Duplicating or Creating Value?

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Your business model describes the rationale of how your organization creates, delivers and captures value. Some organizations don’t realize that the creation and deliverance of value does not reference profits but references your customers, employees, communities, shareholders, and investors. In value creation profits are the last thing you achieve, that does not mean that profit is not important, but profitability is a result of uniquely created value. The majority of businesses in Egypt, Middle East and North Africa, and even worldwide duplicate value, deliver value and capture value but do not create value. I know this statement might challenge a lot of executives, leaders and managers, but before you disagree step back and ask yourself does your organization create value or duplicate value? Who then is creating this value being duplicated by a lot of organizations? The value created in a lot of organizations is not value created from within the organization instead it is value duplicated from competitors. Is the act of duplicating value from other competitors weather they are local or international healthy for your organization? It can be more cost effective and quicker in achieving results but is it sustainable, is it worthwhile for you as an organization?  Innovations to improve processes and products, however, are often expensive and time-consuming, requiring a considerable upfront investment in everything from research and development to specialized resources, new plants and equipment, and even entire new business units. Yet future returns on these investments are always uncertain. Hesitant to make such big bets, more companies now are turning toward business model innovation as an alternative or complement to product or process innovation. A recent global survey of more than 4,000 senior managers by the Economist Intelligence Unit found that the majority (54%) favored new business models over new products and services as a source of future competitive advantage.

Business model innovation can also help companies stay ahead in the product innovation game, as you’re always one innovation away from getting wiped out by a new competing innovation that eliminates the need for your product. A good product that is embedded in an innovative business model, however, is less easily shunted aside. Someone might come up with a better MP3 player than Apple’s tomorrow, but few of the hundreds of millions of consumers with iPods and iTunes accounts will be open to switching brands.

 

Creating value is inventing value, giving birth to value, satisfying an entirely new set of needs that customers previously didn’t perceive because there was no similar offering.  A lot of business models for organizations in Egypt are set up to execute already existent needs or values, how do you transform your organization to create value, and maybe become another Apple in your industry? Is that possible, or do you have to be a large organization such as Apple to conduct business model innovation?

Today countless innovative business models are emerging. Entirely new industries are forming as old ones crumble. Upstarts are challenging the old guard, some of whom are struggling feverishly to reinvent themselves. How do you imagine your organizations business model might look two, five, or ten years from now? Will you be among the dominant players? Will you face competitors brandishing formidable business models?

 

If your organization is keen on Business Model Innovation as part of their strategy they need to look into four main areas of business:

1-       Customers- An organization must make a conscious decision on about which segments to serve and which segments to ignore.

2-       Value Proposition- Adding and linking novel activities catering to your organizations segmented customer (quantitative or qualitative) in a manner that solves a problem or satisfies a need

3-       Infrastructure- Changing one or more parties that perform any of the activities What Key Resources does your value proposition require? Distribution channels? Customer relationships? Revenue Streams? This can be physical, financial, intellectual, or human.

 

An innovative business model can either create a new market or allow a company to create and exploit new opportunities in existing markets. Dell, for example, implemented a customer-driven, build-to-order business model that replaced the traditional build-to-stock model of selling computers through retail stores. Even under conditions of resource scarcity, organizations do not need to renounce innovation as a way of enhancing their performance prospects. Rather, managers should consider the opportunities offered by business model innovation to complement, if not substitute for, innovation in products or processes. Business model innovation can allow managers to resolve the apparent trade-off between innovation costs and benefits by addressing how they do business, for example, by involving partners in new value-creating activity systems.

 

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