belong to? Does anyone have any idea? Ok. The most important innovation Uber made is the deign of service and the app. Compared with taxi, it has shortened the communication steps between drivers and passengers. In addition, the service delivery channel is the mobile app which is also an innovation. And then drivers are not only its customers but also its key partners, which is quite different from a taxi company. Taxi drivers are just employees for taxi companies.
The last concept we will learn is project-based organizations. project-based organizations refer to a variety of organizational forms that involve the creation of temporary systems for the performance of project tasks (Sydow et al.2004)
It is a fast and flexible mode of organizing knowledge resources. It intends to speed up work by diminishing hierarchy and bureaucracy. And it allows for low-cost experiments.
Project based organizations are found in a wide range of industries. These include consulting and professional services (e.g. architectural design,), cultural industries (e.g. film-making,), high technology (e.g. software), and complex products and systems (e.g. construction and transportation).
The organizational structure of project based organizations usually includes two parts: project operation divisions and functional divisions and. This figure shows the organizational structure of a Canadian construction firm which is called turner construction. Its functional divisions include business development, human resources, logistics, and etc. the remained part is project operation divisions. There are project executives, and under each project executive, there are several project managers. And each project manager is leading several project engineers and project superintendents.
Based on the location of the innovations in the organizational structure, business model innovation in project based organizations may vary from individual project level, to firm level, and to inter-firm level. Go back to the organizational chart in the previously slide, if the innovations happen here, then it is project level bmi. If it happens here, then it is firm level. If it crosses firm boundaries, then it is inter-firm level.
So the first case is prefabricated construction. This video will show you a 30 story hotel in China which was built in just 15 days. The structure of the building is a steel structure and everything was prefabricated in factories and then installed on site. Let’s watch the video first. Back to the business model canvas, what kind of innovations this project has made? Either in value proposition, or a better delivery channel? Anyone can tell us?
Yes. Very good. The biggest innovation of this project is it used a different construction method, which reduced cost and time. Think about business model canvas, again, the innovations go to the value proposition block.
The second case is the capsule hotel, which was first proposed in Japan in 1970s. The room of capsule hotel is quite small but cheaper. It can be charged per hour or per night. It has been found that customers do not mind small rooms. The global capsule or pod hotels market was worth $159 million in 2016. (WiseGuy Research Consultants, 2017). There are some similar capsule/ cabin hotel in UK, such as Yotel in London and Nitenite hotel in Birmingham.
The biggest innovation of capsule hotel is it has broadened its customer segments with a cheaper price and a per-hour charge policy. So for some people who cannot afford other more expensive hotels, they may go to these kind of capsule hotel just for like a 1 or 2 hours’ rest.
The last case is the building information modeling related product. does anyone can tell us what is BIM? BIM (Building Information Modeling) is an intelligent 3D model-based process that gives architecture, engineering, and construction (AEC) professionals the insight and tools to more efficiently plan, design, construct, and manage buildings and infrastructure. So it is not just a 3d model, it changes the business process, and the work relationships between the stakeholders.
As we know that ,Autodesk is a famous engineering software developer. Recently, like around 5 years agao, it has published BIM 360 is a cloud based platform. All the stakeholders can login and share the information. it covers quality management, safety, design review, bim coordination, etc.
Because my phd research is about safety, so I checked its safety management, one part I really like in the system is that we can choose the location and then working subcontractors for that location, and to see whether all safety checklists have been done. It is also linked to the schedule.
Again, back to the business model canvas, what biggest innovations it has made? Anyone?
Still, the platform. Because everyone can get access to the platform, to check, to share information, so the working efficiency has been improved a lot.
So, Let’s do a quick review.
Finally I have a small assignment for you.
The first is about Carrillion which is a large construction contractor, as you may know.
These are all the references we used today. Hope you enjoyed my teaching today. Thank you very much!
Here I list some other business model innovation examples.
For example, to some extent, newspapers is replaced by websites. Amazon from selling books to everything, some contractors become general contractors and do construction management of subcontractors. And also building information modeling related products have actually significantly improved the collaboration between all stakeholders, because the 3d model and other project information can be shared.
Based on (i) the extent to which firms focus on developing unusual products and services for varied, and often uncertain markets and (ii) the extent to which the organization of expertise, tasks, and roles is predictable
and stable over projects, there are four types of project based organizations. That is organizational, precarious, craft and hollow. For Organizational type, these firms produce multiple and varied outputs with different and changeable skills and roles, e.g. strategic consultancy. For precarious type, these firms produce risky, unusual outputs with varied and changeable skis and roles, e.g. the biotechnology firms. For craft type, these kind of firms produce multiple, incrementally related outputs with distinct and stable roles and skills, e.g. furniture and machinery firm. For hollow type, these firms produce single outputs and coordinating tasks through standardized, separate and stable roles and skills, e.g. small construction firms
