Business Model Innovation for Goals and Tactics

Describe about the Business Model Innovation for Goals and Tactics.

What is Strategy

The key ideas presented in the video are: Strategy is not same as goals and tactics, rather it enable organisations achieved their goals by identifying and understanding their capabilities and target markets (Freedman, 2013). Strategy today is being used as a buzz word by business to prove their smartness and acumen. Goals, tactics, objectives and descriptions are small components of an overall business strategy. It is the “art of general” wherein managers and leaders are expected to use their orchestration and vision to identify factors that are hidden to others but will play a very vital role in achieving organisational goals (Ansoff, 2007). Every organisation must have a strategy and while formulating strategies it is important to ensure that four key questions are being answered. A good strategy helps identifying where the business actually competes, that is what their target market is. Before formulating any business strategy it is important to define the target market in which the business will be marketing its offerings. A good strategy also helps defining what unique value the business brings to the market, what is its competitive advantage and why the target audience should select their offerings when compared to offering made by competitors (Harrison & John, 2013). Businesses can either provide cost or differentiation advantage depending on their choice of market and their goals. Third question answered by a good strategy is what capabilities and resources are being used by the business to achieve their competitive advantage and deliver unique value. These resources can be of two types, tangible and intangible resources. The last question answered by a good strategy is what businesses should do in order to sustain their competitive advantage against rivals in their target market. While formulating strategy it is not only important to define what the company needs to do, but it is also equally important to define what the company must not do.

The key ideas discussed in the video have been successfully applied by Apple making the world’s leader in technology and innovation. Apple’s business strategy clearly defines the market in which it competes. Apple targets only the technology savvy and high income sector of the market (Apple Inc., 2016). They offer highly innovative, feature rich products which are priced at the higher end. Apple has clearly defined its do’s and don’ts. The company does not manufacture mid range products and do not target the lower income group of the market. Apple operates in a closed ecosystem wherein its components and other raw materials are procured only from selected suppliers that meet their sustainability standards and are assembled in their manufacturing plants in China to benefit from the cheap labour cost (Apple Inc., 2016). The finished products are then moved to distribution centres and then to their specialised outlets. Apple’s retail outlets are recognised worldwide for their unique ambience which motivates consumer buying behaviour. Operating in a closed ecosystem helps the company save huge operations costs and remain competitive in the market (Material Handling and Logistics, 2015). Apple’s closed ecosystem not only helps the company in gaining a competitive advantage but also in sustaining it for future success.

Business Model Innovation

Business Model Innovation helps organisations change their paths before they lose their edge. It adds more value to the organisation compared to any other forms of product or process innovations. BMI is the process of designing and managing innovation at the organisational and systems level of the business (Kaplan, 2012). It leads to enhanced value creation by re-designing and re-thinking the business, ways of offering customer service and making unique offerings. BMI is not about using new technologies, spending thousands of dollars on research and development or allocating the best of employees, rather it is about reinventing the business model or adopting a business model that is already very successful in other industry. Initiation, ideation, integration and implementation are the four steps an organisation must follow to innovate their business model (Kaplan, 2012). Initiation involves evaluation of the current business model by identifying the target customers, what is being offered, how is value proportion created and how revenue is generated. Ideation is the process of comparing the current business model with 55 business model innovation patterns available. Integration phase analyses the consistency of the business model and implementation phase puts into actions the designs and plans for actually adapting the chosen business model innovation. However while following these steps it is important to ensure management supports, handle resistance to change, keep employees engaged and the vision behind change is effectively communicated. More than 70 percent of business model innovation fails due to lack of management support and communication. Organisations must ensure that they focus on implementing only one business model at a time and clearly communicate the need for change and new business model to their employees (Afuah, 2014). It is important to understand that Business Model Innovation is a slow process thus it is not wise to overemphasize on short term KPIs. Top management support is the key to successful Business Model Innovation without which it is sure to fail. It is not necessary that the business model being implemented is innovated by the company itself; it can be the one already being used effectively by other organisations in other industry.

One of the most successful examples of BMI is Dell computers. The company successfully adopted the business model of Toyota, making its supply chain its biggest competitive advantage. Dell implemented the Just-In-Time production technique to keep its inventory costs low which in turn helped the company in reducing overall operations costs (Afuah, 2014). Dell’s suppliers start production only when customer orders are confirmed. JIT allows the company to remain competitive, offer high customisation options and reduce inventory costs. As the company maintains almost no inventory they can easily adapt to innovative technologies. Dell sells their products and services directly to its customers through their retail outlets. This helps the company in understanding their customer needs better and also saving intermediary costs that needs to be shared with distributors.

References

Afuah, A., (2014) Business Model Innovation: Concepts, Analysis, and Cases. New Jersey: Routledge.

Ansoff, H. I., (2007) Strategic Management. Hampshire: Palgrave Macmillan.

Apple Inc., (2016) Apple and Procurement. [Online]
Available at: http://www.apple.com/procurement/
[Accessed 2016].

Apple Inc., (2016) Supplier Responsibility. [Online]
Available at: http://www.apple.com/supplier-responsibility/
[Accessed 2016].

Freedman, L., (2013) Strategy: A History. New York: OUP USA.

Harrison, J. & John, C. S., (2013) Foundations in Strategic Management. New York: Cengage Learning.

Kaplan, S., (2012) The Business Model Innovation Factory: How to Stay Relevant When The World is Changing. New Jersey: John Wiley & Sons.

Material Handling and Logistics, (2015) Apple Aims for More Sustainable Supply Chain. [Online]
Available at: http://mhlnews.com/global-supply-chain/apple-aims-more-sustainable-supply-chain
[Accessed 2016].

 

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