BEMM118 Strategic innovation management

Individual Assignment

QIAN CHENG 630013092

Review of “Reinventingyourbusinessmodel” (Mark W. Johnson, Clayton M. Christensen andHenning Kagermann, 2008)

Summary of Paper

Using comparison of IPODand RIO and Cabo as an opening case, Mark, Clayton and Henning discuss the innovation of business model in a dialectical manner.After a brief introduction by highlighting the social awareness of business model innovation and quick looking at steps to develop a new business model, authors form the main body of this essay as following sections.

-A definition of business model. By defining business model, authors systematically divide business model into four main components which are Customer value proposition (CVP), Profit formula, Key resources and Key processes.

-Three key sections are raised as key steps to achieve a successful business model. Being matched with the definition, they are creating a Customer value proposition, designing a Profit formula and identifying key resources and processes. By displaying the flow chart (Page 5), authors vividly sequence the elements of a successful business model in which CVP plays a fundamental role and leads to the design of a profit formula. Key resources and processes are often seen as practical factors contributing to the CVP.

-Since changes of business model may not always happen, which is also agreed by authors in this article that stories of business model innovation from well-established firms is rare, authors discuss the situation calling for a new business model and the situation where old model will work respectively.

It is concluded that in order to chase transformative growth, many companies resort to technological innovation or product innovation, while as presented in the opening case, enveloping new technology or product in a different business model may get unexpected achievement and such attempt seems to be more popular and feasible in today’s rapid changing world.

Major Comments

Although business model innovations are decisive for a company’s long-term success orfailure, they are still poorly understood compared to product innovations (Bucherer et al., 2012).Businessmodel innovations are becomingincreasingly critical in practice, asmereproduct or process innovations are insufficientin current times, which is effectively argued in the article by the case of Apple IPOD with its Music-and-Player model. At the same time, pioneers of business model innovation of other industries are mentioned in article, which reflects the shift from mere product or technology innovation toward business model innovation. Business models are fundamentally linked with technological innovation, while the business model construct is essentially separable fromtechnology (Baden-Fuller and Haefliger, 2013). Business model is defined as being made of four main sections. To summarize, it can be seen as a system that solves the problem of identifying the target customer, engagingwith their needs (CVP) and delivering satisfaction with key resources and processes.The whole paper focuses on these components.

-Section 1

In this section, a clear definition of business model is presented as several key components of business model instead of a brief summary of the concept, which can lead to a more systematic and dynamic understanding of the concept of business model. Practical examples of Ratan Tata and P&G are introduced to demonstrated empirical application of the concept of business model.

-Section 2

It is believed by marketers that if they conduct a survey of the customers’ needs at the time without cars, they are most likely to get the answer that what customer wants is a faster horse instead of a car. In fact, “be faster” is the real need of customer and “horse” should be a solution.One kind of innovation aim to satisfied customer’s solution such as training a faster horse, it is often related to product or technological innovation. Another kind of innovation calls for transformative change by introducing a new solution to meet the needs of customer. This kind of innovation may often be related to what is discussed in the article --- business model innovation. As author mentioned that a great business model calls for creating a customer value proposition which needs a solution to help customer solve a fundamental problem in a given situation. It is also concluded that at the same time that companies should define a CVP, they should also figure out how to make this business profitable by designing a profit formula. Value delivering is the final steps discussed in the article. It is suggested that in order to introduce a successful business model, it often calls for unique resources such as human resources which is different from that of the old one because old resources and processes often lead to a similar model.

-Section 3

In this section, authors discuss the need of business model innovation in a dialectical manner. It is not always the right choice for the management to create a new business model since a business model never related to only one particular product and it is often dynamic and adjustable.

Minor Comments

The article follows a logical progression and is generally presented clearly; however there are a few minor issues calls for attention:

-It seems that authors pay more attention to the resource-based view by discuss more internal issues when considering a new business model. There should be some external factors to be concerned like institutional affairs in different countries.

-The page scheme, to some extends, makes readers uncomfortable because it use the same form for both titles of each section and practical case such as Hilti Sidesteps case and Dow Corning case.

-The conclusion is not obvious and there is no title for the conclusion.

Overview and recommendation

Instead of pay attention to product or technology innovation, the paper provides a clear look of business model innovation. It is logically demonstrated and clearly delivered with ample cases as examples and flow chart are used to better display the relationship of each components in a business model. Main argument is presented dialectically without strongly supporting or criticizing one statement. Further information regarding to the business model innovation and the relationship between product innovation and business model innovation can be found in references.

Reference

ANDRIES, P. & DEBACKERE, K. 2013. Business Model Innovation: Propositions on the Appropriateness of Different Learning Approaches. Creativity and Innovation Management, 22, 337-358.

BADEN-FULLER, C. & HAEFLIGER, S. 2013. Business Models and Technological Innovation. Long Range Planning, 46, 419-426.

BUCHERER, E., EISERT, U. & GASSMANN, O. 2012. Towards Systematic Business Model Innovation: Lessons from Product Innovation Management. Creativity and Innovation Management, 21, 183-198.