تهیه کننده: دکتر اشراقی
خلاصه مقاله: Business Models, Business Strategy and Innovation از : (Teece, 2010)
In short, a business model defines how the enterprise creates and delivers value to customers, and then converts payments received to profits. To profit from innovation, business pioneers need to excel not only at product innovation but also at business model design, understanding business design options as well as customer needs and technological trajectories. Developing a successful business model is insufficient to assure competitive advantage as imitation is often easy: a differentiated (and hard to imitate) – yet effective and efficient – business model is more likely to yield profits. Business model innovation can itself be a pathway to competitive advantage if the model is sufficiently differentiated and hard to replicate for incumbents and new entrants alike.
In essence, a business model is a conceptual, rather than financial, model of a business. It is not a spread sheet or computer model, although a business model might well become embedded in a business plan and in income statements and cash flow projections. But, clearly, the notion refers in the first instance to a conceptual, rather than a financial, model of a business. It makes implicit assumptions about customers, the behavior of revenues and costs, the changing nature of user needs, and likely competitor responses. It outlines the business logic required to earn a profit (if one is available to be earned) and, once adopted, defines the way the enterprise ‘goes to market’. But it is not quite the same as a strategy: the distinction and the relationship between the two will be discussed later.
Elements of business model design:
History: Despite lineage going back to when societies began engaging in barter exchange, business models have only been explicitly catapulted into public consciousness during the last decade or so. Driving factors include the emerging knowledge economy, the growth of the Internet and e-commerce, the outsourcing and offshoring of many business activities, and the restructuring of the financial services industry around the world. The existence of electronic computers that allow low cost financial statement modeling has facilitated the exploration of alternative assumptions about revenues and costs. Additional impetus has come from the growth of the Internet, which has raised anew, and in a transparent way, fundamental questions about how businesses deliver value to the customer, and how they can capture value from delivering new information services that users often expect to receive without charge. In some industries, such as the recording industry, Internet enabled digital downloads compete with established channels (such as physical product sales) and, partly because of the ubiquity of illegal digital downloading, the music recording industry is being challenged to completely re-think its business models. The Internet is not just a source of easy access to digital data; it is also a new channel of distribution and for piracy which clearly makes capturing value from Internet transactions and flows difficult for recording companies, performers and songwriters alike. More generally, the Internet is causing many ‘bricks and mortar’ companies to rethink their distribution strategies – if not their whole business models.
During the dot.com boom and bust of 1998-2001, many new companies with zero or negative profits (and unprecedentedly low revenues) sought financial capital from the public markets, which- at least for a short while – accommodated them. Promoters managed to persuade investors that traditional revenue and profitability models no longer applied – and that the dot.com companies would (eventually) figure out (highly) profitable business models. Few have, causing one commentator to remark that ‘the demise of a popular but unsustainable business model now seems inevitable’.
A good business model yields value propositions that are compelling to customers, achieves advantageous cost and risk structures, and enables significant value capture by the business that generates and delivers products and services. ‘Designing’ a business correctly, and figuring out, then implementing – and then refining – commercially viable architectures for revenues and for costs are critical to enterprise success. It is essential when the enterprise is first created; but keeping the model viable is also likely to be a continuing task. Superior technology and products, excellent people, and good governance and leadership are unlikely to produce sustainable profitability if business model configuration is not properly adapted to the competitive environment.
The concept of a business model has no established theoretical grounding in economics or in business studies. Economic theory implicitly assumes that trades take place around tangible products: intangibles are, at best, an afterthought. In standard approaches to competitive markets, the problem of capturing value is quite simply assumed away: inventions are often assumed to create value naturally and, enjoying protection of iron-clad patents, firms can capture value by simply selling output in established markets, which are assumed to exist for all products and inventions. Thus there are no puzzles about how to design a business – it is simply assumed that if value is delivered, customers will always pay for it. Putting so called ‘public goods’ and ‘free rider’ issues to one side, business models are quite simply redundant because producers/suppliers can create and capture value simply through disposing their output at competitive market prices. Such models clearly assume away the essential business design issues that are the subject of this article. In short, figuring out business models for a new or existing product or business is an unnecessary step in textbook economics, where it is not uncommon to work with theoretical constructs which assume fully developed spot and forward markets, strong property rights, the costless transfer of information, perfect arbitrage, and no innovation. In mainstream approaches, there is simply no need to worry about the value proposition to the customer, or the architecture of revenues and costs, or about mechanisms to capture value. Customers will buy if the price is less that the utility yielded; producers will supply if price is at or above all costs including a return to capital – the price system resolves everything and business design issues simply don’t arise. But general equilibrium models, with (one-sided) markets and perfect competition are a caricature of the real world. Intangible products are in fact ubiquitous, two-sided markets are common, and customers don’t just want products; they want solutions to their perceived needs. In some cases, markets may not even exist, so entrepreneurs may have to build organizations in order to perform activities for which markets are not yet ready. Accordingly, in the real world, entrepreneurs and managers must give close consideration to the design of business models and even to building businesses to execute transactions which cannot yet be performed in the market.
Business models are often necessitated by technological innovation which creates both the need to bring discoveries to market and the opportunity to satisfy unrequited customer needs. At the same time, as indicated earlier, new business models can themselves represent a form of innovation. There are a plethora of business model possibilities: some will be much better adapted to customer needs and business environments than others. Selecting, adjusting and/or improving business models is a complex art. Good designs are likely to be highly situational, and the design process is likely to involve iterative processes. New business models can both facilitate and represent innovation – as history demonstrates.
The ‘razor-razor blade model’ is another classic (and quite generic) case of a well-known business revenue model (which is just one component of a business model), which involves pricing razors inexpensively, but aggressively marking-up the consumables (razor blades). Jet engines for commercial aircraft are priced the same way – manufacturers know that engines are long lived, and maintenance and parts is where Rolls Royce, GE, Pratt & Whitney and others make their money. So engines are sold relatively inexpensively – but parts (and service) involve considerable mark-ups and represent an income stream that may continue for decades.
In the sports apparel business, sponsorship is a key component of today’s business models. However, this model is readily imitated, and its viability for any particular apparel company depends on the sponsor’s particular abilities to leverage on-field sponsorships into off-field sales. Relationships with clubs, teams, and with team managers and club owners become important in the mix.
Performing artists have several business models they can employ. Their revenue sources might include live productions, movies, sale of physical CDs through stores or online music sales through virtual stores such Apple’s iTunes. Stars might decide to use concerts as their main revenue generator, or to spend less time performing and more in the recording studio, using concerts primarily to stimulate sales of recordings.
Business models must morph over time as changing markets, technologies and legal structures dictate and/or allow.
As noted earlier, the information industries have always raised challenging business model issues because information is often difficult to price, and consumers have many ways to obtain certain types without paying. Figuring out how to earn revenues (i.e. capture value) from the provision of information to users/customers is a key (but not the only) element of business model design in the information sector. The rules for strategic engagement promulgated by Shapiro and Varian are core elements of strategy in the information services sector. Companies can adopt business models [e.g. Freemium or multiple revenue stream models] pioneered in one space into another. A business model pioneered by one company in one space may be adopted by another company in another space.
A business model articulates the logic, the data, and other evidence that support a value proposition for the customer, and a viable structure of revenues and costs for the enterprise delivering that value. In short, it’s about the benefit the enterprise will deliver to customers, how it will organize to do so, and how it will capture a portion of the value that it delivers. A good business model will provide considerable value to the customer and collect (for the developer or implementor of the business model) a viable portion of this in revenues. But developing a successful business model (no matter how novel) is insufficient in and of itself to assure competitive advantage. Once implemented, the gross elements of business models are often quite transparent and (in principal) easy to imitate – indeed, it is usually just a matter of a few years – if not months – before an evidently successful new business model elicits imitative efforts. In practice, successful business models very often become, to some degree, ‘shared’ by multiple competitors.
A business model is more generic than a business strategy. Coupling strategy and business model analysis is needed to protect competitive advantage resulting from new business model design. Selecting a business strategy is a more granular exercise than designing a business model. Coupling competitive strategy analysis to business model design requires segmenting the market, creating a value proposition for each segment, setting up the apparatus to deliver that value, and then figuring out various ‘isolating mechanisms’ that can be used to prevent the business model/strategy from being undermined through imitation by competitors or disintermediation by customers.
Strategy analysis is thus an essential step in designing a competitively sustainable business model. Unless the business model survives the filters which strategy analysis imposes, it is unlikely to be viable, as many business model features are easily imitated. For instance, leasing vs. owning is an observable characteristic of business models that competitors can replicate. The ‘newspaper revenue model’ – i.e. low cost for the newspaper, use of advertising (including classifieds) to help cover the costs of generating content – is easy to replicate, and has been implemented with little variation in thousands of geographically separate ‘markets’ throughout the world. Having a differentiated (and hard-to-imitate) – but at the same time effective and efficient – architecture for an enterprise’s business model is important to the establishment of competitive advantage. The various elements need to be cospecialized to each other, and work together well as a system.
Business model choices define the architecture of the business, and expansion paths develop from there on out. But once established, enterprises often encounter immense difficulty in changing business models. In short, innovating with business models will not, by itself, build enterprise-level competitive advantage. However, new business models, or refinements to existing ones, like new products themselves, often result in lower cost or increased value to the consumer; if not easily replicated by competitors, they can provide an opportunity to generate higher returns to the pioneer, at least until their novel features are copied. These issues are summarized in Figure 2 and explored in more detail later. Figure 2- Steps to achieve sustainable business models:
Barriers to imitating business models: At a superficial level all business models might seem easy to imitate – certainly the basic idea and the business logic behind a new model is unlikely itself to enjoy intellectual property protection. In particular, a new business model, being more general than a business method, is very unlikely to qualify for a patent, even if certain business methods underpinning it may be patentable. Descriptions of a business model may enjoy copyright protection, but that is unlikely to be a barrier to copying its basic core ‘idea’. What then is it, if anything, that is likely to impede the copycat behavior that can so quickly erode the business model pioneer’s advantage? Three factors would seem to be relevant: First, implementing a business model may require systems, processes and assets that are hard to replicate – such was the situation with potential entrants into the towns too small to sustain a Wall-mart competitor. Second, there may be a level of opacity (Rumelt has referred to this opacity as ‘uncertain imitability’) that makes it difficult for outsiders to understand in sufficient detail how a business model is implemented, or which of its elements in fact constitute the source of customer acceptability. Third, even if it is transparently obvious how to replicate a pioneer’s business model, incumbents in the industry may be reluctant to do so if it involves cannibalizing existing sales and profits or upsetting other important business relationships. When incumbents are constrained in this way, the pioneer of a new business model may enjoy a considerable period of limited competitive response. Notwithstanding these constraints, competition is likely to be vigorous because other new entrants, similarly unconstrained by incumbency and cannibalization anxieties, will be equally free to enter.
Technological innovation does not guarantee business success – new product development efforts should be coupled with a business model defining their ’go to market’ and ’capturing value’ strategies.
Business models innovation may not seem heroic but without it there may be no reward for pioneering individuals, enterprises and nations.
Technological innovation often needs to be matched with business model innovation if the innovator is to capture value. Sometimes the creation of new business models leads to the creation of new industries. Consider the payment card industry (the core of which is credit and debit cards). Companies should be seeking and considering improvements to business models – particularly difficult to imitate improvements that add value for customers – at all times. Changing the firm’s business model literally involves changing the paradigm by which it goes to market, and inertia is likely to be considerable. Nevertheless, it is preferable for the firm to initiate such a change itself, rather than have it dictated by external events, as several investment banks in the U.S. and elsewhere have experienced recently.
Designing a new business model requires creativity, insight, and a good deal of customer, competitor and supplier information and intelligence. There may be a significant tacit component. An entrepreneur may be able to intuit a new model but not be able to rationalize and articulate it fully; so experimentation and learning is likely to be required. As mentioned earlier, the evolving reality impacting customers, society, and the cost structure of the business must be understood. It is often the case that the right business model may not be apparent up front, and learning and adjustments will be necessary: new business models represent provisional solutions to user/customer needs proposed by represent entrepreneurs/managers. As Shirky recognizes, a business model is provisional in the sense that it is likely over time to be replaced by an improved model that takes advantage of further technological or organizational innovations. The right business model is rarely apparent early on in emerging industries: entrepreneurs/managers who are well positioned, who have a good but not perfect business model template but who can learn and adjust, are those more likely to succeed. The right business model is rarely apparent early on.
In short, one needs to distil fundamental truths about customer desires, customer assessments, the nature and likely future behavior of costs, and the capabilities of competitors when designing a commercially viable business model. Traditional market research will not often be enough to identify as yet unarticulated needs and/or emerging trends. Changes with respect to the relative merits of particular organizational and technological solutions to customer needs must also be considered.
Selecting the right ‘architecture’ and pricing model for a business requires not just understanding the choices available, but also assembling the evidence needed to validate conjectures and hunches about costs, customers, competitors, complementors, distributors and suppliers takes detailed fact specific inquiry, and a keen understanding of customer needs and customer willingness to pay, as well as of competitor positioning and likely competitive responses. Entrepreneurs and executives must make many informed guesses about the future behavior of customer and competitor, as well as of costs. As the evidence with respect to initial conjectures becomes available, they need to adjust accordingly. Being fast in learning and making the requisite adjustments to the model is important.
A helpful analytic approach for management is likely to involve systematic deconstruction/unpacking of existing business models, and an evaluation of each element with an idea toward refinement or replacement. The elements of a business model must be designed with reference to each other, and to the business/customer environment and the trajectory of technological development in the industry. While the questions are not as crisp as one would like, and the answers are likely to be ambiguous, endeavoring to answer them will impose some discipline and at least help one sort business propositions that are likely to be viable from those that are not. For instance, business propositions that are no more than good ideas fall short; likewise propositions that involve capturing 1% of huge markets show a lack of understanding of differences amongst (potential) customers, market segments and competition. And wonderfully novel (gimmicky) product concept that meets the needs of but a handful of potential customers is unlikely to yield much value. Periodic review can increase the chances of avoiding blind spots: long-lived structural elements – choices made perhaps decades ago in different environments – need to be scrutinized especially thoroughly.
A provisional business model must be evaluated against the current state of the business ecosystem, and also against how it might evolve. Questions to consider (which are summarized in Figure 3):
Designing good business models is in part an ‘art’. The chances of good design are greater if entrepreneurs and managers have a deep understanding of user needs, consider multiple alternatives, analyze the value chain thoroughly so as to understand just how to deliver what the customer wants in a cost-effective and timely fashion, adopt a neutrality or relative efficiency perspective to outsourcing decisions, and are good listeners and fast learners. Useful tools include the various types of market research that lead to a deep understanding of the user, along with elements of the Profiting from Innovation framework such as the innovation cycle, appropriability regimes, complementary assets and intellectual property systems.
The selection/design of business models is a key micro foundation of dynamic capabilities – the sensing, seizing, and reconfiguring skills that the business enterprise needs if it is to stay in synch with changing markets, and which enable it not just to stay alive, but to adapt to and itself shape the (changing) business environment. Dynamic capabilities help govern evolutionary fitness, and help shape the business environment itself. Get the business model wrong, and there is almost no chance of business success – get it right, and customize it for a market segment and build in non-imitable dimensions, and it will contribute to the firm’s competitive advantage.
Recognized (but not fully developed here) is the notion that a business model cannot be assessed in the abstract; its suitability can only be determined against a particular business environment or context. Neither business strategies and business structures nor business models can be properly calibrated absent assessment of the business environment; and of course the business environment itself is, in part, a choice variable; i.e. firms can both select a business environment, and be selected by it: and they can also shape their environment. The business environment itself is a choice variable: firms can select a business environment or be selected by it: they can also shape it. To be a source of competitive advantage, a business model must be more than just a good logical way of doing business. It must be honed to meet particular customer needs. Great technological achievements commonly fail commercially because little attention has been given to designing a business model to take them to market properly. This can and should be remedied.
At business model design understanding business design options as well as customer needs and technological trajectories. In essence, a business model is a conceptual, rather than financial, model of a business. Intangible products are in fact ubiquitous, two-sided markets are common, and customers don’t just want products; they want solutions to their perceived needs.
Business models are often necessitated by technological innovation which creates both the need to bring discoveries to market and the opportunity to satisfy unrequited customer needs. Selecting, adjusting and/or improving business models is a complex art.
the gross elements of business models are often quite transparent and (in principal) easy to imitate – indeed, it is usually just a matter of a few years – if not months – before an evidently successful new business model elicits imitative efforts. In practice, successful business models very often become, to some degree, ‘shared’ by multiple competitors.
Coupling competitive strategy analysis to business model design requires segmenting the market, creating a value proposition for each segment, setting up the apparatus to deliver that value, and then figuring out various ‘isolating mechanisms’ that can be used to prevent the business model/strategy from being undermined through imitation by competitors or disintermediation by customers.
Implementing a business model may require systems, processes and assets that are hard to replicate. There may be a level of opacity that makes it difficult for outsiders to understand in sufficient detail how a business model is implemented, or which of its elements in fact constitute the source of customer acceptability. Incumbents in the industry may be reluctant to do so if it involves cannibalizing existing sales and profits or upsetting other important business relationships.
new business models represent provisional solutions to user/customer needs proposed by represent entrepreneurs/managers. entrepreneurs/managers who are well positioned, who have a good but not perfect business model template but who can learn and adjust, are those more likely to succeed.
to be a source of competitive advantage, a business model must be more than just a good logical way of doing business . It must be honed to meet particular customer needs. Great technological achievements commonly fail commercially because little attention has been given to designing a business model to take them to market properly.