“Comparison between OVOP/OTOP on a Business Model Ontology Canvas”

Kitin Sripuachareon1 and Dr. Kitti Setavoraphan2 1Graduate Student, Panyapiwat Institute of Management

2Lecturer in MBA Program, Faculty of Business Administration, Panyapiwat Institute of Management

Abstract

Business development and business model have been involved in many different types of business, especially in the emerging and developing markets are competing in the marketplace for more success. To small businesses, the biggest threat mostly comes from the big businesses that have better infrastructure and finance. They need the tools to be able to stand up against bigger business by having a good business plan and model. Then, this study aims to compare and illustrate the functions of two own-creative with same conceptual principles’ OVOP & OTOP models. By drawing up frameworks and comparing the two different models. The outcome introduces a twofold result: firstly, propose a better understanding of both business models. Secondly, allow the comparison of two different performance business models in order to improve the performances, representations, designs, and analysis of both business models. By generating a better operational infrastructure for OTOP program.

Keywords: Business model, Conceptual principles, OTOP & OVOP model, Framework

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บทคั�ดย่�อ

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1. Introduction

Business development and business model have been incorporated into many different types of business. Today both terms play important roles in the way we conduct business. That is especially true in developing world where markets are still emerging and business organization are fiercely competing in the current economy. Recently, Small and Medium Enterprises (SMEs) take a very important role in the economy. Knowledge sharing becomes a vital part of our professional and personal lives. Plus in the last

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two decades technology has become inseparable from business and social life. However, it has not been fully integrated into the field of all careers. The integration of technology in living and working is still challenging and developing in many circumstances.

The conceptualization of OTOP’s Business model is based upon logic of earning money, focusing on the business problems in Thailand. Based on t he poverty situation is the majority problem in Thailand. Part of handling poverty reduction is operated by the rural development project in Thailand called “One Tambon One Product” or OTOP. Unfortunately, after performing for many years, OTOP never really showed its achievement in term of real development. In the opposite of the original one “One-Village-One-Product” or OVOP project which has been successfully performed. Regarding the government policy, OTOP project is a self-help development concept that was created to promote the development of the local community and empower the community strength. OTOP has encouraged rural communities to depend on their local material and local resources. OTOP is considered a way to create prosperity for the community in the upgrading of rural livelihood through producing or managing local resources to become more value-added products. OTOP is based on the Japanese One-Village-One-Product (OVOP) concept which began in Oita and was initiated by local people at Oyama village in the Oita prefecture of Japan in 1961. It was promoted by former Oita Governor Morihiko Hiramatsu since 1979 by Oita OVOP International Exchange Promotion Committee in 2006. OVOP is an endogenous development model and a community based model. It is based on three conceptual principles: 1) Local to global: To encourage rural entrepreneurs to produce at least one globally accepted product using available rural

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natural resources, local craftsmanship and develop all products by adding values to them. The product based on global standards.

2) Self-reliance and Creativity: To promote self-reliance from government subsidies, they are not provided directly to OVOP group, but in term of technical assistance and R&D support for product development, assist marketing and distribution. Also help reduce the transaction costs that local entrepreneurs have to carry if they are to execute product development and penetrate market themselves.

3) Human resource development: To have leadership training development, building up community in order to sustain the community, help the local people become stronger with challenge and creative enthusiasm.

The OVOP and OTOP concepts are very much in line with that proposed in economic development literature. Friedman (1987) and Mackenzie (1992) state that one of the primary measures to boost economic development and hence economic well-being in rural areas is by enhancing rural entrepreneurship. Wortman (1990) defines rural entrepreneurship as “the creation of a new organization that introduces a new product, serves or creates a new market, or utilizes a new technology in a rural environment”.

However, the craft-based manufacturing sector was identified as a source of competitive advantage that was not being properly valued and did not transform into either price premium or customer loyalty because the topic of Trustworthy brand. (Takano, 2007) Unfortunately, so far in international development practice it appears that the OVOP movement is being promoted as a quick fix for

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community development by focusing on product development and marketing whilst virtually ignoring community capacity issues. (UN-HABITAT, 2006) Whether OTOP program will survive in the long term depends on continued government support of product development initiatives by people in local communities. However, OTOP is primarily interested in high-end products for export and it has not shown any interest in promoting products that are connected to the domestic market or domestic consumption patterns.

This study proposes an OVOP basic conceptual model and compares the OVOP and OTOP models to understand the similarities and differences between these two models. The models were developed based upon the same conceptual principles, relevant literatures relating to OVOP and OTOP program, gear train system, and business model ontology canvas in the concepts and details.

2. Characteristics and Achievements of the OVOP movement

The original OVOP movement was launched in 1979 in Oita prefecture by Governor Dr. Morihiko Hiramatsu. He encouraged residents in villages and towns to select a possible product or industry distinctive to their village or town and foster it to be a nationally, or even globally marketable one. Previously, local people had worked as woodcutters or seasonal migrant laborers to make ends meet. The challenging attempt of Oyama Town, whose motto was “let’s plant plums and chestnuts to go to Hawaii!” proved to be successful. As their income increased thank to the new products. After the movement that started in Oita prefecture has spread to other rural

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Japanese areas that have been left out of the nation’s economic development and suffer from out-migration and an aging population.1. The OVOP concept shares its focus on quality with other Japanese concepts like Kaizen or the 5S-process. Yujiro Okura, one of the most prominent analysts of the Oita OVOP movement, points out that the success of OVOP was due to the continuous support given by local governments (Okura, 2007).

2.1 The Japanese OVOP and OTOP structure

The most important component of the Japanese OVOP structure is the initiative and practical innovation of local residents. Daily activities, nature and local entertainment can be turned into valuable products or services to be marketed. Activities such as “big voice” or shouting contests in Yufuin town and pond cleaning in Ajimu town attract people from outside Oita. Sometimes, ideas from outside are implemented as local events or activities that fully or partially make use of local resources, both material and human. Public offices, mainly local governments, but sometimes even national public entities, serve as facilitators of OVOP activities by helping with technical innovation, production, and marketing for developments (JICA Research Institute, 2010).

To illustrate the procedures and the supporters of OVOP and OTOP movement in two countries by the frameworks (see figure 1 and 2). These indicate to OVOP procedures & supporters framework based on JICA Research Institute (2010) and Fujioka (2006), 1 Even in developing countries like China and Thailand, rapid urbanization and aging are becoming major constraints in rural areas. This is one of the reasons we should take a fresh look at the One Village One Product movement as a universal rural development policy.

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who conducted a comparative study of OVOP and Thai OTOP implementation, concluded that the former operates from the bottom up while the latter is run from the top down.

Fujioka (2006) examined the Thai OTOP and found out that it is different from the Japanese prototype in the sense that the Thai OTOP is a top-down scheme led by the central government while the Japanese OVOP is bottom-up led by the strong community and local government supporters (see Figure 1 and 2). There are two development methods ‘spontaneous’ and ‘extraneous’ method by using the extraneous method means developing countries (or growing areas) tried to pursue its modernization by outside resources introduction and commercial invitation, such as energy development, automobile and electric appliance industries as to spontaneous method, it means to develop the district economy through maximizing the latent resources and capital in the area, such as economic activities between Primary Industry and Second Industry the farmers process the harvest for products of higher value-added. “OVOP” movement has the same definition with ‘Spontaneous Method’. (Kimoto Shoji, 2008)

3. Theoretical Framework

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This part provides diagrams, frameworks and models; how the two businesses with same conceptual principles are alike, different and related to each other in order to achieve the main objectives of this study. It presents reviewed theories and information from published books, theses, journals, and other reports. The diagrams emphasize in especially the efficiency of OVOP and OTOP models. The study includes the original OVOP conceptual principles, both business models and frameworks, comparison of both frameworks. In additional, the other diagrams and frameworks have been created and designed to merge all their business components as same as the transferring of OVOP & OTOP’s principles, and strategy into a blueprint of the business revitalization plan.

3.1 OVOP and OTOP Basic Conceptual Principles Diagrams

OVOP and OTOP model originally presented in this paper are based on the same OVOP’s conceptual principles and basic components. However, when environment, purposes and business structure has changed, the type of OVOP became in a difference way like OTOP.

Figures below here are illustrated by using the concepts of ‘Mechanical Gears or Gear ratio’ it is easily to explain how OVOP’s principles and components are related. In figure 3 below, it has been drawn up to show the first original OVOP principles, then combining with the gear system concept, it became the original OVOP conceptual principle diagram in figure 4 (see below) and OTOP’s diagram

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in figure 5 (see below).

‘Figure 3. First Original OVOP principles’

From Figure 3, the original OVOP basic conceptual principles diagram begins from ‘self-reliance & creativity’ to ‘human resource development’ and to ‘local to global’. Then, using three ‘spur gears’ apply to show the labels for the interlocking conceptual principles and the ‘arrow shapes’ show how they relate and affect one another.

‘Figure 4 .The original OVOP basic conceptual principle diagram’

After merging OVOP’s principles with spur gear concept they become the original OVOP conceptual principle diagram above in figure 4. There are three sectors or gears: starting from a ‘self-reliance & creativity’ biggest gear (see the black arrow) to a’ Human resource development’ the middle gear use less power and more less in a ‘local to global’ while the smallest gear turns at the same speed. The reason is the more self reliance and creativity run the

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more of human resources development or villagers become powerful as well as challenges.

Then the smallest gear ‘local to global’ component is turning faster to keep up, meaning that a community easily to offer the globally standardized products because they have their own supports from the community.

Having more self-reliance and creativity help economics grow faster, means that any business problem would solve with the more capabilities and flexibilities. Also it is better for the innovative products with costs less. In the meantime, it saves operating costs. As well, the wasted costs. Then OVOP has achieved the purpose ‘Local to global’

Self -relianceCreative

Human resource develop

ment

Local to global

‘Figure 5 .The OTOP basic conceptual principle diagram’

From figure 5, OTOP project starts from turning a ‘self-reliance & creativity’ small spur gear same the black arrow’s direction, to turn other bigger gears with the same speed it needs more power than turning the equal-sized gears. Next turning ‘human resource development gear’ (Idler gear) is done by fostering villagers with more know ledges and creative spirits to operate this gear. Then, the bigger local to global gear, it is too big component for OTOP’s project that start from a small source of ‘self-reliance & creativity’ which is not enough own capabilities power to turn the bigger gears. Thus, the projects or villages need more supports from government in order to adding more facilities, subsidies and other supports. On the other hand, if the community or

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village required more outside supporters, the self-reliance has less to run itself.

3.2 The Nine components of OVOP framework

The nine components of OVOP project based on community , urban area, local materials, local labors, environments, villagers, cultures and traditions, society, behavior, governments, and many more components. By using nine jigsaws and three triangle layers explain the nine components of OVOP framework. After selecting the right nine components then classify them into three layers, which are:

1) Essential layer is required a set of a local material resource (LMR), local labor resource (LLR) and local skills & capabilities (S&C).

2) Structure layer is required a set of a community based model (CM), an endogenous structure (ES) and a strong community (SC).

3) Maintenance layer is require a set of an awareness of OVOP (AO), initiative and practical innovation (I&PI) and trustworthy and value added (T&V).

The nine jigsaws of OVOP component below are related and supported to each other, as well as classified the three layers component. (see figure 6)

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‘Figure 6. The Nine Components of OVOP framework within three layers’

From figure 6 (see above), after combining the nine jigsaws and became OVOP framework, those classifications of three layers are organized the nine components in order to facilitate the systems. See also figure 7; an alternative choice or a replacement plan helps fixing and solving any challenges.

‘Table 1. A description of the nine OVOP components’Layer

Component

Resource Usefulness

Importance

Essen

tial Layer

Local material resources (LMR)

Rural areas (all or part of it), Work in process or Goods in process from other resources.

Supporting local economies

Marketing-opportunity, Reducing Cost Structures

Local labor resource (LLR)

Local residents / Villagers

More job opportunities

Revitalization, Less moving out

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Local skills & capability (S&C)

Traditions, Cultures, Life style (sociology), Knowledge, Practices

Valuable and impressive products

Product quality, Singularity, Employability

Str

uctu

re L

ayer

Community based model (CM)

Community development plans, Community’s problems

Understanding the real problems

Stabilization, Easy and well realization

Endogenous structure (ES)

OVOP’s infrastructure, Local government (Self-governing towns)

Ability to plan & control

Flexibility and Agility

Strong community (SC)

Their cooperative, Local governments, Mayors and Councils

Independence & more flexibility

Manageability, Dominance

M

ain

ten

an

ce L

ayer

Awareness of OVOP (AO)

Maintenance status, Motto and Business plan by JICA

Sustainable business, Limitations

Internal controls, Controllable business

Initiative & Practical innovation (I&PI)

Economic revitalization, Local government and Community, Social life

Motivation and Economic incentives

New creativities, Innovative ideas, Singularity

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Trustworthy & Value added (T&V)

Proudness, Meticulous procedures , Honesty, Motivation, Business systems, Customer services

Royalties and Valuable products

Longevities and Sustainability

According to the details on the above will be able to demonstrate a shortlist of the Resources that indicates ‘Where do they come from’, the Usefulness indicates ‘What are their benefits’ and the Importance indicates ‘Why they are needed’ (in the table 1).

The table 1 above indicates the sources of nine components, the essentials and benefits of the nine components. These results will be useful information and beneficial processes to perform any similar OVOP projects at a later time.

3.3 The nine components of OVOP and OTOP basic conceptual models The purpose of creating a model is help to understand, describe and forecast by exploring a simplified representation of a particular entity. Business model is representing how a company earns money from buying and selling goods and services (Osterwalder, 2004). According to figure 7 and 8, after combining figure 4 with figure 6 (from the above) into an OVOP model (figure 7) and figure 5 with figure 6 into an OTOP model (figure 8).

The small ovals indicate OVOP/OTOP components, the three spur gears indicate original OVOP conceptual principles, the black-arrow indicates a starting gear/concept, the big oval indicates OVOP/OTOP structures, and the curved arrows

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indicate the rolling direction of the OVOP’s conceptual principles under the spur gears concept.

Figure 7 below shows the development process of OVOP business model. Starting from the nine ‘OVOP’s components’ into ‘OVOP structure’ by transferring all component into OVOP structure. It is operated by three gears ‘OVOP conceptual model’.

The structure begins to perform with a self-reliance and creativity concept. It helps motivating a human resource development concept to operate a local to global concept. The concept of local to global is originated from traditional knowledge and local skills to meet with the global standard concept.

‘Figure 7. OVOP Nine Components with Basic Conceptual Model (based on Metaphysics-Ontology)’

‘Figure 8. OTOP Nine Components with Basic Conceptual Model (based on Metaphysics-Ontology)’

The figure 8 is an OTOP basic conceptual model, it’s similar with OVOP, begins with nine OTOP’s components go into ‘OTOP structure’ by transferring

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all components into OTOP structure. It is operated by three gears ‘basic OVOP conceptual model’.

The model has first performing based on a tiny self-reliance & creativity concept to run a human resource development concept, then human resource development concept operated the model by turning a local to global concept, the concept mostly supports by local and central governments including a few traditional skills, knowledge and global standards. Lastly, the main differences between the two business models are: ‘OVOP’ is good because the outcome grow up very fast, able to catch up market’s needs in due time with the high quality products, but OVOP model is not very good yet because it really can not process the big orders or transactions. The reason is the whole processes needed a specific time frame for the meticulous products. But this case may has already been fixed by using a franchise strategy.

‘OTOP’ is good because its goal local to global, expected lot of orders, running the small gear of ‘self-reliance and creativity’ would probably affect the quality of product. The government tries more support in generating and supporting. So, the community is not being able to improve their products.

3.4 Comparison OVOP and OTOP framework by Main Characteristics

In this category is comparing of two business frameworks based on theirs characteristics and functions, to have more understanding in factors and problems, the analysis and improvement of both business models. The study is aims to identifying the similarities and differences of both frameworks in order to find out about their transformations throughout the process. However, it is necessary to have a true understanding of both frameworks for

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knowing their differences and overlaps in their organizations (see table 3).

‘Table3. Comparison nine building blocks of OVOPOTOP frameworks by Benefits.’

Pillars

OVOP’s style

OTOP’ Shared Characteristics

Main Benefits of OVOP model

Valu

e

Pro

posit

ion

Differentiation, Proudness, Meticulous products, Innovative offers ,Trustworthy brand name

Popular-trendy products/services , Too many brands in same category, Competitive pricing

Traditional knowledge, Local skills& capabilities, Product quality control

Knowing what to offer to customer.

Key P

art

ners

Strong community, Villagers, Local banks and cooperatives, Regional training Schools

Central government agencies, Outsider supports, Nation Bank

Local government agency, SMEs

Knowing how to manage the systems.

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Key A

cti

vit

ies

The initiative and practical innovation. A community based model, Endogenous structure, Cooperative, Strong community organizing, Own R&D, Word of mouth

A self-help development program, Exogenous structure, Central government control, SMEs, Supporters, R&D by supporters

Local government supports, Residential participants, Logistics

Knowing what should replace or adjust the system for more flexibility.

Key R

esou

rces

Awareness of OVOP, A community revitalization purpose, Self-reliance and creativity, Trustworthy & Value added

Customer(market) ’s needs/interested, Government &Others directed supports, New entrepreneurs& customers

Local material and labor resources, Local wisdom, Skills & knowledge, Culture, Distributions ways

Knowing what should business look for or have and why.

Cu

sto

mer

Rela

tion

sh

ips

Website& own surveys, Business advisors, Training Program & Dispatch lecturers, Word of mouth

Government & Supporter’s researches and surveys, Websites

Website, Events, Surveys (feed back)

Knowing what/how to do with your customer relationship management

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Cu

sto

mer

Seg

men

tsLocal customer, Regular customer, Exports, Franchise customer.

Middlemen (Wholesalers, Retailers agents),

Tourists, Exports, SMEs, Online customers

Knowing who should business has relationship with.

Ch

an

nels

of

Dis

trib

uti

on

Antenna shops, Local festivals (matsuri), Micho no eki, Franchises

OTOP shops, Direct selling, Middleman (reseller)

Trade fairs, Exhibitions, Micho no eki (roadside stations)

Knowing how to get in touch w/ customer, reducing logistics costs.

Cost

Str

uctu

re

Research &Development cost

Middleman costs,

Local material & labor costs, logistic costs

Knowing more ways to save costs

Reven

ue

Str

eam

Regular customers, Royalty customers, Franchises

Visitors, traders, Middlemen

Affairs, Online, Traders, SMEs

Knowing more business channel

The above table 3 compares characteristics between OVOP and OTOP frameworks and the main benefits of OVOP model that had been missing during the process of transferring to become OTOP. Both models based on Metaphysics-Ontology which are related to environments, society, traditions, cultures and much more. Then the design of their models rely on their information some are same some not, it depends on their business purposes. In spite of, they

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have the same conceptual principles; the out come will be difference. The most important structure of frameworks is the differentiation between two frameworks. The differences are; orderly, methodology and the purpose of creating a framework. On the other hand, the challenges of OTOP need to resolve in a right place and way. Otherwise, it will be wasted more time and cost. The research of this paper is provided OVOP & OTOP’s information as well as the classification between the two. It will also be useful and very beneficial of this project in the near future.

4. Discussion Both businesses models have similarly purpose, they aim to improve their economies, but they have many different purposes which are the characteristics like Self-Reliance, Business purpose, Knowledge management, and Management structure. Self-Reliance is the most important characteristic in OVOP model because originally OVOP’s concept aims to support local community that they are able to take care themselves by own self-sufficiency with reliable and sustainable occupations. While OTOP project did not realized that they did reduced community’s self reliance with more direct subsidies. Not only does the unclear position of improper component capability in today’s market, it also impairs progress on the development of OTOP program and its capability. However, OTOP project has to be truly understanding with the real problem before they would be able to get things fix properly. Business purpose is the topic that stimulates the business plan. OVOP purpose is maintaining the community living specially in the rural area to be longevity and revitalization for the village life, but for

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the OTOP purpose is making money and having career did not think about become strong community which is an important part of OVOP conceptual model. Based on the components in the business model, product, customer, infrastructure, management and finance several business models can be created.

Actually, every business model can be perceived as a unique one, depending on the significance and difference of the variables. The success depends on the inequality in the equilibrium between cost and revenue drivers. As for any different sector components of OTOP business model are also demonstrate in the business models of OVOP project. Actually, new business model is emerging from one sector find their way and application in other sectors. A relatively new type of business model is the open innovation business model. The basic principle of an open innovation business model is the partnering with others for better technology, products and services. It is also that business model is typical for all knowledge where innovation, singularity and business creation are very critical for securing a competitive edge.

5. Conclusion In this paper is about OVOP and OTOP business structures, the comparison between two differences models with same conceptual principle and how it is affected to the business and economic. Both business models are operating based on same conceptual principle but different purposes. And both businesses will continue the maintenances, innovate better product and service by doing as best as they can within their capabilities in developing the most suitable way. Even though OTOP is improving in efficiency and capability, it will still need a better model with more flexibility, better quality and more

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adjustable solution to compete with the original OVOP. There for, a business model is a conceptual tool that contains a set of objects, concepts, and elements and their relationships. It is a description of the value a company offers to one or several segments of customers and the architecture of the firm and its network of partners for creating, marketing and delivering this value and relationship capital, in order to generate profitable and sustainable revenue streams. As well as the business model ontology is also a set of elements and their relationships that aim at describing the money earning logic of a firm based on their adjustable and controllable components like their business environments. As outlined above the ontology contains nine business model building blocks, so-called business model elements.

Further research would include the way to adjust the difference between all kind of OVOP models, especially in OTOP model. The purpose of future research will be able to enable the capability and adjusts the configurations to develop the model and structure. By every business model elements can be decomposed into a set of defined sub elements and recreate into a new one.

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