Comments for Business model design: asking the right questions

Chloé Van Mollekot

Euchner, J., & Ganguly, A. (2014). Business model innovation in practice. Research-Technology Management, 57(6), 33-39.

The main goal of the paper is to provide a coherent framework for companies so that they can make a business model innovation effectively. The article gives us an example of the company Goodyear which has made a successful Business Model Innovation, which means that they developed a business model capable of capturing value from innovation. Systematic Approach: The company Goodyear…
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The main goal of the paper is to provide a coherent framework for companies so that they can make a business model innovation effectively. The article gives us an example of the company Goodyear which has made a successful Business Model Innovation, which means that they developed a business model capable of capturing value from innovation.

Systematic Approach: The company Goodyear developed a six-step process for business model innovation, the goal is to reduce risks and maximize the potential for value creation. This approach begins with the identification of the value for customers and ends with an incubation in the market to test the viability of the business model​​.
Risk Management: The paper emphasizes the importance of identifying and prioritizing risks early in the business model innovation process. These include execution risks, co-innovation risks, and adoption risks, which are assessed and managed through financial models and business experiments​​.
Incubation for Market Introduction: Goodyear’s method includes incubating new ventures at a small scale to test profitability and scalability before large-scale launch as well as to identify a business-building strategy. A key decision in incubation is whether to organize the new business within the relevant business unit or as an independent entity.

While focussing on business model innovation in practice can have many managerial implications, we decided to highlight 3.
The first one is when building a business model, it is more than just fulfilling a tool. Most people associate business models with tools like the business model canvas. Such a tool can be useful for brainstorming and visualizing ideas, but it omits the three main characteristics of a strong business model : coherence, because there is no relationships among elements, the competitive position and finally, the economic leverage, because it does not quantify it.
The second one is in order to succeed in a business model, managers need to make more than just capturing the value. At each step, the company requires to ask the right questions : Why me ? What can I offer that my competitors can’t ? It has to make sure that it is offering something more than others, and that the organization can keep this competitive advantage.
Finally, the main role as a manager is to create the right environment to welcome the new business model. Making sure that employees have the needed skills to implement the business model but also adapting the theoretical model to the reality of the business.

The first limitation you can learn from reading our article is that the business model remains a concept. This is a theoretical scheme and one of its limits is knowing how to apply it in practice, which is rarely the case.
Then, it is from a team standpoint. This is hard to recruit and nurture talent with nontraditional skills required which is essential for the successful execution of business model innovation. For instance, integrating artificial intelligence may demand a workforce with expertise, requiring an effort to identify and attract individuals with specialized skill sets.
Finally, Managing the relationship with core businesses is a limitation. For instance when the new venture and the existing business compete for resources or customers. Business oversight is necessary for creating credibility, but it requires a time commitment from the responsible.

Finally, we have chosen two additional sources that are relevant because they extend our reflection beyond the subject already presented in our article.
The first one is “The wider implications of business-model research” by Ritter, T., & Lettl, C. (2018). published in Long Range Planning. It identified five different perspectives of a “business model” and each of them use a different way of defining it and are meaningful.
In comparison with our article, both emphasized the importance of competitive advantage to attract customers and making innovation viable.

The second one is “How Entrepreneurs make sense of Lean Startup Approaches: Business Models as cognitive lenses to generate fast and frugal Heuristics.” by Ghezzi, A. (2020). published in Technological Forecasting and Social Change. It precisely explains the “lean startup approach” that modifies the traditional business development by promoting a continuous cycle of building, measuring and learning.

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Alexandre Duvivier, Mathys Faustino Ribeiro, Abdul Adil Hayee, Nicolas Beauvois

(Article) Belk, R. (2014). You are what you can access: Sharing and collaborative consumption online. Journal of Business Research, 67(8), 1595-1600.

Key insights The workshop centers on Russel Belk's article, exploring the non-reciprocal pro-social behavior of sharing. Belk distinguishes between demand sharing, characterized by explicit requests, and open sharing, where resources are implicitly available. The article delves into the transformative impact of the digital revolution, highlighting interactive platforms and social media's role in facilitating global information sharing. A significant aspect discussed…
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Key insights

The workshop centers on Russel Belk’s article, exploring the non-reciprocal pro-social behavior of sharing. Belk distinguishes between demand sharing, characterized by explicit requests, and open sharing, where resources are implicitly available. The article delves into the transformative impact of the digital revolution, highlighting interactive platforms and social media’s role in facilitating global information sharing. A significant aspect discussed is the evolution towards collaborative consumption, where individuals coordinate resource acquisition and distribution for compensation. This shift signifies a move from traditional free sharing to a more organized, economically incentivized model, shaping contemporary consumption practices in the digital era.

Implications

The initial query is, “How should stakeholders respond to the sharing and collaborative consumption economies?”

Such a question elicits either a fight or flight response. The former involves resisting disruptive technologies that undermine established business models by deploying intellectual property rights (IPR) and digital rights management (DRM). The latter entails branching out into fresh enterprises beyond the current industry. However, both reactions are knee-jerk, meaning they are very rapid and not effectively capitalizing on opportunities.

A more effective approach is to adapt business models to cater to the shared economy and collaborative consumption. Successful sharing ventures can lead to fewer purchases and a shift towards shared ownership or short-term rentals. An example of a shift towards this business model is Mercedes2Go, which followed in the footsteps of Zipcar, a car rental company that offers subscription-based cards for short-term car access. Mercedes’ aim was to target the younger generation who were not interested in car ownership. Another way to adapt a business model is by acquiring disruptive technology, as Avis did when it purchased Zipcar in 2013.

Companies should also consider asking themselves: ” How else can the consumer acquire and use the types of goods or services I currently provide and how might I innovate to capitalize on these possibilities?” A prime illustration of this is Netflix, which transitioned from physical DVD rentals to a subscription-based streaming service in response to movie piracy.

Limitations

We identified two business cases where the article’s concept of free sharing and collaborative consumption cannot apply. The first one is groceries due to the short-term nature of their products. They are perishable, quickly consumed items, for example bread and shampoo, both of which have no notion of being shared between households since people prefer to have their own. The second case is of artisanal luxury products such as tailored suits, customized jewelry, and commissioned artwork. These products have a niche and exclusive audience, and each product is unique and bespoke one-off specialized designed according to a client’s taste. In that light, it would not be applicable to the practice of free sharing and collaborative consumption.

Further references

Zhao, T., Lu, Y., Wang, V. L., Wu, B., Chen, Z., Song, W., & Zhou, L. (2023). Shared but unhappy ? Detrimental effects of using shared products on psychological ownership and consumer happiness. Journal of Business Research, 169, 114306. https://doi.org/10.1016/j.jbusres.2023.114306

Graul, A. R. H., Brough, A. R., & Isaac, M. S. (2022). How emotional attachment influences lender participation in consumer-to-consumer rental platforms. Journal of Business Research, 139, 1211‑1217. https://doi.org/10.1016/j.jbusres.2021.10.064

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Adrien Rysselinck; Chloe Szabo; Clémence Laming; Eliot Henrotte; Simon Michaëlis

The Entrepreneur's Business Model: Toward a Unified Perspective, 2005, Journal of Business Research, Michael H. Morris & Minet Schindehutte

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Adam Martin, Adam Thibault, Degbomont Brieuc, Lemaire Victor, Libouton Simon, Mahoudeaux Benjamin

(Article) Chesbrough, H. “Business model innovation: it’s not just about technology anymore.” Strategy & Leadership 35.6 (2007): 12-17.

A better business model often beats a better idea or technology. A business model serves two important functions: value creation and value capture. Innovation must therefore no longer be limited to technology and R&D but must also include business models. The objective of this article will be to propose solutions for companies to change their business model and make it…
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A better business model often beats a better idea or technology. A business model serves two important functions: value creation and value capture. Innovation must therefore no longer be limited to technology and R&D but must also include business models. The objective of this article will be to propose solutions for companies to change their business model and make it more innovative. The Business Model Framework is a very interesting tool that can help companies to achieve this. It is composed of 6 different steps that sequence business models from basic and not very useful to advanced and much more useful. It allows you to objectively identify the stage a company is currently in. It provides guidelines on how to advance the business model and take it to the next stage. The article tells us that many companies have a “business model innovation leadership deficit.” In general, no one in a company, even the CEO, has the authority and ability to innovate the business model. Workers are so used to their business model that they are afraid to change it. They prefer to stay with an old model that they find familiar and reassuring.

Business models seem to be often neglected by the companies themselves. Various factors can lead to this neglect. In particular, the lack of leadership to innovate or improve the business model. As explained in the introduction, a good business model is much more important than a new technology. So, companies are wrong to neglect this because it can bring a real advantage, an added value to the company.
An example which testifies here to the negligence of a large proportion of companies in developing the business model is that often no one is actually responsible for the innovation of the business model. What is certain is that it requires the involvement of top management
If it is difficult for a company to answer some questions, it is probably because it has not sufficiently defined the responsibilities of everyone in the business model development process. In this case, the development is given too little consideration, which is not optimal for the company in general. It is therefore important for the manager to draw up a concrete and comprehensible plan within the top management.
Indeed, the fact that everyone knows what they have to do means that the workers who are more involved in developing the business model have a good grasp of this area. In this way it will be possible to assess the framework of the business model. By knowing what stage the company is currently in, it will be possible to imagine an improvement in the business model thanks to the attributes of the next stage which will allow the manager to have the right guidelines.

First of all, it is important to involve employees in the creation of the business model because employees are often left out and only the opinion of a limited number of people are taken into account. By regularly taking the opinion of the employees, the manager shows them the importance they have for the organisation.
The business model framework is a frame which is static. The business model, on the contrary, is something dynamic and constantly changing. The current situation has shown us that many business plans have been challenged because of the pandemic. It is important to note that the parameters of the business model change regularly and therefore a manager has to make constant adjustments to the model in order to use it for running the business.
The last limitation is the limited usability for different sorts of organizations. The Business Model Canvas is formed around profit generation. This excludes non-profit and governmental organizations. Organizations which aim at other values such as Social Value cannot be designed with the Business Model Canvas.

Further references:
Brem, A. V. K. T. M. (2018, 2 février). Business Models For Corporate Innovation Management : Introduction Of A Business Model Innovation Tool For Established Firms. International Journal of Innovation Management. https://ideas.repec.org/a/wsi/ijimxx/v22y2018i01ns136391961850007

Remané, G. (2019). The Business Model Pattern Database : A Tool for Systematic BMI. International Journal of Innovation Management. https://link.springer.com/chapter/10.1007/978-3-319-98723

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Bovy Mélanie, Chatzopoulos Isaline, Eloi Camille, Fragakis Mathilde, Heyne Chloé, Vandenheede Juliette

(Article) Magretta, J. (2002). Why business models matter. Harvard Business Review, 80(5), 86-92.

Key insights The article highlights two fundamental characteristics of a good business model. The first one is that it is like telling a good story which explains the functioning of the enterprise, who are the customers and what is important to them and how the money is created in the business. Thereby, the business model is intended to underline the economic…
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Key insights
The article highlights two fundamental characteristics of a good business model. The first one is that it is like telling a good story which explains the functioning of the enterprise, who are the customers and what is important to them and how the money is created in the business. Thereby, the business model is intended to underline the economic logic and highlights how the company can deliver value to customers at a relevant cost. The second characteristic is to tie narrative to numbers. Indeed, with the help of economic spreadsheets, it is possible to analyse and make some assumptions concerning the behaviour of a business by analysing, breaking down and test certain elements. This allows the economic aspect of the business model to be hypothetically tested before it is launched.

Managerial implications
We have identified three implications that managers should consider. Firstly, they should ensure that their business model succeed both the narrative and the number test. The first one underlines that the story has to make sense to both consumers and partners and that every motivation has to be taken into consideration. The second test consists of making sure that profits stay bigger than losses. The second implication is the importance of making a clear distinction between a business model and a strategy in order to improve both of them. However, this distinction is not easy to perceive in every case. The business model should describe how the pieces of a business fit together while the strategy focusses on how to be different and preferable, compared to competitors. The last implication suggests that while building a business model, managers should follow a scientific method in the sense that they will first formulate a hypothesis, which will then be tested in practice and revised when necessary.

Limitations
We have identified 3 limits to these managerial implications, regarding the successful implementation of a business model.
Firstly, in order to create a successful business model, company must focus on customers and the value proposition that it can offer them. However, it is essential for the company to look at the interests of all its stakeholders and not just the interests of the end customers, especially in a B2B situation. Secondly, the article highlights the importance of telling a good and credible story. However, the moment when the company decides to tell the story to its consumers is also crucial to the success of a project. In the case of the GoPro Hero4 product launch, the company’s business model was in place, they told the right story to the right people, but the timing was not right. This mistiming caused the failure of this product.
Finally, the article does not mention the case of two or more business models existing in the same company. Indeed, two effective business models could prove to be a total failure if they co-exist within the same company. In this case, it is complicated to follow the recommendations given by the article.

Further references
Kavadias, S., Ladas, K., & Loch, C. (2018). The transformative business model. Harvard business review, 90-98. https://hbr.org/2016/10/the-transformative-business-model?ab=at_ articlepage_relatedarticles_horizontal_slot2&registration=success
This article demonstrates that a technology alone is not enough to transform an industry and highlights 6 characteristics that are positively correlated with a company’s chances to successfully change the industry.

Ovans, A. (2020, 17 novembre). What Is a Business Model? Harvard Business Review.
https://hbr.org/2015/01/what-is-a-business-model?ab=at_articlepage_relatedarticles_horizontal_slot2
The author explains that the concept of “Business Model” is often defined and used in different ways by business thinkers. According to him, how people define the term depends on how they use it.

How to build a business that lasts 100 years. (2016, 9 août). [Vidéo]. TED Talks. https://www.ted.com/talks/martin_reeves_how_to_build_a_business_that_lasts_100_years#t-263609
In this video, Martin Reeves explains how managers can build companies that are resistant to change and prosper in the long term by applying 6 principles derived from living organisms.

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DE POTTER D'INDOYE Séverine; GILSON Marie; NAMORADO ROSA Pedro; SCHOCKAERT Evrard.

(Article) Kaplan, S., & Beinhocker, E. D. (2003). The real value of strategic planning. MIT Sloan Management Review, 44(2), 71.

Key insights : Based on this article, we could remark that executives don’t find strategic planning processes important. No one is really sure why they do it, it’s similar to tribal ritual and everyone just expects that something good will come out of it. It’s true that that real strategy is made in an informal way, for example, in hallway conversations,…
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Key insights :

Based on this article, we could remark that executives don’t find strategic planning processes important. No one is really sure why they do it, it’s similar to tribal ritual and everyone just expects that something good will come out of it.
It’s true that that real strategy is made in an informal way, for example, in hallway conversations, in working groups, and in quiet moments of reflection on long plane flights and rarely in the paneled conference rooms where formal planning meetings are held.
But, actually, formal planning is not necessarily a waste of time. If it is approached with the right goal in mind, this can be a real source of competitive advantage, using strategic planning not to generate strategic plans but as a learning tool to create “prepared minds” within their management teams. And why is this a source of competitive advantage? Most of companies’ strategic decisions are made in real-time. If the company is in an unpredictable environment or facing issues, the only way to act in a strategic way is to be well-prepared.
As a former senior executive at GE Capital once said, companies react poorly under pression, because they are not well prepared, discussions are very focused on CEO’s opinions.
So, summarizing, the goal of a strategic planning process should not be to make strategy but to build prepared minds that are capable of making real-time strategic decisions.
But how do we create these prepared minds?

Implications :

So How do we want to create prepared minds. We want really to focus on information sharing here. So first of all we need to review the standard formal meetings. We want acually to move from “review of the CEO to conversations between business unit members and corporate leaders.

Then, to obtain efficient meetings where everyone can speak and be listened to the numbers of people attending the meetings should be reduced between 5 and 10 people, often these people are of course the CEO and the business unit head, sometimes ther are joined by the HR, the CFO and senior executives. The natural reaction of managers is often that meetings should not last more than 3 hours, but in this case when looking at the amount of time corporate leaders are meant to put in strategy it is really okay to have several day-meetings so that all subject can be covered.
So Where should the meetings take place ?
To reduce mobility and distraction the meetings should have place in the business unit site. So that the business unit member really feel valorised by the CEO coming to their department to discuss with the head, it provides good signs.
Then, what should be discussed during thesse meetings, it is important to discuss the LT, it is the strategic viewpoint of the conversations and not interfere that LT view and discussion with ST problemes like finances and budget. The ST matters are to be discussed in separate meetings and the afterwards merged with the LT vision.

As we can see there are a lot of guidelines to prepare the staff’s minds. But can we talk about a standard culture to have inside the company, actuallly ther isn’t, there are only some guidelines to follow to come near an acceptable company culture. For example during the meetings the people should’nt be afraid to challenge existing strategies in front of the corporate leaders. In this interaction there shouldn’t be interferences. For example in a lot of departments there is a lot of stuff going on the department don’t really want the corporate leaders to know about, so the both sides should reeally try to keep a transparent conversation, one not being afraid of telling the whole story and the other side not playing the inspector trying to find out about department’s mistakes. The members of the meetings should also look for opportuniities wherever they can, and find out weaknesses, let’s not forget that these meetings are principaly future oriented and it is the nature of prediction that is interesting., Finally consensus-oriented meetings are to be avoided.

So What should the corporate leaders do ?
They need to be well prepared and give the opportunity of the business unit to be also , that can be done by providing the department a list of demands to be prepared in advance to ensure efficiency? The CEO plays a very important role, as not all the company assists these meetings he has to show a form of commitment to the meetings as I said before by for example going himself to the department site and not just summon the departments head to his office… Perception by “lower” company workers is really important here. Not to forget that the CEO should really bring his main goals to the meeting and try to incorporate them in the LT vision.

All these recommendations for managers as well as corporate leaders are really focused on achieving a meeting where, srategy is put in place in a future oriented view. The aim here is to be prepared and able to make strategic decisons in unpredictable environments like mergers or new business opportunities.
In the paper an example was given of an automotive production company that succesfully acquired German acquisition because the corporate leaders had the previous year had meetings about expanion in Europe, it was a competitive advantage in comparison to other companies.

Limitation :
– As a first limitation, we can see that there are only two essential participants in the review of a business unit’s strategy: the CEO and the head of the business unit. All others should only be included if they are really a decision-maker.

– Changing the process requires changing attitudes and culture throughout the company, which is no small task. Companies also tend to underestimate the degree of resistance they will receive from business units, which often see the willingness to implement a new process as a threat, another demand on their time and an excuse for greater interference from the business centre.

– Not for everyone, it only concerns large companies with large hierarchical structures, whereas in Belgium we stay in a country where most companies are SMEs.

– When they do their experimental, they say they test the strategic planning process but how can they see if it really works? They don’t have the perspective. They should be in the long term but are they really? Limit of impact.

Further References :
1. Bouhali, R. & Mekdad, Y. & Lebsir, H. & Ferkha, L. (2015), Leader Roles for Innovation: Strategic Thinking and Planning. Procedia – Social and Behavioral Sciences, 181, 72-78.
2. Fairholm, M. (2009), Leadership and Organizational Strategy. The Innovation Journal: The Public Sector Innovation Journal, 14(1), article 3.
3. Mueller, C. & Naffziger, D. (2015). Strategic planning in small firms: activity and process realities. Journal of Small Business Strategy, 10(1).

The first two reading allow us to go further and to differentiate strategic planning and strategic thinking. The third reference shows us that SME’s use strategic planning as well and confirms one of the limits of the paper.

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Bodeux Augustin, de Foy Adrien, Meurmans Augustin, Feron Solène

(Article) Day, G. S. (2007). Is it real? Can we win? Is it worth doing. Harvard Business Review, 85(12), 110-120.

(Article) Day, G. S. (2007). Is it real? Can we win? Is it worth doing? Harvard Business Review, 85(12), 110-120. Key points The first thing the article tells us is that most of the development projects in a firm are minor innovations. These small projects, which the author calls “little i” innovations, are necessary for continuous improvement, but they don’t contribute much…
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(Article) Day, G. S. (2007). Is it real? Can we win? Is it worth doing? Harvard Business Review, 85(12), 110-120.

Key points

The first thing the article tells us is that most of the development projects in a firm are minor innovations. These small projects, which the author calls “little i” innovations, are necessary for continuous improvement, but they don’t contribute much to profitability.
It’s the risky “Big I” projects—new to the company or new to the market—that can generate profits. According to one study, only 14% of projects were major innovations, but they accounted for more than 60 % of all profit from innovations. However, people often believe that big projects are too risky and their rewards (if any) will come too far in the future.
The solution to this paradoxal problem is to pursue a process that will find a compromise between risk and profit. The article shows two tools, used in tandem, that can help companies build a balanced portfolio of projects. The first, the risk matrix, will graphically reveal risk exposure across a portfolio of innovations. The second, the R-W-W (“real, win, worth it”) screen, built on a series of questions about the innovation, its potential market, the company’s capabilities and competition, can be used to evaluate individual projects.

Implications

There are 3 actions on which managers should focus more in order to develop a more balanced portfolio of projects and build a better business model.
First of all, it is very useful for managers to use the risk matrix tool. In this exercise, it is important that managers work closely with the development teams of each project. Indeed, their purpose is to evaluate projects independently and to better understand the risk associated to them. Better communication will thus allow them to share different points of view and find a consensus on which projects they will chose to keep at the end. But the scores obtained, which will allow them to place projects on the matrix, require a thorough knowledge of the subject. This is why it is so essential that managers initiate dialogue and take into account their opinions.
The second tool that managers should use is the screening process. It is now well known that for a project to be successful, it must correspond to the company’s culture and be led by a suitable, motivated and charismatic manager. Their role as managers is therefore to energize the development team, to help them overcome the obstacles they will encounter, and so on… However, it is essential that managers be careful not to be blinded by their enthusiasm or their fear of failure and not to bias certain results that confirm the validity of the project. So, when managers do this screening process exercise, they have to question themselves at every step to be sure not to distort any results.
A final action that managers should take is to highlight partnerships with people with more expertise in the field. Indeed, whether it is for the first or second tool you have been told about, it is sometimes easier to call on a company that has market or technology expertise that the company lacks, to better understand in depth the risks associated with the project and to find solutions if possible.

Limitations

First, the quality of information and the evaluation of information by the manager during the different phases of a project seems to be key points in order to allocate project resources and to decide whether a project should continue or not. However, this concept could not be applied in some companies in which managers focus too much on theory and prefer to evaluate their project only with valuation methods such as net present value (NPV) and discounted cash flow (DCF) without continuously reviewing the project and taking new informations into account. Moreover, when they are reassessing a project throughout its evolution, the managers will have to be careful to find the right sources of information, which means finding the right contacts. Finding good contacts can be complicated for different reasons such as a lack of expertise within the company, a contact network that could be too small or the fear of disclosing an R&D project. These elements could prevent managers from having enough information to better manage their project.
Secondly, the second implication emphasized that the manager should focus on learning of the research team by evaluating what has been learned at the end of a project. The limit of this implication is that developing new technology in the pharmaceutical sector is equivalent to acquiring new knowledge, but knowledge is not quantifiable precisely. There is no metric to evaluate what a project has really brought to the research team in terms of learning.
Finally, the third implication suggests that managers have to choose the right people to evaluate a project correctly. These people could be outside experts, representatives from several levels of management, as well as peers from other project teams. The limitation here is that this managerial implication will not be applicable in all types of companies. Large companies have the financial means to pay outside experts and they have enough management levels to bring together several representatives to evaluate a project. However, if we consider smaller companies and start-ups this is not especially the case. Their financial and human resources are often more limited. They don’t always have the possibility to find enough and the right people.

Further references

-Coleman, T. (2011). A Practical Guide to Risk Management. Virginia :The Research Foundation of CFA Institute.

-Li1, Z. P., , Yee Q. M. G., Tan P. S., Lee, S.G. (2013). An Extended Risk Matrix Approach for Sup- ply Chain Risk Assessment. IEEE International Conference on Industrial Engineering and Enginee- ring Management.

-Day, G. (2013). Find innovation succes with the “REAL-WIN-WORTH IT” screen. University of Pennsylvania. Retrieved from https://executiveeducation.wharton.upenn.edu/wp-content/uploads/ 2018/03/1306-Find-Innovation-Success.pdf.

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DELSARTE Mathilde, GUIDUCCI Eva, MARCUS Julia, SYMON Oriane, VAN HAMME Léa

Bertels, H. M., Koen, P. A., & Elsum, I. (2015). Business models outside the core: Lessons learned from success and failure. Research-Technology Management, 58(2), 20-29

The paper by Bertels et al. (2015) studies the reasons for the success and failure of outside the core business models. As a supportive tool, the business model canvas (BMC) is used, that the authors enlarge by a few internal as well as external aspects. The key finding is that innovations closer to the company’s core are less successful. The…
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The paper by Bertels et al. (2015) studies the reasons for the success and failure of outside the core business models. As a supportive tool, the business model canvas (BMC) is used, that the authors enlarge by a few internal as well as external aspects. The key finding is that innovations closer to the company’s core are less successful. The main reason for that is that firms tend to pay less attention when analyzing the aspects of new business models that seem to be similar to their existing business models (core). In consequence, false assumptions are made in crucial areas like the distribution channels or cost structures. Hence, the further away from the core a project is, the more it is perceived as “different”, the more cautious the business model gets analyzed and the less false assumptions are made.

Several implications can be derived from these insights. (1) Managers should use the modified business model canvas as this incorporates not just more detailed internal aspects but also helps to keep highly important external aspects in sight. The more aspects are scrutinized the easier it is to make realistic assumptions and hence to promote innovation success.
(2) While doing it, managers need to intensively invest time on all parts of the business model canvas, especially being aware that the aspects that seem to be similar to the known business models, might be in fact very different. Too often, the area that feels familiar to the project teams are not enough studied in the initial evaluation for the new growth opportunities and can lead to failure.
(3) Even with an intensive analysis of the modified BMC, wrong assessments are still possible. Therefore, managers should further try to develop the new business at a speed that allows them to identify wrong assumptions as quickly as possible and to resolve them as soon as possible.

Nevertheless, some limitations to these implications can be identified. (1) Even though the modified BMC helps managers to not lose sight of (nearly) all of the aspects that determine the success of an outside-the-core innovation project it might be too complex for less experienced managers to apply. The original BMC was composed in a way that allows to balance completeness (which is linked to complexity) and ease of use. A more complex tool is only helpful as long as it can be applied successfully. Therefore, especially those managers who do not have experience with the concrete application of the standard BMC should master that first in order to get an advantage out of the modified version.
(2) Another limitation of these implications is that sufficient time to experiment and grow slowly might be scarce due to internal and/or external reasons. Especially in large companies, new projects are often linked to certain growth requirements (like early on sales or margin targets) in order to be approved. These growth requirements could hinder the project in growing at the necessary speed that allows for efficient learning and modification. An external factor that might hinder managers to exhaustively test new business models is intense competition. Especially when there is a first-mover advantage and competition around it is harsh, growing a project slowly might not be an option.

Further references:
• Trapp, M., Voigt, K., & Brem, A. (2018). BUSINESS MODELS FOR CORPORATE INNOVATION MANAGEMENT: INTRODUCTION OF A BUSINESS MODEL INNOVATION TOOL FOR ESTABLISHED FIRMS. International Journal of Innovation Management, 22(1) Retrieved from https://search-proquest-com.proxy.bib.ucl.ac.be:2443/docview/2003000605?accountid=12156
• Giesen, E., Riddleberger, E., Christner, R. and Bell, R. (2010), “When and how to innovate your business model”, Strategy & Leadership, Vol. 38 No. 4, pp. 17-26.
• Business model innovation – beating yourself at your own game. Stefan Gross-Selbeck. (2014). TedxTalk. Retrieved from https://www.ted.com/talks/stefan_gross_selbeck_business_model_innovation_beating_yourself_at_your_own_game

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Florine Nicaise, Gauthier Corbeau, Manuel Martins da Silva, Guillaume Nicolas, Maria Mercredes Catolino

(Article) Casadesus-Masanell, R., & Ricart, J. E. (2011). How to design a winning business model. Harvard Business Review, 89(1/2), 100-107.

The article was written by two researchers, Ramon Casadesus-Masanell (Harvard Business School) and Joan E. Ricart (IESE Business School) in 2011. The main subject is how companies can improve or change their business model to another one that would be more efficient. In this summary, we will explain the three insights we took out of the paper, then the managerial…
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The article was written by two researchers, Ramon Casadesus-Masanell (Harvard Business School) and Joan E. Ricart (IESE Business School) in 2011. The main subject is how companies can improve or change their business model to another one that would be more efficient. In this summary, we will explain the three insights we took out of the paper, then the managerial implications that are linked to said insights. The last point will be about the limitations of the implications, before giving a few more references about the subject.
The three key points from the article are that companies should make sure that their business model is aligned with their goals, the model is self-reinforcing and is robust. The first one means that every decision should lead to a consequence that enters the scope of the company’s objectives. The second is about how the model should reinforce itself, each move validating the business model and its implications. The last one implies that the model should be able to resist four kind of threats: the imitation (your competitor copies your model), hold up (other stakeholders can capture the value of your model), slack (getting complacent) and substitution (getting outperformed by new entries on the market).
Out of these insights, we highlighted three managerial implications. Firstly, companies must strengthen their virtuous circles. They need to identify what makes the company works in an efficient way and improve it continuously. Secondly, they must try to weaken their competitor’s circle. Indeed, they should prevent other companies to profit from virtuous circles. Lastly, they have to turn competitors into complements. This means that they should work together and share knowledge to increase efficiency.
However, these implications may lead to some limitations. Indeed, strengthening your virtuous circles seem easy enough, but it’s in fact quite tricky. There’s a thin line between virtuous circles that lead to greatness and vicious circles that lead to nothingness. Another point is that weakening your competitors means that you need to have some market power to influence it in a way that plays in your favour. About sharing knowledge between competitors, companies can face a dilemma: how much knowledge do I share? The problem here is to find a way to share enough knowledge to gain more profits, but still not enough for the competitor to outperform me.
If this article interested you, we found two more resources to dive deeper in the subject. First, a Ted Video where the speaker talks about the successful start-ups of today. Second, an article linked to the third managerial implication and its limitation about why you should cooperate with your competitors.
Gross-Selbeck, S. (Speaker). Business model innovation: beating yourself at your own game [Ted Video], Ted Talks, 12min. Online:
https://www.ted.com/talks/stefan_gross_selbeck_business_model_innovation_beating_yourself_at_your_own_game
Fernandez, A. & Le Roy, F. (2010). Pourquoi coopérer avec un concurrent : Une approche par la RBV. Revue française de gestion, 204(5), 155-169. DOI: 10.3166/rfg.204.155-169

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Bardellin, Aurore; Clerbois, Louis; Germeau, Jean; Goosse, Floriane; Torres Rodrigo, Beatriz​

Hargadon, A. (2015). How to discover and assess opportunities for business model innovation. Strategy & Leadership, 43(6), 33-37.

Key insights: This article is divided into two mains parts: a first one, dedicated to understanding what innovation in a business process is, and then a second where the author makes some suggests. The first thing is that BP innovation represents difficult innovation, with substantive and simultaneous changes. But in addition, BP innovation represent a great sustainable competitive advantage.…
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Key insights: This article is divided into two mains parts: a first one, dedicated to understanding what innovation in a business process is, and then a second where the author makes some suggests. The first thing is that BP innovation represents difficult innovation, with substantive and simultaneous changes. But in addition, BP innovation represent a great sustainable competitive advantage. Secondly, this kind of innovation faces two obstacles: Leaders required to commit, and Innovation team do not have control over strategic changes.

Managerial implications: Regarding the managerial implications, it is essential to highlight that a new business model should not be the initial goal of a company, but whether the by-product of a process that maximizes the meeting of the consumer’s need. Indeed, this can be a complicated process to implement, but if successful, it can provide a lot of benefits. An example was proposed by Netflix, a few years ago, which destroyed the former worldwide leader of video rental, Blockbuster.

However, this process must answer to the changes in the environment. That’s why it should be free from any constraints the innovators face. It means that building a new business model should not be constraints by lack of resources, for example. Developing a new business model involves aligning three decisions:

What do customers want?

What can the company deliver?

How can the company make money delivering it?

The company needs to focus on the broader problem its customers have and not only on the part the company addresses. By following all the steps of the process, the company can identify all the problems customers might encounter, document the full set of activities associated with the problem’s solution. The company also needs to consider the possible external changes that might be emerging and could significantly change the customer’s needs or even create other customers, for instance, new technologies, new market preferences or new regulatory policies.

Given that the company already identified customer’s struggles, it needs to decide which activities might take on, considering its current capabilities and which needs to acquire or develop, and simultaneously, which activities the company might take control over by bringing in external partners into its business. An example to illustrate this matter, is the partnership between Nike and Apple, settled in 2006, that brought together music and sports activities.

Finally, managers have to shape and implement a revenue model to guarantee the new business become profitable. It is important to make it as best as possible since it determines the way consumers perceived the costs. It is a difficult task, which have several key questions, as if the team has enough capabilities? What are the costs and key risks? Can the technical system support the new offer? When the new business model will recoup the costs?

Limitations: The first limitation concerns the decision (What your customers want?). In fact, it is useful for the company to focus on the larger problem they have. But we think it’s not enough to just ask what the customers want. The challenge for the company is to anticipate future needs because the customer may change their minds.

Finally, not all business models are created equal. The question “How you can make money delivering it?” cannot apply to every business model innovation. Sometimes, innovative companies are not profitable, and this is not their goal. For example, some organizations might take the decision to allow their content to be freely available on the Internet. But, even for these organization, it’s important to assess the financial aspect. That’s why the question should change with “How much?” including the required resources or the revenue model.

Further references:

Stampfl, G. (2015). The Process of Business Model Innovation: An Empirical Exploration. Retrieved from http://hdl.handle.net/2078/ebook:103095

Ebel, P., Bretschneider, U., & Leimeister, J. M. (2016). Leveraging virtual business model innovation: a framework for designing business model development tools. Information Systems Journal, 26(5), 519‑550. https://doi.org/10.1111/isj.12103

Kim, S. K., & Min, S. (2015). Business Model Innovation Performance: When does Adding a New Business Model Benefit an Incumbent? Strategic Entrepreneurship Journal, 9(1), 34‑57. https://doi.org/10.1002/sej.1193

Rayna, T., & Striukova, L. (2016). 360° Business Model Innovation: Toward an Integrated View of Business Model Innovation. Research-Technology Management, 59(3), 21‑28. https://doi.org/10.1080/08956308.2016.1161401

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Gilles de Buijst, Alice de Walque, Guillaume Delande, Nathalie Garron, Robin Josse

(Article) Wirtz, B. W., Pistoia, A., Ullrich, S., & Göttel, V. (2016). Business models: Origin, development and future research perspectives. Long Range Planning, 49(1), 36-54.

Executive summary: Business Models: Origin, Development and Future Research Perspectives - Key insights (“What?”): 1) WHERE DID THE BUSINESS MODEL COME FROM AND HOW HAS IT DEVELOPED? Even if the term business model has been present in scientific discussions for over fifty years now, there is still a very heterogeneous comprehension of the concept.Today, there is an increasingly converging view of the concept…
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Executive summary: Business Models: Origin, Development and Future Research Perspectives

– Key insights (“What?”):
1) WHERE DID THE BUSINESS MODEL COME FROM AND HOW HAS IT DEVELOPED?
Even if the term business model has been present in scientific discussions for over fifty years now, there is still a very heterogeneous comprehension of the concept.Today, there is an increasingly converging view of the concept among authors but still no accepted definition of it. Yet the majority of the authors understand a business model as a link between strategy and process management.

2) WHAT IS A BUSINESS MODEL ANYWAY AND WHAT DOES IT CONSIST OF?
After a background in the literature, we define business model as a simplified and aggregated representation of the relevant activities of a company. The ultimate goal of a business model is to generate or secure a competitive advantage of a company. It is capital to be conscious that there may be a need for business model evolution or innovation, due to internal or external changes over time. Moreover, we learn that there exist many components of business models, which can be gathered through strategic components, customer and market components, and value creation components.

3) WHAT IS THE FOCUS OF CURRENT RESEARCH AND WHAT ARE THE IMPLICATIONS FOR FUTURE RESEARCH?
In scientific research, business model receives continuously increasing attention, even if it is at an early stage yet. We can mention three important areas of research, which are about the concept, the structure and the management process of business models. One of the main question to be answered in future research is how to determine the quality of a business model, and so far the studies have had lots of trouble with that.
—————
– Managerial Implications (“So What?”):
Having a business model is essential for companies, it acts as a road map of the value creation. But it is not a theoretical document, it must lead to concrete actions and therefore it is important to consider the following elements.
1) FIRST, IT IS HARD TO FIND AN UNIVERSAL BUSINESS MODEL
All companies must have a BM, regardless of their size, their value creation, their age or their clients. And if components of the BM must be chosen carefully, even the scientists don’t totally agree on what the components a BM should include. Nevertheless, some key elements are considered as essential: the strategy, the material and immaterial necessary resources, a network-oriented view, the importance of the customers, the value proposition and the revenue model.

2) DYNAMISM OF THE BM
Then, the second managerial implication of the article is the dynamism of the business model. Indeed, a BM is not frozen and must be considered as evolutive. New sources of sustainable competitive advantage can often only be reached from BM reinvention. The innovation by the BM is based on a disruptive innovation. For example, Ryanair did it by inventing the low-cost aviation. The value chain, the customer relation, all was different from a traditional airline company. Moreover, the entire economic ecosystem can change (with a deregulation, or new technology for example). So, it is important to regularly make a structural revision of the BM.

3) UNDERSTANDABLE BM REQUIRED
Finally, the third implication is to establish a logical and understandable BM. Scientists are still discussing about the definition and the content of a good business model and there are several articles which deal with that, but it is not only a conceptual topic. Entrepreneurs need to have a functional BM. For the moment academic researches didn’t highlight the essential success factor of a BM but the only remarkable thing is that they were all flexible.
—————
– Limitations:
1) ASSESSING QUALITY (OF THE BM)
The quality of the business model is not directly measurable. How can we then ensure quality and reliability of the BM? Different researches have been made about this topic but there doesn’t seem to be a clear consensus about the success criteria of a BM. For example, in other research fields there’s some sort of consensus about using SMART criteria. But there’s no equivalent to business models.

2) BUSINESS MODEL IS BASED ON ASSUMPTIONS
A BM simplifies the business to be “understandable”. This implies that the BM is based on assumptions. If some of these assumptions appear to be false, it could have some incidence on the validity of the BM. Some examples of the assumptions that are typically made; access to capital; ressources; customers: needs, perceptions, purchasing behavior; interest rates & exchange rates; stable economic & political environment; laws & regulations.

3) DYNAMIC BM IN PRACTICE
It seems very clear that dynamism is needed. But in practice it seems less clear about how dynamism needs to be managed. When should the company take action and adapt or reinvent its BM? How to know if an adaptation will be enough or if a total reinvention is needed?
—————
– Further references:
——
https://www.youtube.com/watch?v=xwwtkMdFYHE
Video on the conference about the “collaborative economy and new business models’ challenges” organized by the ACCA (Association of Chartered Certified Accountants), UEAPME (European Association of Craft, Small and Medium-sized Enterprises) and European Movement International Brussels. They debate about the opportunities and limits of new business models.
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ACCA (2018), Business models of the future: systems, convergence and characteristics
Report on the “business models of the future”, exploring “what lies behind business model innovation”. What are the trends leading the organizations to rethink their business models? Currently, a systematic way of thinking for the long-term is required to create “new sources of value”.
——
Business models and dynamic capabilities, David J. Teece, Long Range Planning, Volume 51, Issue 1, 2018, pp. 40-49.
Explains the interdependence between business models, dynamic capabilities and strategy. Dynamic capabilities and business models reinforce each other and define what strategy is feasible for the company.
——
A dynamic business modelling approach to design and experiment new business venture strategies, Federico Cosenz, Guido Noto, Long Range Planning, Volume 51, Issue 1, 2018, pp. 127-140.
This article addresses the too static representation of business models. This perspective can prevent from “identifying the most effective strategies”. So the authors propose a combination of the conventional and a dynamic method to build business models.

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ADANT Aurore, CALCUS Sophie, CLOQUET Nelson, VANDEN HERREWEGEN Géraldine, VIDREQUIN Charles

Girotra, S. & Netessine, S. (2014). Four Paths to Business Model Innovation. (2014). Harvard Business Review (July-August ISSUE).

This article was about the innovation in the business model and more precisely the way you can innovate in your decision making. The three key insights in this article are based on a framework to help managers with their innovation. The key insights are the different decisions you can make and through which you can be innovative. The first decision…
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This article was about the innovation in the business model and more precisely the way you can innovate in your decision making. The three key insights in this article are based on a framework to help managers with their innovation. The key insights are the different decisions you can make and through which you can be innovative. The first decision is focusing on the offer we’ll make, the mix of product or services we’ll propose. Making changes in our offer can reduce the risk of an uncertain demand which is the biggest risks a business may face.
The second decision is more based on the timing of the decision making. Some strategies, such as changing the order of the decision in order to delay the investment commitments until pertinent information is known, can help the manager to avoid the risk of fixing a price before actually sell anything. Finally, the third key insight is focusing on the person who’s making the decision and why this decision. A way to radically improve the decision making in the company is simply by changing the people who decide and give the decision right to the most informed people.
That implicates that manager should build a relation of trust with his stakeholders. He has also to build a strong network, by asking his collaborators to expand their own. The manager should also think about integration as a way to innovate. You can either work with a vertical integration or a horizontal one, it will depend on the goal you want to achieve. Furthermore, managers should not forget to make detailed risk assessment regarding all the different kind of uncertainty the company may face. A company that knows how to react to each type of uncertainty would be more efficient and lose less time than a company that doesn’t.
While keeping those implications in mind, managers should pay attention to the fact that, yes, a strong network is important, but they have to do their homework in advance, and inform themselves on the culture, the tradition, ect, otherwise they can offense other people. Then, to be able to integrate vertically, the company need to have capital. So, it has an impact on the flexibility of the company’s strategy.
Further references:
• For more general knowledge on Business Model :
Mokter, H. (2017). Business model innovation: past research, current debates, and future directions. Journal of Strategy and Management, Vol. 10 Issue: 3, pp.342-359.
• For more insights on decision making:
Arms, H., Danner, C., Gerber, J., Wiecher, M. (2014). Leveraging Flexibility Win the Race with Dynamic Decision Management. Springer Berlin Heidelberg.
• For more methods on risk analysis:
Cox, L-A Jr. (2013). Improving risk analysis. Springer (New York, NY).

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Valentin Vendy (Group 10)

Koen, P. A., Bertels, H. M., & Elsum, I. R. (2011). The three faces of business model innovation: Challenges for established firms. Research-Technology Management, 54(3), 52-59.

Key insights : This article provides a model to understand the reason why some established companies have seen themselves disrupted by new innovation and new companies. It is called The Business Model Innovation Typology (BMTI) and it classifies innovation among 3 dimensions reported on 3 axes: (1) technology, (2) value network which is the network and relationship that the firm…
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Key insights :
This article provides a model to understand the reason why some established companies have seen themselves disrupted by new innovation and new companies. It is called The Business Model Innovation Typology (BMTI) and it classifies innovation among 3 dimensions reported on 3 axes: (1) technology, (2) value network which is the network and relationship that the firm have with all its partners and (3) financial hurdle which is the minimal rate that the firm needs to achieve to cover all its costs. This model then divides the innovation in two categories: (1) The sustaining innovation which are innovation that are less risky as firms only uses existing value network and existing financial hurdle rate; (2) The business model innovation which are disruptive innovations. Established firms often fail at implementing those innovations as they try to reach a new network or require a lower than expected financial hurdle rate.

Implications :
Having a clear understanding of the company’s mission will help to realize what the company actually does and not only what it sells. The purpose of this is to develop sustaining innovations because it is something necessary for the firm to obtain or keep a competitive advantage and therefore, remain on the market. You can see how MasterCard got disrupted by the contactless payment method due to the fact that they were too focus on what they were selling instead of seeing what was their mission.
Analyzing the Value Chain with the Porter’s model, will also help to find those innovation through the ‘technological development’. In other words, it is a tool to find where you create or can create some value.
The main implication is finding new opportunities, thinking about new boxes. With what I have, what can I do ? Where can I be next? Creating a new value network and going into a new innovative business model because it could be profitable or even the future of your company. Building your new BM by starting with Why, What, Who and How much.

Limitations :
The BMTI model does not allow to anticipate the disruptive innovation, it only allows to understand a posteriori how the business model was unprepared to face disruption and why the firm failed in the process to identify the coming disruption.
A new Business Model is a risky solution, because, on the one hand,you have to invest in it and it did not prove its successfulness, and on the other hand, it costs a lot because in the meantime you need to keep investing in your previous models to counterbalance the risks taken. Furthermore, there is a risk of sales cannibalization between the products of those 2 business models.

Further references:
– Video : Christensen talks about disruptive innovation (Harvard Business Review) https://www.youtube.com/watch?v=qDrMAzCHFUU
– Z. Lindgardt, M. Reeves, G. Stalk, M. S. Deimler, (2009), “Business Model Innovation”, The Boston Consulting Group, http://operatingpartners.com/wp-content/uploads/2014/03/OMS-3b-Process-Improvement.pdf
This article defines the concept of Business Model Innovation by explaining its components, its utility, its role and its limitation.

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Dehon Benjamin, Demoulin Sylvain, Goffin Clément, Jonet Claire, Poncelet Antoine

Ritter, T., & Lettl, C. (2018). The wider implications of business-model research. Long Range Planning, 51(1), 1-8.

The article “The wider implication of business-model research” highlights business models and especially the application of five different perspectives of the business model. By explicitly distinguishing among these five perspectives and by aligning them into one overarching, comprehensive framework, this paper offers a foundation for consolidating business-model research. A business model describes how a firm does its business from the…
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The article “The wider implication of business-model research” highlights business models and especially the application of five different perspectives of the business model. By explicitly distinguishing among these five perspectives and by aligning them into one overarching, comprehensive framework, this paper offers a foundation for consolidating business-model research. A business model describes how a firm does its business from the raw materials to the final product while fulfilling its goals and what is its strategy to create value. It is often seen as a “webbing” between diverse strategic management theories such as resource-based value and demand-side perspective or organization design.

The five perspectives on terms of business model are the following: activities, logics, archetypes, elements and alignment. The first perspective describes the business model as a means for the firm to organize and describe its activities in order to implement its strategy. The second one summarizes the logic of the business and focuses on why certain activities make sense for a business in term of value-creating logics. The next one is the business model archetypes that aim to create value. For example, a firm sells a product at a reasonable price but offers paying services needed to use the product. The fourth perspective propose structuring business model on the basis of essential elements the company must take into account to capture the essence of its business. The last one perspective describes how the pieces of a business fit together. It is important that the different elements of a business model complement each other and can be aligned to understand the company’s core strategy.

Moreover, these key insights have several managerial implications that can be useful in the development of a business model. Firstly, the company’s core strategy should be defined by equitably aligning the 5 perspectives of the business model to offer a comprehensive framework for understanding organizations and the strategic options available to them. However, an analysis of the existing business models of other players in the industry is required to know on which perspective the company should focus to capture a potential competitive advantage. Managers must therefore find out how the firm’s competitors manage their resources, what is their supply chain and which markets they serve. Lastly, to innovate its business model in the future, an organization must set up easily reconfigurable assets that will allow to modify or improve at least one of the value dimensions.

Furthermore, three limitations have been identified. This paper provides a general definition of the business model but does not differentiate it according to different types of business such as B2B or B2C. Previously, it is advised to look at what and how other firms are doing concerning their business model but it might be really hard to deduct something by looking at the business plan of a competitor. Actually, copying someone’s business plan does not guarantee the same result and analysing someone’s business plan without all the internal information needed could lead to wrong conclusions. The last limit relates to the business model (membrane which connects diverse strategic management theories) innovation. Sometimes, it could be disastrous for a company to change its business model because the modification of the membrane will damage the existing synergy between all the existing strategy components of its strategy.

Further references:
– Dellyana, D., Simatupang, T. M., & Dhewanto, W. (2018). MANAGING THE ACTOR’S NETWORK, BUSINESS MODEL AND BUSINESS MODEL INNOVATION TO INCREASE VALUE OF THE MULTIDIMENSIONAL VALUE NETWORKS.International Journal of Business and Society, 19(1), 209-218.
– Fehrer, J. A., Woratschek, H., & Brodie, R. J. (2018). A systemic logic for platform business models. Journal of Service Management, 29(4), 546-568. 

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Anonymous

Zott, Christoph, and Raphael Amit. “Business model design: an activity system perspective.

This paper focused on the importance of business models in current innovation and how can managers adapt their business accordingly. To profit from innovation, business pioneers need to excel not only at product innovation but also at business model design. Technological innovation does not always guarantee business success, therefore, new product development efforts should be coupled with a business model defining their “go to market”…
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This paper focused on the importance of business models in current innovation and how can
managers adapt their business accordingly.
To profit from innovation, business pioneers need to excel not only at product innovation but also at
business model design. Technological innovation does not always guarantee business success,
therefore, new product development efforts should be coupled with a business model defining their
“go to market” and “capturing value” strategies.
At the same time, new business models can themselves represent a form of innovation.
Indeed, the creation of new organizational forms , and in particular new business models are of
equal, if not greater, importance to society, and to the business enterprise than technological
innovation.
For the key points, the purpose is to conceptualize a firm’s business model as a system of
interdependent activities. The activity system allows to create some value for the company. She
creates some value for these partners but also for the company. To create a business model, it is
necessary a set of activity to connect between her. For example, there are the price model and the
revenue model. Although the business model and the revenue model are connected. They can
sometimes be conceptually distinct as Gillette. Gillette uses a valuable strategy. It sells cheap razor,
but the blades are expensively. For the activity system, the article suggests two sets of parameters
that activity systems designers need to consider: design elements and design themes.
Regarding implications, the paper suggests two sets of parameters that activity systems designers
need to consider: design elements that describe the architecture of an activity system; and design
themes that describe the sources of the value creation of activity system.
One set of important design parameters that characterize an activity system is content, structure, and
governance.
For the content : this concerns the activities to be performed. For example, in addition to the typical
activities of a retail bank, Bancolombia adopted activities to offer microcredit to reach the more than
60% of Colombians who did not have access to banking services. To perform these new activities, the
bank needed to train its top management, hire and train new staff, develop new capabilities, and link
the new activity to its existing system.
For the structure: describes how the activities are linked. Take the example of IBM. Triggered by a
severe financial crisis in the early 1990s, the firm switched its core and peripheral activities, shifting its
focus from a supplier of hardware (old core) to becoming a service provider (new core). IBM launched
a range of new activities in consulting, IT maintenance, and other services. As a result, more than half
of IBM’s 90 billion $ revenues in 2006 came from these activities.
For the governance : refers to who performs this activities. Franchising, for example, represents one
possible approach to activity system governance. It can be the key to unlocking value.
Thus, activity system design describes how firms do business, and captures the essence of the
business model.
The other set of parameters who the managers should take into consideration the following four major
interlinked value drivers of business models: novelty, lock-in, complementarities and efficiency.
Indeed, each of these value drivers enhances the total value-creation potential of a business model
and when combined, they can be even more powerful.
1. Novelty (N): you should think about new activities (content) and new ways of linking and governing
activities (structure and governance).
2. Lock-in (I): you should use many ways to retain the customer and bring him back to the company.
3. Complementarity (C): propose complementary products and services by improving the
interdependencies among business model elements.
4. Efficiency (E): think on how to reduce transaction costs to achieve greater efficiency.
One of the main limitations that could occur in the designing of a business model would be first
of all the exclusion of external forces as the competition between the firms , the market factors
or even the narrowness of the value of the final good in a way that the main valuation of the
good produced by an organization is monetary , other dimensions as the social responsibility
one is often forgotten or reduced . Another limitation could be the separation between key
activities and key resources in the chain of production of the final good which could lead to a
higher level of details in the business model and thus could also lead to higher costs for the
organizations .
further reference:
● Magretta, J. (2002). Why business models matter . Harv Bus Rev.
● Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a
handbook for visionaries, game changers, and challengers : Wiley.
● McDermott, C. M., & O’Connor, G. C. (2002). Managing radical innovation:
an overview of emergent strategy issues . Journal of product innovation
management.

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Anonymous

Amit, R., & Zott, C. (2012). Creating value through business model innovation

The aim of the paper is to explain what companies need to know about business model innovation to answer the question “when is the right time for launching new business model?” and see if they can benefit from the new business model. To understand the article, we will first define two important notions:  Classical business model is a system of interconnected and…
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The aim of the paper is to explain what companies need to know about business model innovation to answer
the question “when is the right time for launching new business model?” and see if they can benefit from the
new business model. To understand the article, we will first define two important notions:
 Classical business model is a system of interconnected and interdependent activities that determines
the way the company “does business” with its customers, partners, and vendors.
 An innovative business model can either create a new market or allow a company to create and
exploit new opportunities in existing markets.
Before launching a new business model, six important questions have to be asked.
1) What are the perceived needs that can be satisfied in a market?
2) What novel activities are needed to satisfy these ones? (Business model content innovation)
3) How to link these novel activities together in novel ways? (Business model structure innovation)
4) What novel could governance arrangements support this structure? (Business model governance
innovation)
5) How is value created through the novel business model for each stakeholder?
6) What revenue model fits with the company’s business model?
Interdependencies exist between content, structure, and governance. These ones could help companies to
strengthen their business model innovation. Furthermore, we observe a high interdependence between the
business model and the revenue model which is the specific way a business model generates revenue for its
stakeholders. Indeed, the definition itself shows the interdependence.
In order to increase the odds of developing the right business model, the paper provides four major value
drivers:
1. Novelty: it captures the degree of business model innovation that is embodied by the activity system.
2. Lock-in: it refers to those business model activities that create switching costs or enhanced incentives
for business model participants to stay and transact within the activity system.
3. Complementarities: it refers to the value-enhancing effect of the interdependencies among business
model activities.
4. Efficiency: it refers to cost savings through the interconnections of the activity system.
The presence of each of these value drivers enhances the value-creation potential of a business model.
The managerial implications of this paper are many. First, an organization must give the managers the
resources and authority to define and launch business‐model experiments since business model
innovation is a source of tacit knowledge and also that a good level of R&D may be efficient but is never
sufficient. For example, the managers could meet once or twice a year to discuss and re-challenge the
business model. Then, they should also encourage the different business ‘entities to communicate together.
By developing a new product, the R&D team should continuously communicate with the other departments
and managers to allow them to innovate the business model at the same time. Finally, the managers should
also involve the creativity of their employees, ask them to be intrapreneurs. The managers should define a
clear challenge and ask the employees to come up with creative ways to innovate the business model in order
to solve this challenge and give them feedback.
From this paper, two limitations can be emphasized. First, the corporate culture of a firm may strongly be
dependent on the business model of this one. The relation between employees and their identity inside the
firm, that they have developed for many years, will have to be rebuilt. Therefore, when a firm innovates in its
business model, it has to make sure that the employees are following the trend and must offer them the
support needed. Another limitation is that the context in which a business model innovation occurs is also a
context of uncertainty. The firm must make an assumption on the six questions before innovating its business
model. But these remain theoretical assumptions that will be tested later on the field. Business model
innovation can lead to failures and these failures will not directly lead to higher returns.
In order to have a broader knowledge of this topic, some extra sources can be found:
 Amit R., Zott C., Business Model Innovation: Creating value in times of change, IESE Business School
Working Paper No. 870, July 2010, retrieved on
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1701660 on the 30/11/2017
 Girotra K., Netessine S., Four paths to business model innovation, Harvard Business Review, July-
August 2014, retrieved on https://hbr.org/…/07/four-paths-to-business-model-innovation on the
29/11/2017

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