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1.The essence of a businessmodel is that it crystallizes customer needs and ability to pay, defines the
manner by which the business enterprise responds to and delivers value to customers, entices
customers to pay for value, and converts those payments to profit through the proper design and
operation of the various elements of the value chain.
One key conclusion of the analysis is that, to be a source of competitive advantage, a business
model must be something more than just a good logical way of doing business. A model must
be honed to meet particular customer needs. It must also be non-imitable in certain respects, either
by virtue of being hard to replicate, or by being unpalatable for competitors to replicate because it
would disturb relationships with existing customers, suppliers, or important alliance partners. There
may be complicated process steps or strong intellectual property protection, or organizational
structures and arrangements may exist that will stand in the way of implementing a new business
model.
This can and should be remedied. Increased understanding of the essence of business models and
their place in the corpus of the social and organizational sciences should help our understanding of
a variety of subjects including market behavior, competition, innovation, strategy and competitive
advantage. Our understanding of the nature of the firm itself, together with the role of entrepreneurs
and managers in the economy and in society, should also benefit from a better appreciation
of business models and their role in entrepreneurship, innovation and business performance.
2.
,Innovation is often described in terms of changes in what a firm offers the world
(product/service innovation) and the ways it creates and delivers those offerings (process
innovation).
An important aspect of innovation is its functionality— i.e. the uses made of innovation
capability. We refer to this as ’targeting’.
Ryoichi Kawai took the company through four distinct stages on its path from
obscurity to beating Caterpillar in many core markets. The four stages were:
† improve quality
† reduce costs
† develop innovative products
† devise new methods of sales and financing
P1 innovation to introduce or improve products;
P2 innovation to introduce or improve processes;
P3 innovation to define or re-define the positioning of the
firm or products;
P4 innovation to define or re-define the dominant paradigm of the firm.
In relatively young industries, such as medical instruments, every development effort
appears to be a platform effort (to broaden the firm’s market coverage), with
incremental changes targeted primarily at correcting deficiencies in the platform
products.
Innovation is widely seen as a critical imperative for survival and growth of firms. But
responding to this challenge needs to be balanced against the resource constraints of the
organization in terms of money, skills, time and knowledge base. In this article we have
developed a framework for setting a firm’s innovation agenda holistically which makes a
contribution to thinking about the strategic portfolio of innovation projects undertaken.
It also focuses attention on areas which may not be recognized as having innovation
potential and on emerging areas in which it may be desirable to explore potential new
projects.
,Fig. 1. shows how the approach was applied in a company (R&P Ltd) making garden machinery. The diamond diagram provides an
indication of where and how they could construct a broad-ranging ‘innovation agenda’.
, Innovation in paradigm: Type A and type B.
Type A; Inner-directed: Type A innovation capabilities targets organisational
values and people management policies
Type B: Outer-directed paradigms: Type B innovations of paradigm relate to business
models-these are the system of coherent, comprehensive,
explicit and/or implicit constructs used by managers
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