Assessing The Opportunities And Threats Of Smart Connected Products: A Business Model Perspective On Volvo

Understanding the Importance of Business Strategy, Innovation and Models

In the modern business, Innovation has become very essential part of any company’s strategies. Disruptive innovation has taken their place in the business operations. It is seen that the business models that have succeeded over the years are failing these days. There are many opportunities and threats that technological advancements are bringing to the business. It is due to the wide range of changes in the working process. Today’s business models are subjected to fast disruptions, displacements and outright destructions (Steen, 2013). Volvo is one of the biggest manufacturers of trucks, buses and other equipment of construction. Technological advancements in the industry are taking place in huge number especially in terms of smart connected products. This report highlights the opportunities and threats caused by smart connected products. It also showcases the business model framework by Osterwalder and Pigneur in terms of Volvo as well as two business model perspectives.

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According to Vermesan & Friess, (2013), business model for any organisation is understood as the rationale of how a firm creates, captures values and delivers in social, economic, culture or some other contexts. The process of construction of business model forms a part of business strategy. Model of business is understood as the broad range of formal and informal description to illustrate core aspects of business. This may involve target consumers, strategies, sourcing, infrastructure, operational policies and processes, offerings, culture, trading practices etc. Business model of the firm offer three components i.e. value delivery, value capture and value creation. All this creates new financial model that elaborates the way in which a firm captures economic values from its business operations.

On the other hand Leminen, et al., (2012) believes that disruption is understood as business administration that refers to as the innovation that may create value network and new market as well as eventually disrupt a present market and value network. This is capable of displacing the market that is established firms that are leading the markets, alliances and products. It involves description regarding the values that any firm offers to its targeted section hence it helps in enhancing the profit margins of the company which is necessary for the growth of the company. Smart connected products have replaced all the pre-existing products.

Smart connected products are those which are linked with each other in such a manner that are capable of taking decisions as per the situations. These products are called smart because they are capable of taking decisions on the basis of their past experiences also. This technology is considered to be as the disruptive technology because they are making the businesses smarter. They have become disruptive as they are having higher flexibility and are capable to solve many problems of the company. A network of smart products are generated which is capable of interacting with each other by sending and receiving data from one node to another. Since the modern day vehicles are getting smarter day by day hence they need such devices that are capable of making smart decisions. Volvo is a maker of equipment that is used in the automobile and construction industry.

The Evolution of Business Models and its Analytical Tools

There smart products involves the trucks that are smart. The concept of smart cars is used in trucks also where various types of sensors gets connected with the trucks that is capable of adjusting as per the situations (Hildebrandt, et al., 2015). The driverless racks have navigation system that helps them in reaching to the destinations without human interventions. In the Era of Internet of Things where everything is connected with each other smart connected have a very great future. This is due to the fact that everything in the world is getting connected with each other and accessing the environment there is easier. Trucks are of different types and carries different types of goods. In carrying some of the fresh products it is essential that the temperature gets regulated. It is hard to maintain the temperatures throughout the day on the longer roots hence with the help of sensors temperatures can be maintained easily without human interventions.

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These smart trucks have higher opportunities in the market as they can carry out the different process without making very less failures. Owners of the firms are usually troubled by the faults of the drivers while taking trucks from one place to another. These human errors can be removed with the help of smart technologies as they can take decisions without getting tired (Kuschel, Remneland & Kuschel, 2011). These human errors cost the company in huge amount. With the network that is created by connecting all the devices can help the owners to understand the whole operations of the truck through the navigation. They can also control the machineries from far off places like changing the routes of the trucks without being present there (Giannoutakis, & Li, 2012). Yes it will affect the stakeholders like it will do more job cuts but it will also help the owners to make the operational speed faster as well as efficient. With the increasing labour requirements these smart connected products can help in making the cost reductions in the operations.

It is also acting as a threat to the business of Volvo since the smaller companies with less resource can also adopt this technology and can make their mark in the industry. There is one biggest threat linked with this technology is that it makes the business vulnerable to data piracy (Vermesan & Friess, 2015). There are several hackers that are present in the environment who have the intention to steal the data of the firm which can be dangerous for the growth of the firm in the longer run. This is due to the fact that competitors can take use of this data for making their plans. Since the smart connected products have several nodes which give a very wide loop hole to the technology. Hackers can hack any one node and can enter into the system and can distort the whole system.

Assessing Business Models using Different Perspectives

Business model framework that is given by Osterwalder and Pigneur for Volvo is as follows:

Key partners

Key activities

Value Proposition

Customer Relationship

Customer Segmentation

Subsidiaries like Volvo buses, VE commercial vehicle, Volvo Penta, Construction equipment, Construction equipment, UD trucks.

Technology developers

Distribution network

EPC firms

Automotive companies

Manufacturers of components and parts.

Machinery manufacturers

Suppliers

Collaborators

Design and engineering.

Production

Service and Support

Distribution

Post sales

Financial services

Marketing

R&D and innovations

The mission of Volvo’s group is driving prosperity using transport solutions.

Components and equipment of higher quality.

Contract manufacturing.

Self-driving vehicles.

Consumer service

Change

Trust

Transformation

Automation

Innovation

Post sales services

Performance based relationship

EPC companies

Construction and municipalities firm

Equipment manufacturers

Building and plants

Carmakers

Key Resources

Channels

Cost Structure

Revenue Streams

95000 people

Production facilities in 18 nations and sells its products in more than 190 markets

Production technology

Brand

Network

Intellectual property

Open innovation

Creative innovation thinking

Curious and open-minded teams

Authorised distributors

Websites

Social media

Volvo museum

Service centres

Parts

Software

Components

Raw materials

Assembling/ Manufacturing

Distribution

Production

1.6 Billion  of US Dollar spent on research and development per year

Taxes

Technology

Facilities

Fabrics

Employees

Product sales like Buses, Marine and industrial equipment, Construction equipment

Components

Spare part

Technical services

Licensing

Rental

Insurance and Financing

 
Among all these business models, two selected aspect for the business model canvas for Volvo are resources and capabilities. Resources of the company includes large amount of skilled employees. It also includes many production facilities in more than 18 countries and sells its products in more than 190 markets (Laya, Bratu & Markendahl, 2013). Such a huge amount of resources can help the firm in their expansion plans. There are many skilled labourers who can help the company in their innovation processes. This company is known for taking use of production technology that helps in increasing the efficiency of the production process as well as eliminating the faults that can occur due to man made errors.

Another aspect is value preposition of the company that involves its capability to confront all the challenges that are coming in front of their business (Roos, 2014). It aims to provide best facilities to its clients that will help them in making their work easier. They take use of equipment and components of higher quality. The most important value preposition that it aims to add is bringing the new slot of smart trucks that are connected with various devices and takes decisions smartly.

Both these assets give them competitive edge over the other competitor which is the need in the competitive environment that company is facing. The company will be able to attract new potential consumers of the inter-connected networks towards it as well as retaining the older ones.

On the concluding remark it can be said that disruptive innovations will help the company in expanding their reach in the market and hence ensuring a higher growth rate. The production of smart inter-connected products will help the company in expanding its reach to the new consumers as well as retaining the old ones. There are large numbers of opportunities that are available with Volvo if they take use of such technological advancements. With their resources and value preposition in the business model it will not be difficult for the firm to satisfy the needs of the consumers.

References

Giannoutakis, K. N., & Li, F. (2012). Making a business case for intelligent transport systems: a holistic business model framework. Transport Reviews32(6), 781-804.

Hildebrandt, B., Hanelt, A., Firk, S., & Kolbe, L. (2015). Entering the Digital Era–The Impact of Digital Technology-related M&As on Business Model Innovations of Automobile OEMs.

Kuschel, J., Remneland, B., & Kuschel, M. H. (2011). Open innovation and control: a case from Volvo. International Journal of Networking and Virtual Organisations9(2), 123-139.

Laya, A., Bratu, V. L., & Markendahl, J. (2013). Who is investing in machine-to-machine communications?.

Leminen, S., Westerlund, M., Rajahonka, M., & Siuruainen, R. (2012). Towards IOT ecosystems and business models. In Internet of Things, Smart Spaces, and Next Generation Networking (pp. 15-26). Springer, Berlin, Heidelberg.

Roos, G. (2014). Business model innovation to create and capture resource value in future circular material chains. Resources3(1), 248-274.

Steen, R., (2013). Retrieved from: https://www.divaportal.se/smash/get/diva2:643254/FULLTEXT01.pdf

Vermesan, O., & Friess, P. (Eds.). (2013). Internet of things: converging technologies for smart environments and integrated ecosystems. River Publishers.

Vermesan, O., & Friess, P. (Eds.). (2015). Building the hyperconnected society: Internet of things research and innovation value chains, ecosystems and markets (Vol. 43). River Publishers.