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Changes That Call For a New Business Model |
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Why New Business Models?
The old principles no longer work in the
new economy. Businesses have reached the old model's limits with respect to
complexity and
speed.
Great shifts – genuine and radical
transformation
– have been shaping the economy and
business environment
in recent decades. Technology, especially information and communication one,
has radically altered the requirements for building and managing a
successful business.
Disruptive technologies
require
new business models.
Case
in Point
Amazon.com
New business model developed by
Amazon.com
creates value for customers by offering a
synergistic combination of the following benefits:
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Shopping convenience
-
Ease of purchase
-
Speed
-
Decision-enabling information
-
A wide selection
-
Discounted pricing
-
Reliability of order fulfillment
No single aspect of Amazon.com's business model is sufficient to create a
sustainable competitive advantage. It is the synergistic combination of
all of these information services and logistical processes that creates
value for customers and comprise Amazon.com's competitive advantage.
Harness the Power of Diversity
Diversity is a specialized term describing a workplace that includes:
You can find a strategic
competitive advantage in an
organizational and
cultural
context by seeking to leverage, rather than diminish, opposite forces.
Extended Enterprise
The term "extended
enterprise" represents a new concept that a company is made up not just
of its employees, its board members, and executives, but also its business
partners, its suppliers, and its customers.
The notion of
extended enterprise includes many different arrangements such as
virtual integration,
outsourcing, distribution agreements, collaborative marketing, R&D
program
partnerships,
strategic alliances,
joint ventures, preferred suppliers, and
customer partnership.
Internet Power
The
Internet
changes the fundamental nature of doing business and competition. As new ways of
building and delivering products and services online emerge,
your competition goes beyond established competitors to include new
companies, in addition to new
innovations, ideas or ways of improving existing
business processes,
products, and services.
Internet business models continue to evolve. New and interesting variations
can be expected in the future. Internet commerce will give rise to new kinds of
business models. But the web reinvents also tried-and-true models. "The Internet
is the Viagra of big business," said
Jack Welch,
the former legendary CEO of
GE.
Case
in Point
Dell
Computer Corporation
Adapted from
Direct from Dell,, Michael Dell with Catherine Fredman
The direct model is a backbone of
Dell Computer Corporation
and the greatest tool in its growth. It enabled Dell to achieve incredible
success. The direct model is based on direct selling – not using a reseller
or the retail channel – and it's not new. But the way Dell went about it was
quite different.
The three golden Dell rules are:
1) Disdain inventory,
2) Always listen to the customer, and
3) Never sell indirect.
Because Dell employees were talking with both prospective customers and
people who had already bought their products, they knew exactly what they
wanted, what they were happy with, and where Dell could make improvements,
so they could build a business based on what people really wanted.
An important element of Dell
virtual integration with the customers is segmentation by
different kinds of customer. Segmentation is not a new idea. But like may
things at Dell, it has worked so well for them because they did it
differently. Segmentation initially started as a sales concept to most
effectively meet the needs of different groups of customers. It soon evolved
into a series of complete
business units, each with its own sales, service, finance, IT, technical
support, and manufacturing arms.
The Role of Venture Capital Investors
Many
venture capitalists see themselves as investing in a
business model. Consequently it often is the venture capital investor
that pushes for a change in the business model when it becomes apparent that
the original model is not working.
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