The Interrelation between Business Model, Business Strategy and Innovation
Question:
Discuss about the Innovation and Sustainable Business Development of Volvo Group.
Business models are often innovated to establish a new and unique idea which supports the organization’s goals and responsibilities including the financial health and other vital processes. Additionally, innovation is implemented by companies to explore new sources of revenues and exploit to the firm’s operational and growth benefits. Business model, business strategy and innovation are closely linked and interrelated, whereas the business model is the plan or diagram of an organization’s functionalism and activities and processes facilitating its competitiveness in the market, business strategy is the long-term direction of the company. The aspect of innovation in an organization is vital and strategic due to its ability to ensure the company thrive in a competitive market environment as a result of adopting and inventing a modern and customer-focused process and products.
Business model explains the rationale which a company creates, delivers and captures value in its set of philosophies, policies, rules, processes and activities. Examples of key elements forming the business model include the firm’s purpose for existence, processes, target customers, infrastructures and trading culture and practices among others (Tejeda, 2016). Essentially, the process of settling for a business model and setting it up reveals the mode of strategy the organization has adopted for its business including market positioning, customer relations, and partnerships. The term disruptive innovation in layman means the creation of a market due to the emergence of a new firm with favourable competitive advantage thereby grabbing market share from the incumbent firm. The concept has various positives and negatives. The advent of technology has emerged to greatly impact the formation and turnover of business models because of triggered aspects of innovation and competition. Mainly, technology has revolutionized modes of gathering, dissemination and processing of information and data, therefore, firms can efficiently structure their operations to mirror the situation. However, several threats and opportunities follow the adoption and implementation of technological systems.
Volvo Group is one multi-national company that has embraced smart technology and leveraged its capabilities to spur growth and development of its operations (Esslinger, 2011). A number of technologies have been invented and applied by the company in a bid to achieve cost reductions and enhance performance of the truck dealer company including peloton technology aimed at preserving the truck’s fuel by driving them in close ranges and semi-autonomously (Bhatt, Wang & Rodger, 2017). Additionally, the smart technology is vital in preventing accidents through collision mitigation and adaptive cruise control systems. The system coordinates trucks’ communication and manages radar-based braking systems which result to enhanced collusion prevention plan and optimized fuel efficiency (Schaltegger, Freund & Hansen, 2012). Other lucrative value-adding projects the company has initiated include the Sartre (Safe Road Trains for the Environment) providing successful and enhancing performance of the value chains. The truck and company fleet also have inbuilt security systems including the cameras, radar and laser sensors which aid in monitoring the fleet on move.
Several benefits accrue when a firm successfully implements model innovation which includes aiding the firm to be ahead of product innovation thus remaining competitive in the industry with good reputation (Buzzavo, 2012). Further, the significance of business model innovation poses difficulty for copycats to replicate the exact concept because of uniqueness in the activity system; therefore, benefiting the innovated business with sustainable performance.
The Impact of Technology on Business Models
Innovation disruption has several cons and pros for businesses and the end customers (Osiyevskyy & Dewald, 2015). Firstly, the occurrence of disruption in innovation triggers competition among the market players which eventually lowers the prices of products and services apart from enhancing quality which ultimately benefits the stakeholders (Kim & Min, 2015). Entry of a new business with an innovative model gives it the opportunity to thrive and gain the market share and reputation.
Smart devices have significantly grown in popularity due to the perceived value it adds to the quality of lives of people and general users among other benefits (Supriyadi, 2017). Contrary, these smart connected devices have cons which pose as limitations to the users as discussed below.
The automation capability adds value to processes in an organization through cutting on cost and time which can be channelled to other vital and core activities and processes (Rayna & Striukova, 2016). Automation improves the quality and sufficiency of communication thereby enhancing collaboration and team performance across the departments (Buzzavo, 2012). As a result, the team records improved performance and as a result gets the opportunity to expand its operations and collaborate with other industry leaders.
Some of the disadvantages of these products includes the costs and challenges in installation and launching. Mainly, acquisition of these devices demand capital expenditure and further expenses in operating and repairs to them. The security of this kind of technology is under threat of attacks by unauthorized users since the chances of hacking are probable (Bhatt et al., 2017). Smart connected products are IT integrated products which facilitate value creation to the end customers due to various capabilities and competencies (Supriyadi, 2017). Technological advancement has been leveraged in these products to enhance a range of various functions vital in a workplace setting including communication, tracking and monitoring, control and optimization of processes (Alimin et al., 2012). Some of embedded technologies and capabilities includes sensors and data soft-wares.
All smart connected products have three common elements distinguishing them from the normal ones; namely physical components like mechanical and electrical parts; smart components like sensors and microprocessors, data storage and finally connectivity components like ports, antennae, protocols and networks (Singh, 2016).
The company Volvo group has various advantages due to resource and technical capabilities in the organization. Firstly, the firm is known leader in innovation and process automation which benefits it with massive production and operational efficiency.The firm has key activities of dealing with trucks and transportation and also partnering with other organizations for synergy. Volvo company has also invested massively in technology specifically smart connected products which help tracking and monitoring of its fleet possible enabling it to serve satisfactorily its end customers.
Business models are created and instituted processes which guide the relations, communications, policies and procedure between different departments and stakeholders. Processes are a pre-determined and documented steps of handling an activity to achieve efficiency and productivity (Teece, 2018). Businesses design standard operating procedures or processes which aid in making them competitive as well as allowing innovation to thrive in the company. A company can set up processes and channels to reach and serve its targeted customers while considering cost-effectiveness and efficiency.
Volvo Group: A Case Study of Embracing Smart Technology
Organizations incur capital expenditure to acquire assets including technological products which will enhance performance and the firm’s reputation (Niles, 2011). Additionally, businesses focus on on-boarding qualified and talented staffs to enhance their productivity and cultivate a positive culture which will give the firm a respectable reputation (Thoroughgood et al., 2016).Moreover, virtually every firm invest in their human resource through training them and supporting their development and growth to attain the needed competencies and skills to be able to drive forth the operations efficiently.
A strategy refers to the long-term direction or roadmap the company is focused on achieving through implementing the necessary process or product innovation (Teece, 2018). Commonly, organizations often deploy operational strategies, business unit strategies and corporate strategies which integrates the lower level strategies giving a clear distinct path the company is taking to manage competition or achieve a competitive edge over its competitors (Esslinger, 2011). The presence of stiff market competition has forced companies to invent and implement smart strategies to counter rival competition and gain market leadership (Niles, 2011). Normally, organizations are designed from business models which describes the processes for value creation, service or product delivery to end customers ensuring satisfaction and preserving the client relations. Creating a good business model is critical to the workability of the strategy adopted and future innovations to ensure consistency and competitiveness in the market (Rondi et al., 2018). The model supports the implementation of the strategy through resource providence and positive culture including collaboration which defines how the firm competes.
Organizations often strive to keep abreast with innovation on their products, services and internal processes in a bid to spur growth and maintain or improve its profits and competitiveness in the industry. Innovation projects often consumes resources including funds for asset or technology acquisition, training and consultancy payments and costs for downtime or errors among other expenses (Rondi et al., 2018). The current competitive market environment, customer preference and demand have severely affected the concept of business models and their durability (Andries & Debackere, 2013). Illustratively, companies have to adjust and adopt different models more frequently with the market dynamism to remain relevant, efficient and effective to the needs of its end customers (Thoroughgood, Sawyer, Padilla & Lunsford, 2016). For example, a change in the modern society leaning on digital-ism has forced organizations to embrace technology and customize their products and services in line with digital aspects.
The digital age has supported the rapid growth and development of innovation through the adoption of technologies, consequently, dramatically changing how companies operate in delivering services to the customers (Osiyevskyy & Dewald, 2015). Other aspects which have necessitated firm’s interests in adoption and implementation of innovation is the stiff market competition both the local and global platform (Rondi, De Massis & Kotlar, 2018). Such situations are catalyzing organization to restructuring their business models to conform and mirror the competitive and innovative market situation. There are a couple of value drivers organizations need to consider to realize the right kind of business model namely novelty, lock-in, complementarities and efficiency (Andries & Debackere, 2013). Disruptive innovation is a term which majorly refers to an innovation that creates a new market and value network which emerges to challenge and outdo the existing market-leading firms (Rayna & Striukova, 2016). These firms that emerge to disrupt the industry often taps from the unexploited area and gain the market share progressively to becoming the market leader. The disruptive innovations occur due to the exploitation of the underdog company on the markets the incumbents overlook (Kim & Min, 2015). As the industry leaders focus on their most profitable customers providing them with tailored products and services and pay little attention to less demanding clients, the upcoming firms exploit this opportunities to service the low-end customers with their requirements.
Benefits and Limitations of Model Innovation and Disruptive Innovation for Businesses
Conclusion
The terms business model and business innovation are closely related; while business model implies the plan designed by an organization for its functions and operations, business innovation majorly introduces certain value-adding processes or products to the firm thereby enhancing the services to the end customers. However, there are cases of disruptive innovation whereby a firm enters the market and disrupts the business of the incumbent company having an edge in various competencies. Normally, these emergent firms target unexploited areas and capitalize to service the customers with all their acquirement, therefore, gaining market trust and reputation of reliability.
Business models essentially encompass a set of processes put together to ensure operations are performed at the required standards and value relayed to the end customers. Normally, organizations establish standard operating procedures which guide their quality of operations including communication and relations to the end customers. Additionally, business models are made of resources and capability ensuring the business operates at the required standards in their bid to serve the end customers with products and services. Capabilities include strength of resource availability and the human labour competencies also making a firm to have a competitive advantage over its rivals.
Various advantages area accrued from when a firm adopts smart connected products including automation advantages, efficiency and cost reduction thereby resulting in enhanced customer satisfaction. For example, Volvo Company has massively invested in technology including automation, tracking and monitoring technologies which align its operations to best practices and enhancing its customer experience.
References
Alimin, I., Raduan, C., U., & ., A. (2012). The Effects of Organizational Resources, Capabilities and Systems on Competitive Advantage. International Business Management, 6(2), 176-186. https://dx.doi.org/10.3923/ibm.2012.176.186
Andries, P., & Debackere, K. (2013). Business Model Innovation: Propositions on the Appropriateness of Different Learning Approaches. Creativity And Innovation Management, 22(4), 337-358. https://dx.doi.org/10.1111/caim.12033
Bhatt, G., Wang, Z., & Rodger, J. (2017). Information Systems Capabilities and Their Effects on Competitive Advantages. Information Resources Management Journal, 30(3), 41-57. https://dx.doi.org/10.4018/irmj.2017070103
Buzzavo, L. (2012). Strategy Innovation as Business Model Reconfiguration. SSRN Electronic Journal. https://dx.doi.org/10.2139/ssrn.2037408
Esslinger, H. (2011). Sustainable Design: Beyond the Innovation-Driven Business
Model. Journal Of Product Innovation Management, 28(3), 401-404. https://dx.doi.org/10.1111/j.1540-5885.2011.00811.x
Kim, S., & Min, S. (2015). Business Model Innovation Performance: When does Adding a New Business Model Benefit an Incumbent?. Strategic Entrepreneurship Journal, 9(1), 34-57. https://dx.doi.org/10.1002/sej.1193
Niles, N. (2011). A New Definition Of A Business Model. Journal Of Business & Economics Research (JBER), 6(12). https://dx.doi.org/10.19030/jber.v6i12.2504
Osiyevskyy, O., & Dewald, J. (2015). Explorative Versus Exploitative Business
Model Change: The Cognitive Antecedents of Firm-Level Responses to Disruptive Innovation. Strategic Entrepreneurship Journal, 9(1), 58-78. https://dx.doi.org/10.1002/sej.1192
Rayna, T., & Striukova, L. (2016). 360° Business Model Innovation: Toward an Integrated View of Business Model Innovation. Research-Technology Management, 59(3), 21-28. https://dx.doi.org/10.1080/08956308.2016.1161401
Rondi, E., De Massis, A., & Kotlar, J. (2018). Unlocking innovation potential: A typology of family business innovation postures and the critical role of the family system. Journal Of Family Business Strategy. https://dx.doi.org/10.1016/j.jfbs.2017.12.001
Supriyadi, S. (2017). Analysis Effect of Resources and Dynamic Capabilities to
Sustainable Competitive Advantages and It’s Implications to the Firms Performance. International Business Research, 10(10), 209. https://dx.doi.org/10.5539/ibr.v10n10p209
Schaltegger, S., Freund, F., & Hansen, E. (2012). Business cases for sustainability:the role of business model innovation for corporate sustainability. International Journal Of Innovation And Sustainable Development, 6(2), 95. https://dx.doi.org/10.1504/ijisd.2012.046944
Singh, K. (2016). Business innovation and diffusion of off-grid solar technologies in India. Energy For Sustainable Development, 30, 1-13. https://dx.doi.org/10.1016/j.esd.2015.10.011
Teece, D. (2018). Business models and dynamic capabilities. Long Range Planning, 51(1), 40-49. https://dx.doi.org/10.1016/j.lrp.2017.06.007
Tejeda, L. (2016). Peace Dialogue: Business for Peace and the Sustainable Development Goals. Business, Peace And Sustainable Development, 2016(8), 70-79. https://dx.doi.org/10.9774/gleaf.8757.2016.de.00006
Thoroughgood, C., Sawyer, K., Padilla, A., & Lunsford, L. (2016). Destructive Leadership: A Critique of Leader-Centric Perspectives and Toward a More Holistic Definition. Journal Of Business Ethics. https://dx.doi.org/10.1007/s10551-016-3257-9
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
