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Module-2 Notes

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25 views3 pages

Module-2 Notes

Uploaded by

sherrellpenney
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Paper: Business Models, Business Strategy, and Innovation

● Business model: value creation delivery, and capture


● The way to deliver value to customers, entice them to pay for value, and convert
payments to profit
What customers want / how they want it / how the company can organize to meet those needs / get
paid for doing so / make a profit
● A differentiated and hard-to-imitate business model is likely to yield more profit

Standard approach (text book economics)


● Tangible products
● Value capture = inventions with patents
○ Assume that firms can capture value simply by selling output
● It is assumed that if value is delivered, customers will pay.
● Customers will buy if the price is below the utility yield.
● Suppliers will sell if the price is above the cost - including return on capital
● The price system simply resolves everything, so business design issues do not arise.
Customers don’t just want products, they want solutions to their perceived needs

The ’razor-razor blade model’ is a classic business revenue model... Jet engines for commercial
aircraft are priced the same way

The business model is more generic than the business strategy.


● Business model + strategy = Protect competitive advantage

Steps to achieve sustainable business models - Competitively sustainable business models


require a strategic analysis filter.
1. Segment the market
2. Create a value proposition for each segment.
3. Design and implement mechanisms to capture the value of each segment.
4. Figure out and implement 'isolation mechanisms' to hinder competition imitation

Barriers to imitating business models:


1. It requires systems, processes, and assets that are hard to replicate.
2. There is a level of opacity making it difficult for outsiders to understand enough about the
model and why it is successful with customers.
3. Incumbents may be reluctant if it involves cannibalizing their sales and profits or
upsetting existing relationships.

Business model learning:


● The capacity to improve business model to reinforce your competitive advantage
Profit from innovation framework: figuring out how to capture value from innovation
● Tech innovation itself does not guarantee business/economic success.
● Every new product developed should be coupled with the development of a business
model that defines GtM and value capture strategies.
● Tech innovation without a commercialization strategy will lead to the destruction of
creative enterprises
● Translate technical success to commercial success
● Two extreme modes in which innovators can capture value:
a. Integrated business model: bundle innovation and product together. Responsible
for the entire value chain
b. Outsourced (pure licensing)
c. Hybrid: most common

Bundling of inventions and products is the way to capture value (e.g. R&D…)
Basic research is usually funded by governments and is found in publications. The business
model cannot be supported by value capture.

Business model as innovation:


● Business model innovation is arguable equally, if not more, than technology innovation.
● Tech innovation must be matched with business model innovation if the inventor is to
capture value.
● Sometimes the creation of new business models creates new industries.
● It is better for an organization to trigger an organization change than to have it dictated
by an external force

Discovery, learning, and adaptation


● Business models need to be adjusted as you progress.
● The chances are greater if managers are good listeners and fast learners.
● Business models need to be assessed in the context of a particular business
environment.

Questions to ask about a potential business model:


● How will the product be used, how is it a solution to the customer’s problem?
● What might the customer want to pay for the value delivered?
● How large is the target segment?
● Do there exist competitive offers?
● Where is the industry in its evolution, has the dominant design emerged?
● How should the product be presented as a solution to the customer problem?
● What will it cost to deliver value to the customer?
1. What is the supplier-specific customer value proposition
2. What is the relevant appropriate related mechanism?
3. How can imitators be kept at bay?
0 Paper: The Perils of Bad Strategy

● A good strategy acknowledges the challenges and provides an approach to overcome


them.
● Bad strategy is similar to the quarterback who’s only advice is “let us win”.

Bad strategy key points:


1. Failure to face the challenge
a. If you do not identify and analyze obstacles, you don’t have a strategy.
2. Mistaking goals for strategy
a. Define how you will get there
b. If you don’t have a competitive advantage, don't compete.
c. The job of the leader (strategist) is to create conditions that will make the push
effective.
3. Bad Strategic Objectives
a. Good strategy focuses on one or very few pivotal objectives whose
accomplishments will lead to a cascade of favorable outcomes.
b. It is a bridge between critical challenges (at the heart of the strategy) and actions.
c. The objectives that a good strategy sets stand a good chance of being
accomplished (given resources and competency)
4. Fluff
a. Superficial abstraction

Why bad strategy:


1. The inability to choose
a. Settling for a compromise instead of making a choice / trade-off (box, chip, soln)
2. Template-style planning

The kernel of good strategy:


1. A diagnosis: explain the nature of the challenge
2. A guiding policy: approach to overcome obstacles
3. Coherent actions: steps that are coordinated with one another

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