Literature Review On Business Models Innovation And Disruption And The Business Model Of P&G

Understanding the Concept of Business Models

Discuss about the Business Model and Disruption for Proctor & Gamble.

In simple words, business model can be understood as the company’s plan to generate revenue and make profits out of it. The business model in general states the products and services the company plans to manufacture, produce, market and strategic plans to conduct the same. It is a systematic step by step overlay of plan of action for business sustainability. In order to develop a business model company should always focus on its value proposition, customers value the company which reflects value in its product or services. The purpose of the assignment here is do a literature review on business models innovation and disruption, and also to understand the business model of P&G in length. The assignment will also focus on the threats and opportunity of the business model of P&G due to the utilization of the smart connected products.

DaSilva and Trkman In the year 2014 published an article on “ Business model: What it is and what is not”, the contents of the article clarified in depth the understanding of business model and how people at times misunderstand and confuse business model with business strategy, concept, economic model and business process modelling. However, in existence business model is the conceptual structure which supports the viability of the business encompassing its purpose, goals, vision and the path to achieve the goals. In other words, a business model describes the ways organization intends to fulfil its purpose and take the organization to the path of business sustainability. According to the authors, the business model helps in answering plethora of questions such as: the value delivered by the company, define and differentiate the product offering, challenges the organization will overcome as a result of its business model and how it will acquire and reach its target audience.

In the same context, Foss and Saebi in the year 2017 conducted a research on business model innovation and did a critical analysis on the journey of business model and how far the organization have come from where they started. The authors mentioned that business models have evolved in practicality since the 16^th century, where the business models were purely focussed on manufacturing. However, in the 20^th century with the introduction of the definition of Business model companies began exploring the concept in more depth. Organizations started focussing on the rationale of the business model, significance of the business model for the organization and customers and most importantly about community development with the aim of co-creation. Thus, according to the authors, Business models have undergone a tremendous change from the past making them more relevant to business and its stakeholders.

Kaplan is a management expert and co-author and author of many books and article, also wrote article on business model in the year 2012. According to Kaplan the three pillars of business model are value creation, value delivery and value capture. Value creation is how a firm creates value for its customers to enrich the customer experience. Value delivery focuses on how to offer the value through its business operating model to its targeted customer. In the end value capture is how the company convert the value it created and delivered in financial terms for the organization. Value creation, value delivery and value capture undoubtedly are the core areas of a successful business model.

Evolution and Importance of Business Models

Due to rapid globalization, development and advancement of technology, business models do not have a lifetime the way they used to have in the past.The average life has reduced from 50 years to 20 years and it will further get shortened. In the year Armanda & Martin in the year 2016 in their journal “Business model Disruption: Innovation as a catalyst” emphasized on the importance of innovation in the business model to attain business momentum. The authors mentioned that in the absence of innovation, the business model will fade away leading to the collapse of the organization, thus innovation has to be used as a catalyst for the longer sustainability of the business model.

Christensen, Raynor & McDonald published an article in Harvard business review on what is disruptive innovation. According to the authors, disruption in the business model implies an creation of an innovation which leads to creation of a new market and value network which eventually disrupts the entire existing market and the value network. Such a model replaces the old with the view of providing better offering to the customers. Airbnb is a great example of business model disruption; it changed the existing practices of people booking hotels and resorts and came up with the concept of providing people an experience of staying in the homes of the local inhabitant. According to the authors, business model disruption will change the future course of every industry in the coming 15-20 years, thus implying the importance of business disruption.

Rayna & Strjukova in the year 2016 published an article on how 3D printing is changing business model innovation. According to the authors, the evolution and discovery of 3D printing came out in the form of innovation in the manufacturing industry. Authors mentioned that people were struggling to create small customized objects to use in their daily lives and also to create products on their own accord. 3D printing can thus be seen as a disruptive technology which is extremely helpful for hobbyists and small businesses.

Smart devices are another example of disruption which is creating waves in the existing industry ecosystem. Smart devices provide a good level of automation which can be programmed for specific usage. Most of the smart devices in the present day have some local computing associated with them with intuitive user interface. The flexibility of such devices is limited; however they are highly efficient in doing the task they are designed for. FMCG giant Proctor and Gamble is way ahead of competitors in coming up with smart devices. The company was quick to understand the importance of the smart devices in the present and future and invested a large sum of money in the smart devices production.

P&G in the year 2016 during Mobile world Congress conference at Barcelona unveiled its latest innovation is smart device which sets a new standard for industry benchmarking. The company introduced Oral-B Genius, one of its kind intelligent brushing systems available till date. The device used smart motion sensor technology and video recognition using the smartphone’s camera to track the areas usually left unbrushed. This device helps better cleaning of teeth which also reduces parents’ concerns who are worried that their children do not brush their teeth properly. Oral-B Genius encompasses Position detect technology, oscillating-rotating-pulsating technology, triple pressure sensor technology and professional timer in the device to make it one of the most significant smart device of its time. The company brilliantly was involved with Amazon Dash Devices which lets the consumer press a button to get delivery of Oil and Olay facial cleansers and bounty bound paper towels. Both the product open gates of tremendous opportunity for P&G. The opportunity of increasing sale, the opportunity of first mover advantage, the opportunity of penetrating the market of smart devices and the opportunity of contributing to the society technologically advanced goods are immeasurable.

Every invention and technology has certain threats associated with it, more so, when the consumer data is at stake. The biggest threat for the smart connected device is the chance of data theft of the consumers, competitors can easily hack into the system and steal the most valuable asset of the company “Customer data” . Another major threat is less penetration of the smart devices, which propels P&G to increase the marketing spend which can significantly reduce the profits of the company. Another major threat is high production cost of the device, which can significantly affect the existing customer base of P&G.

The business model framework as explained by Osterwalder, Pigneur & Tucci goes as below:

The two aspects of business model canvas for the analysis are Value Proposition and resources and capabilities. The understanding of value proposition is the value P&G delivers to its customers through its product and service offering. Value proposition is the most valued aspect of any company thus extremely important. The company offer value proposition by offering number of products in personal health and hygiene which are superior in quality and rich in value. The company provides value by ensuring that the products are accessible in different parts of the world very easily.

The company has various resources and capabilities which help the firm to deliver value to billions of its customers and assist in the functioning of its business model. The company holds large manufacturing plants which ensures the delivery of products at all point in time covers a huge brand portfolio targeted at different customer segment. Extensive distribution network further helps the company in increasing its operational and distribution efficiency.

To conclude, business model innovation is an extremely important concept which every organization should adopt in order to keep its business momentum running and to ensure that it maintains a competitive edge over its competitors. Smart connected devices by P&G are an example of business model innovation, which however as of now as a low adoption rate, but with increased promotion and marketing can penetrate the market which can further reduce the cost of the smart devices

References

Armada, A. A., & Martin, A. (2016). Business model disruption: innovation as a catalyst. Frontiers of health services management, 33(2), 39-44.

Christensen, C. M., Raynor, M. E., & McDonald, R. (2015). What is disruptive innovation. Harvard Business Review, 93(12), 44-53.

DaSilva, C. M., & Trkman, P. (2014). Business model: What it is and what it is not. Long range planning, 47(6), 379-389.

Foss, N. J., & Saebi, T. (2017). Fifteen years of research on business model innovation: how far have we come, and where should we go?. Journal of Management, 43(1), 200-227.

Kaplan, S. (2012). The Business Model Innovation Factory: How to Stay Relevant When The World is Changing. Hoboken, NJ: Wiley. 

Rayna, T., & Striukova, L. (2016). From rapid prototyping to home fabrication: How 3D printing is changing business model innovation. Technological Forecasting and Social Change, 102, 214-224.

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