Business Model: A Tool for Business Survival and Excellence
Many times in recent years, these years of uncertainty and risk, many companies which are considered to be successful disappear from the business map. The easy answer to the question “Why is this happening” is the economic crisis. But is this the truth? And if so then why other companies manage to survive and they launch despite the recession?
The answer to the question “Why is this happening” is that the companies which disappear do not put themselves to the process of changing their business models. They don’t manage to adapt their business models to the new market conditions, the new economic reality. Of course, it is obvious that in order to create business models that will differentiate them they have to apply all the best practices of entrepreneurship, such as Project Management & Branding (and not only!)
But what we mean with the term “Business Model”? We have to define the meaning of this term because it is often confused with the term “Business Plan”.
A Business Model describes the rationale of how an organization will create, distribute and gain value. It specifies the viability of the organization. It focuses on the coordination of the internal and external processes so as to be possible to determine the ways by which the organization interacts with its partners, its distribution channels and its customers.
Business Model is the compass that shows the destination of an organization.
A Business Plan offers analytical information that are related to the path which must be followed by the organization so as to reach its destination.
Business Model Innovation
The second question is: “Is it enough to change these companies their business models in order to survive? Or something more is needed?”
The answer to this second question is that they need to do something more. They need to innovate. And what does “to innovate” mean? To differentiate their product or service? To change their processes? For sure, all the above mentioned are ways that help an organization to gain a comparative advantage and to manage to survive. But the critical factor which is going to give them the right to continue to exist and even to stand in the market is to innovate at business model level. Simply to craft their business model so as to provide in a different way their value proposition to their customers.
A recent study by BCG and MIT Sloan in 2013 showed that innovation at business model level is the key to the sustainable innovation, thus the viability of an organization. More than 60% of the organization that implemented this kind of innovation managed to increase their profits.
IBM during 2012 conducted a research which showed that the “successful players” in the business world are companies that innovate at business model level twice as often compared to the others which actually struggle to survive.
The comparative advantage of the companies today and in the future will be based on the adoption of innovative business models and rather than on innovative products/services and/or processes.
That’s why we have to work hard and smart in order to create innovative business models which will offer intelligent solutions to the severe problems faced by people all over the world while in parallel they will generate value for themselves.
Dimitra Zervaki, EMBA, PMP, TTT
- Gassmann O., Frankenberger K. and M. Csik, 2014. The Business Model Navigator.Pearson. United Kingdom.
- Ostervalder A. and Y. Pigneur, 2010. Business Model Generation. John Wiley and Sons, Inc.