Definition of Business Models

Discuss about the Ambidexterity Literature and  Management Perspective.

The essay provides a detailed analysis of the business models that are currently used in the businesses today. This essay focuses on the issue of less durability of business model compared to the technical advances adopted in Common Wealth Bank in Australia. The sources of the stated issue clarifies that businesses models are developed to create and capture economic value. Therefore, to conduct the analysis considering these issues this essay starts with providing an in-depth definition of business models and disruption on the basis of existing literature. In addition to this, essay also provides an analysis of the threats and opportunities caused by the advances in the smart-connected products.

It is identified that organizations tend to commercialize new ideas as well as technologies through their business models. As put forward by Chesbrough (2010), even though the business models remain as the fundamental to trade and economic behaviour since the early age, business model concept has been prevalent as the internet entered in the mid 90’s and it has been gaining popularity since then. However, according to Zott, Amit and Massa, (2011) the business models have been considered or referred as a statement, a description and conceptual model. Nonetheless, in the existing literature, it is found that business model is often reviewed and analysed without a trace of explicit definition of the model.  Such poor definition or lack of an appropriate definition of business model creates a confusion which clearly promotes dispersion instead of the convergence of perspectives.  An article conducted by Markides (2013) reveal the fact that business models are usually developed to resolve and describe the phenomenon such as e-business and the use of information technology in the business and identification of some strategic issues including competitive advantage and value creation.

When it comes to disruption in business model de Jong & van Dijk (2015) mentioned that in today’s disruptive age, pre developed business models are at stake, although, the organizations are seeking to reframe the principles and functions of those models. It is a true fact that compared to today’s technological advancements, established business models are not effective enough to resolve the existing and future business issues. An example provided by Christensen, (2006) Bitcoin is bypassing the conventional banks as well as clearing those with the blockchain technology.

To understand how smart-connected products affect the process of running organizational operation, it is essential for Commonwealth Bank to understand in-built components, technology and capabilities. As put forward by Massa & Tucci (2013) elements “Physical, Smart and Connectivity” are the three major elements are emerged from the home appliances and industrial equipment. Hence, the physical equipment may include mechanical and electrical parts, while smart may include the data storage, microprocessors and connectivity may include ports, antennae and protocols.  The “the product and the product cloud” are interacted and then runs the operation on isolated server enabled by Smart connected product network. According to Porter and Heppelmann (2014) “smart connected products” could require a new backup technological base such as “technology stake” which provides an entrance for the exchange of data between the customers and the users belonging to the business system.

Disruption and the Durability of Business Models

Furthermore, “the technology stake” can work as the platform for storing data and analytics and it could run application and safeguard the access to product. More particularly, when it comes to opportunities delivered by smart connected product, it is worth mentioning that banking agencies like Commonwealth Bank can take the advantages of new data resources. This happens because Massa & Tucci (2013) in their article revealed the fact that data was principally by “internal and external operations” as well as via transactions in the value chain. The information was also generated across the communication with the customer service and suppliers.

Thus, the organization can supplement the data with the information collected from the survey, study as well as other external sources. In addition to this, the organization can use the data analytics tools associate with smart connected product, which provides the ability to uncover the full value of data and information, which remains as a significant factor for the competitive advantage, security of data and the overall governance. When digging into the literature of smart connected products, it is identified that the business model of Osterwalder contributes to the development of new strategies business issues. This model talks about a pro-active way to experiment with the alternative business by empowering organization to stimulate different possibilities before committing to the particular investment in reality. The model shows how business values can be created by traversing the key activities, client relationship, customer segment, distribution channels and other areas.

On the other side, Osterwalder (2010) commented that some smart connected devices could share some known vulnerabilities with Information Technology generally. Afuah, (2014) particularly mentioned that smart connected products could be vulnerable to analogous “denial of service attack”.

“Business model as the value proposition” provides significant competitive advantage, value creation to the organization. It is identified that business model has received adequate attention from scholars and business strategists in describing firm’s value creation as well as competitive advantages. In the context of value creation, Lindgardt et al., (2009)mentioned that the digital economy provided the potential opportunity to experiment with fundamental forms of value creation process that are designed in a manner that value can be generated in a concert by the organization for many users. Nonetheless, it has also been identified that when in describing the value creation, the idea of business mode has not been utilized in the context of digital economy. As put forward by Zott,  Amit and Massa (2011) the value creation techniques could exceed the range of value that can be generated via “Schumpeterian innovation”.

Smart-Connected Products and Organizational Operations

In the case of advantage of “business model” as a set of resource and capabilities, Johnson, Christensen and Kagermann (2008) mentioned the business model with resources and capabilities are highly effective because there are several instances where organizations find it difficult to manage their resource and competencies. In the earlier age of business model invention, the organizations were often observed to be investing in the activities that do not provide the desired returns and some organizations did not have ideas how the resources can be aligned with the strategies developed, For example, the organization Xerox took a lot of time to implement the business model for the purpose of resource allocation. Till the last decade, Xerox would use their conventional business process where they did not have any relation between the investment strategies and the availability of resources (Chesbrough, 2010). The newly developed business innovation model enables the firm to use their resource-based view to focus integrating the assets together that effectively meet firm’s own criteria for the resource and capabilities. This can also support the lasting competitive advantages.  

Throughout the findings, only one common factor found is concepts of business models have been used to resolve different business issues with different context and areas. However, it is certain that business models evolved from the previous ones are highly relevant and useful to today’s business issues and challenges. The findings also indicates that a business model both explicitly or implicitly considered as the innovative unit of analyses which could bridge the conventional business model than is closer to the organization. The significance of the findings lies in the fact that in the coming days, innovation in business models would be a top requirement because the market environment and the business industries are rapidly changing and giving marketers the threats of new business trends. Therefore, it is highly necessary for the organization to understand that existing business models and their concepts may not work in a proposed dynamic business environment in the future. Therefore, to avoid such threats in business, Commonwealth Bank needs to determine new strategies to shape their existing business models. As put forward by Zott, Amit and Massa (2011), the business framework complements the technology and technology is considered as the enabler of the model instead of a part of the model; so, what if the technology changes and does not remain compatible with existing functions of model.

Conclusion

In conclusion, it can be ascertained that the business environment has increasingly been dynamic with respect to needs and demands of markets. To deal with this dynamic business environment, the marketers are seeking to adopt an innovative business model that protect them from unnecessary issues such as loss of competitive advantages, and poor control on resource and capabilities. Therefore, it is particularly recommended to Commonweal Bank to modernize their businesses mode to effective manage resource and capabilities and maintain security threats.

References

Afuah, A. (2014). Business model innovation: concepts, analysis, and cases. Routledge.

Chesbrough, H. (2010). Business Model Innovation: Opportunities and Barriers. Long Range Planning, 43(2–3), 354-363.

Christensen, C. M. (2006). The ongoing process of building a theory of disruption. Journal of Product innovation management, 23(1), 39-55.

de Jong, M., & van Dijk, M. (2015). Disrupting beliefs: A new approach to business-model innovation. McKinsey Quarterly

Johnson, M. W., Christensen, C. M., & Kagermann, H. (2008). Reinventing your business model. Harvard Business Review, 86(12), 50. Scroll down to find the article.

Lindgardt, Z., Reeves, M., Stalk Jr, G., & Deimler, M. (2009). Business model innovation: When the game gets tough, change the game. Own the future: 50 ways to win from The Boston Consulting Group, 291-298.

Markides, C. C. (2013). Business model innovation: What can the ambidexterity literature teach us?. The Academy of Management Perspectives, 27(4), 313-323.

Massa, L., & Tucci, C. L. (2013). Business model innovation. The Oxford Handbook of Innovation Management, Oxford University Press, Oxford, 420-441.

Osterwalder, A. (2010). Business Model Generation. New Jersey: John Willey & Sons.

Porter, M. E., & Heppelmann, J. E. (2014). How smart, connected products are transforming competition. Harvard Business Review, 92(11), 64-88.

Zott, C., Amit, R., & Massa, L. (2011). The business model: Recent developments and future research. Journal of Management : JOM, 37(4), 1019-1042