REINVENTING BUSINESS MODELS -
Digital transformation and strategic
innovation
Summary of:
Volberda, H.W et al. (2018), Reinventing Business Models - How Firms Cope with Disruption.
Oxford: Oxford University Press (ISBN 978-0-19-879204-8).
Chapters:
1. Introduction
2. Know Your Business Model
3. How Firms Modify Their Business Model: Replication or Renewal
4. Levers for Business Model Innovation
5. Enablers and Inhibitors of Business Model Innovation
6. Business Model Transformation: Driven by Strategy or Customer?
7. Managing Business Model Transformation
8. Re-examining Business Model Innovation: Dos and Don’ts for Managers
Chapter 1 Introduction
,In Chapter 1 it becomes clear that changing competitive environments force firms to innovate
their business models.
In the current turbulent environment, it is no longer relevant to ask whether firms should
innovate their business model. These days it is about how you change your business model,
when, and the extent to which you do that—questions which this book brings up for
discussion.
Every organization has a business model. A business model:
- Is either explicit or implicit
- reflects the outcome of a firm’s strategic choices and how the firm executes its
strategy
- focuses on creating and appropriating customer value.
In today’s rapidly changing business environment innovations of the business model has
become important and is a crucial factor in explaining differences in firm performance.
1.1 The need for business model innovation
,The speed with which technologies and strategies change forces firms in almost all industries to
innovate their business model continually.
E.g. Uber, Airbnb, booking.com
→ Many established firms with bricks and mortar business models are finding
themselves being superseded by new firms whose business models are based on the
digital world.
A sign that business models are under pressure is often that new generations of
products and services are not significantly better.
→ Customers notice this, and either complain about it or look for alternative
solutions.
Traditional vs nowadays:
Competing successfully in turbulent markets requires business model renewal, an approach
which is essentially different to business model replication, which is needed in more stable
markets
Traditional
During long periods in a stable competitive environment and of relatively stable
relationships between existing players, firms were able to continually extend and maintain their
competitive advantage.
The traditional strategies (figure below and described above) are characterised by :
- based on top-down control
- formal planning
- detailed industrial analysis
- guaranteed that the business models would remain both distinctive and sustainable for some
time
- only slow and gradual erosion of the business model
- firms can anticipate in advance how to develop a new business model over time.
Nowadays
Competition is now characterized by short periods of competitive advantage, alternating with
frequent disturbances and disruption of the business model. This all is driven by:
- market globalization
, - rapid technological change
- shorter product life cycles
- increasing aggressiveness from competitors
Firms will have to cope with frequent disruptions that are either:
1. Demand-driven (new entrants finding unserved customer needs),
→ new entrants serve underserved market segments of incumbent firms
using technologies that are initially inferior to the mainstream technologies used by
incumbents. =real estate or travel agencies
2. Supply-driven (emerging technologies that make the firm’s business model
redundant),
→ stem from new entrants introducing a fundamentally new technological
architecture that cannot be copied by incumbents by simply improving elements of
the existing technology = Iphone, film photography
3. Combination of the two (often have a great impact on a sector as a whole)
Products and services quickly turn into commodities; they become less distinctive, and
consumers make their purchases more cleverly and cheaply (Walmartizatoin).
Future success lies in moving away from traditional prescriptions for strategy. Inventing
something new does not guarantee success, but nor does imitating one’s rival.
1.2 A competitive race with only losers?
Greater competitive pressure and the need to change even faster because:
→ Firms can only achieve temporary competitive advantages (as competitors
imitate or improve those advantages)
Digital transformation and strategic
innovation
Summary of:
Volberda, H.W et al. (2018), Reinventing Business Models - How Firms Cope with Disruption.
Oxford: Oxford University Press (ISBN 978-0-19-879204-8).
Chapters:
1. Introduction
2. Know Your Business Model
3. How Firms Modify Their Business Model: Replication or Renewal
4. Levers for Business Model Innovation
5. Enablers and Inhibitors of Business Model Innovation
6. Business Model Transformation: Driven by Strategy or Customer?
7. Managing Business Model Transformation
8. Re-examining Business Model Innovation: Dos and Don’ts for Managers
Chapter 1 Introduction
,In Chapter 1 it becomes clear that changing competitive environments force firms to innovate
their business models.
In the current turbulent environment, it is no longer relevant to ask whether firms should
innovate their business model. These days it is about how you change your business model,
when, and the extent to which you do that—questions which this book brings up for
discussion.
Every organization has a business model. A business model:
- Is either explicit or implicit
- reflects the outcome of a firm’s strategic choices and how the firm executes its
strategy
- focuses on creating and appropriating customer value.
In today’s rapidly changing business environment innovations of the business model has
become important and is a crucial factor in explaining differences in firm performance.
1.1 The need for business model innovation
,The speed with which technologies and strategies change forces firms in almost all industries to
innovate their business model continually.
E.g. Uber, Airbnb, booking.com
→ Many established firms with bricks and mortar business models are finding
themselves being superseded by new firms whose business models are based on the
digital world.
A sign that business models are under pressure is often that new generations of
products and services are not significantly better.
→ Customers notice this, and either complain about it or look for alternative
solutions.
Traditional vs nowadays:
Competing successfully in turbulent markets requires business model renewal, an approach
which is essentially different to business model replication, which is needed in more stable
markets
Traditional
During long periods in a stable competitive environment and of relatively stable
relationships between existing players, firms were able to continually extend and maintain their
competitive advantage.
The traditional strategies (figure below and described above) are characterised by :
- based on top-down control
- formal planning
- detailed industrial analysis
- guaranteed that the business models would remain both distinctive and sustainable for some
time
- only slow and gradual erosion of the business model
- firms can anticipate in advance how to develop a new business model over time.
Nowadays
Competition is now characterized by short periods of competitive advantage, alternating with
frequent disturbances and disruption of the business model. This all is driven by:
- market globalization
, - rapid technological change
- shorter product life cycles
- increasing aggressiveness from competitors
Firms will have to cope with frequent disruptions that are either:
1. Demand-driven (new entrants finding unserved customer needs),
→ new entrants serve underserved market segments of incumbent firms
using technologies that are initially inferior to the mainstream technologies used by
incumbents. =real estate or travel agencies
2. Supply-driven (emerging technologies that make the firm’s business model
redundant),
→ stem from new entrants introducing a fundamentally new technological
architecture that cannot be copied by incumbents by simply improving elements of
the existing technology = Iphone, film photography
3. Combination of the two (often have a great impact on a sector as a whole)
Products and services quickly turn into commodities; they become less distinctive, and
consumers make their purchases more cleverly and cheaply (Walmartizatoin).
Future success lies in moving away from traditional prescriptions for strategy. Inventing
something new does not guarantee success, but nor does imitating one’s rival.
1.2 A competitive race with only losers?
Greater competitive pressure and the need to change even faster because:
→ Firms can only achieve temporary competitive advantages (as competitors
imitate or improve those advantages)
