BUSINESS MODEL INNOVATION
Innovation in Family Business Forum
December 11, 2014
By
Dr. Mohy Ghannoum,
BUSINESS MODEL - BACKGROUND
Business model is an emergent
concept
The differences between the notions of
Business Model and Strategy are
debatable.
2
On one hand, strategy can be
considered a high-order choice
On the other hand, business models
are the reflection of the firm’s strategy
BUSINESS MODEL - BACKGROUND
3
The greater frequency of disruption and
dislocation in many industries is
shortening business model lifecycles
These factors require businesses to
bolster and accelerate innovation.
BUSINESS MODEL INNOVATION
4
The discipline of Business Model Innovation (BMI) offers a fresh way to think about renewing competitive advantage
Strategic management has begun to consider business model as a determinant factor in the firm’s performance
BUSINESS MODEL INNOVATION
5
Business model innovations have reshaped entire industries and redistributed billions of dollars of value
To confer a reliable competitive advantage, BMI must be systematically cultivated, sufficiently supported, and explicitly managed
BUSINESS MODEL INNOVATION
6
A business model consists of
four inter-locking elements
that, taken together, create
and deliver value. The most
important to get right, by far, is
the first
ELEMENTS OF BMI
7
1. Customer Value Proposition (CVP):
A successful company is one that
has found a way to create value for
customers – that is, a way to help
customers get an important job
done
ELEMENTS OF BMI
8
2. Profit formula:
The profit formula is the blueprint
that defines how the company
creates value for itself while pro-
viding value to the customer
ELEMENTS OF BMI
9
3. Key resources:
The key resources are assets such
as the People, Technology, Products,
Facilities, Equipment, Channels, and
Brand required to deliver the value
proposition to the targeted customer
ELEMENTS OF BMI
10
4. Key processes:
Successful companies have
operational and managerial
processes that allow them to
deliver value in a way they can
successfully repeat and increase in
scale
ELEMENTS OF BMI
11
ELEMENTS OF BMI
Business
Model
Innovation
Key
Resources
Revenue
Model
Key
Processes
Customer
Value
Proposition
12
These four elements form the
building blocks of any business.
The Customer Value Proposition and
the Profit Formula define value for the
customer and the company.
Respectively; Key Resources and Key
Processes describe how that value
will be delivered to both the
customer and the company
ELEMENTS OF BMI
13
1. Articulate the value proposition
2. Identify a market segment
3. Define the structure of the value chain
required to create and distribute the
offering, and determine the
complementary assets needed to
support the firm’s position in this chain.
FUNCTIONS OF BMI
14
4. Specify the revenue generation
mechanism(s) for the firm
5. Describe the position of the firm within
the value network linking suppliers and
customers
6. Formulate the competitive strategy by
which the innovating firm will gain and
hold advantage over rivals
FUNCTIONS OF BMI
15
More companies than ever
are encountering the need to
redefine their strategies as the
world continues to speed up
and industry turbulence
becomes the norm
and not the exception
BMI – IS IT A MUST?
16
Enterprises should re-evaluate
their business models and
re-configure themselves.
Enterprises that do not conduct
such an assessment and change
have limited chance to persevere
in the market
BMI – IS IT A MUST?
17
Business model innovation is especially
valuable in times of instability.
BMI can provide companies a way to
break out of intense competition.,
BMI – IS IT A MUST?
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Every successful enterprise has a
successful business model. However,
there is not any everlasting business
model.
With developing technology to meet
increasing customer demands,
enterprises are urged to change their
business models
BMI – HOW IT WORKS?
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It is apparent that enterprises
engaged in business model
innovation are more successful
than enterprises engaged in
product and process innovation
BMI – HOW IT WORKS?
20
Google figured out how to parlay its search technology into a highly disruptive advertising model by which companies bid to tie their advertising to specific search terms.
Recently, Google’s free, flexible Android operating system has helped new competitors like Samsung from South Korea and ZTE from China offer devices that are both low priced and highly functional.
BMI – SUCCESS STORIES
21
Amazon’s core e-retailing model has turned the retail world on its head.
It has subsequently launched three successive disruptive business models. Its Prime subscription model now provides close to $1 billion of revenues. With its Kindle e-reading platform, the company happily sells low-cost devices and makes money on content. And through its Amazon Web Services business, it has built a multibillion-dollar business by turning its internal technology prowess into a powerful cloud-computing service.
BMI – SUCCESS STORIES
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Its QQ instant-messaging service and WeChat
SMS service — aren’t particularly interesting.
But it follows a business model that is distinct
from competitors
Instead of seeking wide audiences to get
advertising revenue, it built a multibillion-dollar
business out of micro-transactions, such as
charging consumers to upgrade the look of the
avatar that appears on their chat service
BMI – SUCCESS STORIES
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BMI – SUCCESS STORIES
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