Business Models For Open Innovation Essay

Question:

Importance of Business Model Innovation for both Small and Large-Scale Companies.

Answer:

Business model innovation is a relatively old concept and many companies have made usage of it to improve the business model and create competitive advantage in their market. However, the larger multinational companies often do not use innovation in their business model and innovation process takes a back seat when compared to brand image (Massa and Tucci 2013). The multinational companies are more focused towards the improvement of the brand image of the company. However, ALDI and Amazon are two such organizations, which have made usage of innovation in business model to create a competitive advantage in the market.

Key Strategic Idea

The business models of various companies are neglected and they on working with outdated assumptions, which they have earlier deduced. However, globalization has intensified the competition among the multinational companies and Amazon is one such who has made usage of the innovation in the business to gain competitive advantage in the market (Serrat 2017). The most important part of a business model is finding the sweet spot for the company, which will help in growth and transformation of the company. This will also create opportunities and sources for generation of revenue, which are new and the company will have made successful usage of the Blue ocean strategy to create a market for themselves (Gobble 2014). Amazon has been instrumental in usage of innovation in the business model, which has made them the market leader in their sector. Amazon is the first mover in their market and they have removed the distribution channel in between to reduce their operational cost. The quality of service and product offered by the organization has set a benchmark for their competitors.

ALDI can be considered as one of the most innovative companies as the new products that have been launched have proved to be the most innovative in the present market. The company also keeps on changing their business model to create the blue ocean in the market. However, the success of the company is not only because of the innovation in the products but also in the business models created by the company (Saebi and Foss 2015). The company was able to create new ways of adding value to their product, which has helped the company to gain competitive advantage. The usage of systematic integration in innovation is the main reason behind the success of the company. The company introduced new products under their brand name which were as the same quality than its competitors but were priced cheaper than the market competitors. This simple method has added value to their products and ALDI has been able to maintain immense growth in the market. ALDI provides excellent services to its consumers and the products are of high quality and are priced lower, which has helped to capture the market. ALDI is using a aggressive expansion strategy wher4e they are trying to gain consumers by reducing their cost of switching. ALDI has developed a good name for their brand of products and it has helped them to incorporate backward integration. Thus, the organization was able to reduce the price of the products and sell them at cheaper price in thea mrket. The company does not follow any specific business model but incorporates multiple business models in their organization (Inigo, Albareda and Ritala 2017). This has helped the company to become a better competitor in the market and create a new market segment for themselves.

Business model innovation at Amazon Inc.

Amazon has made usage of the Eliminate-Raise-Create-Reduce framework to become one of the most dominant organizations in this industry (Aversa et al. 2015). Amazon was able to find a channel, which eliminated the traditional distribution channel followed by the rivals. The company with the help of technology created direct relationship with the consumers and suppliers. The company introduced check out on one click, which reduced the time for shipping and billing. Amazon was not the first online retail outlet but they were able to capitalize on the opportunity of transforming the shopping experience for the consumers. Amazon was the first to create a platform, which provides the consumers with extraordinary scope, value and choices. Amazon was able to transform the interface between the company and the consumers, which has helped the company to gain competitive advantage in the market (Zott and Amit 2015). The company was able to change the dynamics of their business model and reinvent their business. The core technology of the company was utilized to develop the Amazon Web Services, which made the cloud computing cheaper and readily accessible to all the consumers. This new model introduced by the company gave the company an advantage of being the first mover in to this field. This helped the company to gain competitive advantage in the market and in turn increase the growth of the company. This business model used by the company has caused the company to reduce their short-term profitability in the market (Maglio and Spohrer 2013). However, the company was able to capture majority of the share in the market, which would prove to be profitable in the future and help to reduce their cost of operation. The company able to change the value proposition of the products they offered to the consumers. The usage of innovation by Amazon has increased the cost of switching for the company and made the entry barriers high.

Business model innovation at ALDI

The technologies in ALDI have no bounds and have a creative way of thinking about all their problems. The company uses continuous integration in their processes so that they can keep on making changes in their business models. The company focuses on expansion of their minimal product line in to a huge model. The company creates demand for their products by creating astounding technologies, which has made the company stand out from the other companies in the market (Maglio and Spohrer 2013). The company has differentiated their products and consists of extended product line that created the need for such products in the market. The company offers product to the premium consumers still they have captured the majority of the market segment The company has made usage of the innovation in their supply chain management, which has helped then company to make sure that they have, reduce the operational cost of the supply chain. This has helped the organization to make sure that they are able to sell products at cheaper prices than the consumers in the market are. The backward integration sued by the company is one of the most innovative organizations which has helped the organization to make sure that they gain competitive advantage in the market

Conclusion

Thus, it can be concluded from the essay that business model innovation is very important for both small and large-scale companies. There are lot of companies how does not consider innovation in business model as a priority but Amazon and ALDI had showed the other how innovation can be used to create a blue ocean where the company will be the first movers

References

Aversa, P., Haefliger, S., Rossi, A. and Baden-Fuller, C., 2015. From business model to business modelling: Modularity and manipulation. In Business models and modelling (pp. 151-185). Emerald Group Publishing Limited.

Gobble, M.M., 2014. Business model innovation. Research-Technology Management, 57(6), pp.58-61.

Inigo, E.A., Albareda, L. and Ritala, P., 2017. Business model innovation for sustainability: exploring evolutionary and radical approaches through dynamic capabilities. Industry and Innovation, 24(5), pp.515-542.

Maglio, P.P. and Spohrer, J., 2013. A service science perspective on business model innovation. Industrial Marketing Management, 42(5), pp.665-670.

Massa, L. and Tucci, C.L., 2013. Business model innovation. The Oxford handbook of innovation management, 20, p.18.

Saebi, T. and Foss, N.J., 2015. Business models for open innovation: Matching heterogeneous open innovation strategies with business model dimensions. European Management Journal, 33(3), pp.201-213.

Serrat, O., 2017. Business model innovation. In Knowledge Solutions (pp. 499-507). Springer Singapore.

Zott, C. and Amit, R., 2015. Business model innovation: toward a process perspective. Oxford Handbook of Creativity, Innovation, and Entrepreneurship: Multilevel Linkages. Oxford University Press, New York: NY, pp.395-406.

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