Business Model and Disruption

Discuss about the Connected Products and Transforming Competition.

Business model can be understood as a conceptual tool that is extensively used in defining the core logic of the business. Business model provides an insight into the production and sustenance of customer values (Chesbrough, 2010). Business models helps in understanding ways in which business will work and generate profit for the company. The aim of this paper is to succinctly define about business model and disruption. The next section of the paper discusses on the opportunities and threats posed by the smart-connected services in the growth of business with a special focus on Domino’s in Australia. This next section refines and supplements the arguments in the next section through Osterwalder and Pigneur’s theory of business model. Finally there is a discussion on the two business model perspectives-customer value proposition and profit formula. The paper concludes with the overview of the findings.

The term business model refers to the three key characteristics of customer value proposition, profit formula and the key resources and the key processes. The customer value proposition is concerned with the fulfillment of the job intended for the customers and that would pose competition to the in a better manner for the competitors (Chesbrough, 2010). The notion of profit formula is concerned with how the company is generating money for delivering the value proposition. The notion of key resources and key processes is concerned with the processes that are needed for the delivery of the proposition (Zott, Amit & Massa, 2011). When a business is able to identify and utilize game-changing opportunities it enhances the aspect of new customer value propositions. Business model innovation is important for the business to grow (Schneider & Spieth, 2013). However, in regard to innovation it has been found that it is quite difficult to achieve. Some experiments pertaining to the business model may fail but it will be beneficial in the future for the company as it will render opportunity to the company (Reinventing Your Business Model, 2018). The basic principle of business model is to create opportunities and formulate strategies that would be better than the rivals and therefore enjoy a competitive advantage.

The term disruption refers to a business model that is an alternative to the traditional ideals associated with business model. Disruption is associated with taking risks and experimenting with the business (De Jong & van Dijk, 2015). An illustration would be the principles of the retail industry that is premised on the purchasing power and format. In case of the telecommunications industry, average revenue and customer retention defines the bottom-line of the industry. The incumbents usher in disruption in the core values and beliefs pertaining to an organization . Some of the strategies in this line are outlining the core values of the business model, dissection of the long-held beliefs and toppling an underlying belief on its head.

Opportunities and Threats of Smart-Connected Services

Analysis of opportunities and threats caused by the advances in smart-connected-products to the existing business model for Domino’s Pizza, Australia.

The wave of information technology that have entered into the various businesses have contributed in the in the revolution of the products and brought a welcome change in the field of product delivery. Earlier the composition of the products was limited to mechanical and electrical parts but with the revolution in information technology it has led to new and complex systems (Porter & Heppelmann, 2014). This includes microprocessors, data storage, connectivity and hardware that are being used in different ways. The smart-connected products has swept in a new era of competition in the market. Some of the opportunities created by the smart-connected products have transformed the industry structure and altered the nature of competition, it is remoulding the boundaries of the industry and creating new industries. It is pushing the envelope by provoking the leaders to rethink about their business models. It is leading to the creation of improved and better-quality products (Forbes Welcome, 2018). Smart-connected products expand the bargaining power of the buyers and it leads to rivalry among the competitors. The threats pertaining to the use of smart-connected products are new and much more complex. These threats may range from more complex design of the product to the high cost to embedded technology.

Domino’s has recently upgraded the competition by introducing a range of mobile ordering system. This is a new venture in association with an automation platform known as IFTTT. The company has incorporated Domino’s Applets. This product will enable the consumer to receive notification on mobile (How Smart, Connected Products Are Transforming Competition, 2018). Domino’s has created history by becoming the first organization in the world to form partnership with IFTTT. The new technology will also enable to monitor franchise-wide and store-level performance. The IoT implementation has enabled the automation of tasks that further includes monitoring and keeping a tab on the temperature that will be collected in the production table of the store. Apart from monitoring the temperature for the purpose of food safety, the IoT incorporates an additional smart building functionality that includes thermostas for regulating the ambient temperature (Domino’s Pizza IoT deployment delivers temperature monitoring, food safety, 2018). Domino’s has introduced a tracker that would enable the customers to know the location of their ordered item and monitor the quality of the product. This tracker would further provide information on the preparation of the product, once it is ordered by the customer and then track the process of delivery. Domino’s is planning to incorporate robots in the delivery of the products.

Domino’s Pizza in Australia – Impact of Smart-Connected Services

Osterwadalder and Pigneur conceptualized nine aspects of the business model. These nine elements of this business model are value proposition, customer segments, , channels, customer relationships, key resources, key activities, key partners, revenue streams and cost structure. Based on the initiative of Domino’s it can be stated that the company is keen on emphasizing on the customer interface pillar and strengthening its channels Osterwalder & Pigneur, 2010). Domino’s is intention has been to identify their desired customer and improvise on the needs of the customer. It has identified its target audience as the millenials who are mostly on their phone and therefore, the introduction of mobile notifications looks quite promising. The used of smart-connected technologies in business enables in keeping in touch with the customer and enhance the communication. This can be seen in their partnership with IFTTT and usher in transformation in their business model. On the front of the customer relationships, the company has fostered link with the customers through upgrading its technology. These benefits provided through technology will help the customer to know about their products and choose Domino’s over other brands.

Key Partners ·       Partner with local restaurants ·       Network of distribution	Key Activities ·       Firms of financial services ·       Supports and services ·       Sales and marketing ·       Production of pizza ·	Value Proposition ·       Value propositions is with held in its transportation business	Customer Relationships ·       Creating brand awareness ·       Innovating products ·       Building trust ·         ·       Customer service	Customer Segments ·       Health conscious segment ·       Catering to the millenials and teenagers ·       30-minutes campaign
Key Resources ·       Excellent network ·       Brand image ·       Use of latest smart-connected technology in the delivery of products.	Channels ·       They have distribution networks throughout the country ·       Social media The company has its own websites that approaches many at a time
Cost Structure ·       Technology ·       Taxes to government and intercity and interstate taxes ·       Customs ·       Employee wages ·       Production costs ·       Buying of raw materials ·	Revenue Streams ·       Financing the company and insurance ·       Components

Johnson, Christensen and Kagermann have discuseed on the importance of understanding the current business model as point of origin for the development of business model. The basic notion of this is job to done.

(a) Customer value proposition-It is one of the four elements of a business model and refers to the creation of values for the customers through identification of the target customers, understanding the job that is to be done and finding out possibilities on the job that is to be done. The aspect of value creation and value delivery can be understood as the value proposition and customer segments as recognized by Osterwalder’s and Pigneur. This has been identified as part of the value creation for the company. Even building relationships with the customer can be understood as part of the value creation in case of a value co-creation setting.

(b) Profit formula- The term profit formula refers to the values that the company has created for itself. This is concerned with the blueprint of the financial elements of the business model and may include cost structure, revenue model, and resource velocity and margin model.

Conclusion

Therefore, it can be seen that business model is premised on three key characteristics of value proposition, key resources and key processes, and profit value.  Smart-connected services are replete with both opportunities and threats. It can be understood that the strategy of using the smart-connected services incorporated by Domino’s is an appropriate move keeping in mind the advantages of the revolution in information technology. There are other companies that will be inspired by this step by Domino’s and mat emulate this in the future. This should be understood as disruption in business as it transforms the core value of practising business through the incorporation of new technologies. The move about incorporation of robots as a possibility indicates that artificial intelligence may be the future of the business. Companies are coming up with up innovative strategies to retain the customer and reach out to the target market. By making services and customer interaction easier companies are strengthening their position and thus, gaining in a competitive advantage over rival companies.

References

Chesbrough, H. (2010). Business model innovation: opportunities and barriers. Long range planning, 43(2-3), 354-363.

De Jong, M., & van Dijk, M. (2015). Disrupting beliefs: A new approach to business-model innovation. McKinsey Quarterly, 3, 66-75.

Domino’s Pizza IoT deployment delivers temp monitoring, food safety. (2018). IoT Agenda. Retrieved 19 April 2018, from https://internetofthingsagenda.techtarget.com/feature/Dominos-Pizza-IoT-deployment-delivers-temp-monitoring-food-safety

Forbes Welcome. (2018). Forbes.com. Retrieved 19 April 2018, from https://www.forbes.com/sites/curtissilver/2017/05/01/dominos-delivers-its-pizza-tracker-to-your-iot-devices/#3e7a8102cc35

How Smart, Connected Products Are Transforming Competition. (2018). Harvard Business Review. Retrieved 19 April 2018, from https://hbr.org/2014/11/how-smart-connected-products-are-transforming-competition

Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries, game changers, and challengers. John Wiley & Sons.

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

Reinventing Your Business Model. (2018). Harvard Business Review. Retrieved 19 April 2018, from https://hbr.org/2008/12/reinventing-your-business-model

Schneider, S., & Spieth, P. (2013). Business model innovation: Towards an integrated future research agenda. International Journal of Innovation Management, 17(01), 1340001.

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