Innovation and Sustainable Business Development Business Models

Question: Discuss about theInnovation and Sustainable Business Development for Business Models. Answer: Introduction The three articles on conceptualizing business models as activity based, arrived at significantly different models because of difference in business environments and business activities as modelled by the different organisations. There is no one-fits-all business model that can be universally adopted by all organisations for execution as different companies faces different situations even in the same business environment. For example, one company could be having a superior technology that enables it to produce at lower cost than its peers it could also be that, a different company uses a supplier with very strong network of supply chain but their services are expensive not that all organisations can afford to partner with them and still remain in business. It is therefore possible to come up with significantly different type of business models even when all of them are activity based. (Itami, Nishino, 2010) The concept of business model can therefore be defined as a set of interdependent activities that aims to achieving a common objective of having a product or service delivered to the market for consumption. The business model contains three important players that are; the producer or the focal organisation, the supplier and the consumer each playing different activities in the system. When one is conceptualizing business model as a system there are elements that needs to be considered. One such element is the objective of the focal organization. The objective in this case is what the focal organisation is offering. What type of product or services is it selling or offering? This would then assist the entrepreneur of the focal organisation or its manager to come up with who are going to be the suppliers and the consumers. The activities which these other players will carry out are all guided by the nature of the product or the service on offer. Therefore to come up with business model as a system the key determinant is the focal company objectives then the rest would depend on it. Using business model as an activity based system to solve static problem one needs to consider a case whereby one company is experiencing business challenges in meeting a certain objective. This can be inability to deliver products to the clients because of lack of adequate infrastructure to carry out this function effectively. This company can simply contract another company which can deliver these products on time to the market without delay instead of investing heavily to be able to internally carry out the function. The products can be highly perishable products such as farm flowers. Therefore this static problem is solved by incorporating another firm in to the business system and solves the static of supply. To solve dynamic problem one needs to consider a case where the focal organisation contracts a different firm to produce certain part of their product and still retain the production of the same parts in-house. The focal firm can therefore be able to learn from both in-hous e production and from the contracted outside firm. Any change in consumer behaviour will be easily noted by the focal firm by comparing its findings in its in-house production and external production and make appropriate changes in accordance to the dynamism of the problem. (Itami, Nishino, 2010) To understand how business partner using business model as an activity based we take an example of a focal firm which needs to focus on production and leave another company to focus on distribution and marketing of the product. The two firms will be in one system whereby each of them will be playing distinct activities and the consumers will complete the system by buying the products, thus forming a business model where each player has distinct roles or activities but in one system with one objective of producing and delivering the products to the consumers for purchase. Understanding innovation process using business model as an activity based system will require a consideration of two companies one a research and development company and another an established mechanical engineering company. The research and development company may come up with an innovative idea of friction reducing technology. This technology can significantly reduce the friction of the mechanical equipments being manufactured by the established mechanical engineering company giving them an edge in the market. The established company can contract the research and development company to have this important technology incorporated in its machines and gain advantage in the market. Thus the two companies are now in one business model but each playing distinct activities with one objective of delivering a high efficiency machines to the customers. (Itami, Nishino, 2010) (Kodama, n.d.) Toyota is a car manufacturer based in Japan. To understand the business model of this company we shall consider the article by two professors namely Hiroyuki Itami and Kazumi Nishino in which they titled Killing Two Birds with One Stone. The two professors argue that a business model ought to have two elements, the business system and the profit model. Considering Toyota business model the company procures production of certain car parts from a few selected companies but still produces the same parts internally. What this does is that Toyota is able to learn the new developments as far as production of the parts is concerned. It is also able to draw comparisons with its internal production and make appropriate changes according to the findings the company draws from the two sets of production. This double production is what constitutes the element of business system which make Toyota come up with the sustainable profit model. From the lessons it draws using business system Toyota wil l always respond according to the consumer behaviour and that is why probably, it has been able to coin out this phrase The car in front of you is always a Toyota (Itami, Nishino, 2010) (Cumberlidge, 2007) The article which best explains the concept of business model as an activity based system according to me is Killing Two Birds with One Stone by Professor Hiroyuki Itami and Professor Kazumi Nishino. The reason for this finding is that the article points out that a good business model needs to have two elements, the business system and the profit model where the business system is the main concept of the business not the profit model. I find this to be the best model because as an entrepreneur you need to constantly learn by participating in all aspects of your business not simply procuring them out and forgetting about the new developments which may happen in the market concerning the procured service. In conclusion, future business models should lay emphasis on the business system and not the profit model. There is a temptation to focus more on the profit model because the company is getting monetary gains from this model but in essence it is the business system that makes the profit model breath life. The entrepreneur is able to learn and make adjustments that will make clients continue holding the products of the firm in high regard and thus purchase. If the entrepreneur doesnt study the market and make appropriate response the profit model will become obsolete with time and there will no or less sales as per the profit model. (Quaddus, Woodside, 2015) (Zott, Amit, Massa, n.d.) References Cumberlidge, M. (2007). Business Process Management with JBoss jBPM. Birmingham: Packt Publishing. Itami, H., Nishino, K. (2010). Killing Two Birds with One Stone. Long Range Planning, 43(2- 3), 364-369. https://dx.doi.org/10.1016/j.lrp.2009.07.007 Kodama, M. (2007). Knowledge innovation. Cheltenham: Edward Elgar. Kodama, M. (2010). Boundary management. Heidelberg: Springer. Kodama, M. Collaborative innovation. Quaddus, M., Woodside, A. (2015). Sustaining competitive advantage via business Intelligence, knowledge, management, and system dynamics. Bingley: Emerald. Zott, C., Amit, R., Massa, L. The Business Model: Recent Developments and Future Research. SSRN Electronic Journal. https://dx.doi.org/10.2139/ssrn.1674384