BUSINESS MODEL INNOVATION

Innovation in Family Business Forum

December 11, 2014

By

Dr. Mohy Ghannoum,

BUSINESS MODEL - BACKGROUND

Business model is an emergent

concept

The differences between the notions of

Business Model and Strategy are

debatable.

2

On one hand, strategy can be

considered a high-order choice

On the other hand, business models

are the reflection of the firm’s strategy

BUSINESS MODEL - BACKGROUND

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The greater frequency of disruption and

dislocation in many industries is

shortening business model lifecycles

These factors require businesses to

bolster and accelerate innovation.

BUSINESS MODEL INNOVATION

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The discipline of Business Model Innovation (BMI) offers a fresh way to think about renewing competitive advantage

Strategic management has begun to consider business model as a determinant factor in the firm’s performance

BUSINESS MODEL INNOVATION

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Business model innovations have reshaped entire industries and redistributed billions of dollars of value

To confer a reliable competitive advantage, BMI must be systematically cultivated, sufficiently supported, and explicitly managed

BUSINESS MODEL INNOVATION

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A business model consists of

four inter-locking elements

that, taken together, create

and deliver value. The most

important to get right, by far, is

the first

ELEMENTS OF BMI

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1. Customer Value Proposition (CVP):

A successful company is one that

has found a way to create value for

customers – that is, a way to help

customers get an important job

done

ELEMENTS OF BMI

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2. Profit formula:

The profit formula is the blueprint

that defines how the company

creates value for itself while pro-

viding value to the customer

ELEMENTS OF BMI

9

3. Key resources:

The key resources are assets such

as the People, Technology, Products,

Facilities, Equipment, Channels, and

Brand required to deliver the value

proposition to the targeted customer

ELEMENTS OF BMI

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4. Key processes:

Successful companies have

operational and managerial

processes that allow them to

deliver value in a way they can

successfully repeat and increase in

scale

ELEMENTS OF BMI

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ELEMENTS OF BMI

Business

Model

Innovation

Key

Resources

Revenue

Model

Key

Processes

Customer

Value

Proposition

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These four elements form the

building blocks of any business.

The Customer Value Proposition and

the Profit Formula define value for the

customer and the company.

Respectively; Key Resources and Key

Processes describe how that value

will be delivered to both the

customer and the company

ELEMENTS OF BMI

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1. Articulate the value proposition

2. Identify a market segment

3. Define the structure of the value chain

required to create and distribute the

offering, and determine the

complementary assets needed to

support the firm’s position in this chain.

FUNCTIONS OF BMI

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4. Specify the revenue generation

mechanism(s) for the firm

5. Describe the position of the firm within

the value network linking suppliers and

customers

6. Formulate the competitive strategy by

which the innovating firm will gain and

hold advantage over rivals

FUNCTIONS OF BMI

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More companies than ever

are encountering the need to

redefine their strategies as the

world continues to speed up

and industry turbulence

becomes the norm

and not the exception

BMI – IS IT A MUST?

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Enterprises should re-evaluate

their business models and

re-configure themselves.

Enterprises that do not conduct

such an assessment and change

have limited chance to persevere

in the market

BMI – IS IT A MUST?

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Business model innovation is especially

valuable in times of instability.

BMI can provide companies a way to

break out of intense competition.,

BMI – IS IT A MUST?

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Every successful enterprise has a

successful business model. However,

there is not any everlasting business

model.

With developing technology to meet

increasing customer demands,

enterprises are urged to change their

business models

BMI – HOW IT WORKS?

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It is apparent that enterprises

engaged in business model

innovation are more successful

than enterprises engaged in

product and process innovation

BMI – HOW IT WORKS?

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Google figured out how to parlay its search technology into a highly disruptive advertising model by which companies bid to tie their advertising to specific search terms.

Recently, Google’s free, flexible Android operating system has helped new competitors like Samsung from South Korea and ZTE from China offer devices that are both low priced and highly functional.

BMI – SUCCESS STORIES

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Amazon’s core e-retailing model has turned the retail world on its head.

It has subsequently launched three successive disruptive business models. Its Prime subscription model now provides close to $1 billion of revenues. With its Kindle e-reading platform, the company happily sells low-cost devices and makes money on content. And through its Amazon Web Services business, it has built a multibillion-dollar business by turning its internal technology prowess into a powerful cloud-computing service.

BMI – SUCCESS STORIES

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Its QQ instant-messaging service and WeChat

SMS service — aren’t particularly interesting.

But it follows a business model that is distinct

from competitors

Instead of seeking wide audiences to get

advertising revenue, it built a multibillion-dollar

business out of micro-transactions, such as

charging consumers to upgrade the look of the

avatar that appears on their chat service

BMI – SUCCESS STORIES

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BMI – SUCCESS STORIES

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