Business Model Innovation
Business model innovation is the process of the development of unique and new concepts that supports the financial viability of an organization. It also includes the process of converting those ideas into fruition along with its mission. The prime goal of the innovation is the realization of the sources of new revenue by the improvement of product value and the delivery of the product to its customers (Massa and Tucci 2013). With the progression of the digital age, business model innovation has evolved as the technology that has changed dramatically the process of delivery and operation of services to the customers. Several Australian organizations are undergoing a business model transformation as part of innovation that has significantly increased their revenue generation capabilities (Amit and Zott 2012). From the e-learning material, the key ideas that have been extracted consist of innovation, competitive advantage, limitation and commodity and the process of the application of innovation includes initiation, ideation, integration and implementation.
McDonald’s Australia (MDA) is a public company in Australia that is unlisted and two-thirds of its business is operated and owned by franchisee business in the country. The company serves more than one million customers everyday and therefore, it is the priority of the company to maintain the integrity and trust. The corporate values and vision of the organization are customer based that has grown the company in over 118 countries with a total of more than 34,000 restaurants that serves more than 50 million people everyday globally (Kane et al. 2015). MDA contributes about 0.2% to the GDP of Australia by serving 1.7 million Australian customers daily across its 869 restaurants throughout the country (Nadolny and Ryan 2015). The existing business model of the company is based on its value proposition of delivering food of consistent quality to its customers that are also served quickly. The targeted customer segments of the company include the youngsters, families, business and elderly people. Its franchise holders are its main strategic partners that cover up to 80% of its restaurants and follow a three-legged stool of MDA, franchisees and suppliers (Emerson and Prang 2015). Selling and marketing of its beverages and food are the key activities of the business with its key resources being its restaurants and the employees. The customer relationship activity is an online activity on the customer preferred device. The cost structure includes the marketing costs, raw materials procurement, restaurants and the employee loans and the generation of revenue takes place from the restaurants that are owned by the franchisee holders and the company itself. MDA can undergo business model innovation to further increase its business, generate greater revenue and improve customer satisfaction. The company can build a strong partnership with the suppliers for creating shared market values and sustainable development.
Business Model Strategy
Business model strategy is the process by which the business achieves the desired objectives with a long term planning. The prime resource issues of business strategy are concerned with the scope of the activities of the business, financial considerations and allocation of the resources. Growth and globalization are the outcomes of the appropriate implementation of innovative business model strategy which will be further discussed for MDA in the form of its digital strategy. Innovation can be brought about in the business model of MDA by the application of innovative digital strategy. Presently, the company lacks a digital holistic approach that misses the aspect of the customer journey and service out of the restaurant (Mohapatra and Singh 2012). This can drastically improve the customer experience by making the food delivered to the customer’s place and increase the customer engagement in designing the mobile app that has greater customer customization according to their preferences. The digital strategy will also improve the in-restaurant experiences that will also make them skip the queues and customize their food from their cars. Drive-ins can also be facilitated to increase the in-car experience of the customers along with the food anywhere strategy that will enable the delivery of the food from the restaurants to apparently anywhere according to the customer requirements. This can give an innovative makeover to the largest restaurant chain in the world by making it digitally minded. These innovations can take the restaurant and its customers to the next level of food delivery and provenance with real time supply chain for the food preferred by the customer. These innovations can provide increased competitive advantage to the business over its competitors based on the strategies of focus, differentiation and cost leadership. This business model innovation of MDA will make its products and services different from its competitors and can make its customers believe in the same concept with increased accessibility to the commodities of food and beverages. The negative sales of few of the outlets can have a turnaround with the menu simplification and its locally relevant facet (Weber and Prodromou 2015). Although this business model innovation has several advantages, it has the limitation in its application on the franchisee level. Since majority of the business of MDA is based on franchisee outlets, appropriate implementation of the concept may not be possible in every outlet managed by the franchisee holders. In addition, the mobile strategy might face the hazards of online threats that can potentially hit the business as the customers might choose to opt out of the digital purchase system (Coursaris et al. 2014). Although the strategy aims to remove the physical boundaries of time or place and enable the customers to stay connected and place orders, it might miss the cordial feelings of the restaurant that the customers are provided by the staff members. However, with the business model innovation of digital strategy, the company will have to aim the local customers and restructure its local stores to generate maximum revenue out of its commodities at each level of its business. Implementation of the business model innovation of digital strategy will follow the steps of initiation, ideation, integration and implementation. The initiation step will allow MDA to analyze the existing business model and identify the potential loopholes. The need for the digital strategy will be surfaced in this step and with the targeting of the customers and what the company will be offering them with the digital strategy. This step is also crucial as it will discuss the value proposition and the generation of revenue. In the ideation step, the digital strategy business model will be compared with the other possible business models and establish the suitability of the proposed business model innovation of digital strategy (Tomlins 2014). This comparison will enable MDA to thoroughly examine the proposed business model and identify the limitations of the innovation. Matches are tried to find out between the digital strategy of MDA and the digital strategy adopted by the other organizations of similar capacity and business. The basic assumptions are challenged along with the dominant logic of the digital strategy as an innovative model. The integration step will investigate the business model consistency and examine the aspects of organizational fit to determine how the innovative digital strategy will fit into the business policies of MDA. The final step is the implementation where the business model will be thoroughly revised. A business model is designed in iterative cycles where a pilot model for the application of the digital strategy will be built and tested with qualitative and quantitative data and on success, the design phase will be considered where the implementation blueprint will be designed (Grant 2016). The assumptions are testified with the output of the new business model and the soft factors of innovation are also considered in this step of digital implementation.
The digital strategy of MDA is targeted for the next generation of customers with its holistic approach of going beyond the television commercials to engage its customers at every step from social and mobile to advertising. A seamless ecosystem will be formed by tightly integrating the digital platforms with the rest of the organization. New apps will be developed to market the new services and products of MDA and taking them to the market with a huge opportunity to increase its revenue and avail competitive advantage of the mobile platform.
Amit, R. and Zott, C., 2012. Creating value through business model innovation. MIT Sloan Management Review, 53(3), p.41.
Coursaris, C.K., van Osch, W., Balogh, B.A. and Quilliam, E.T., 2014. Social Media Marketing: Investigating Empirical Links Between Purchase Involvement, Strategy, Content, And.
Emerson, L. and Prang, Y., 2015. Compensation and Benefits: Company-Provided Benefits at McDonald’s.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Kane, G.C., Palmer, D., Phillips, A.N. and Kiron, D., 2015. Is Your Business Ready for a Digital Future?. MIT Sloan Management Review, 56(4), p.37.
Massa, L. and Tucci, C.L., 2013. Business model innovation. The Oxford Handbook of Innovafion Management, pp.420-441.
Mohapatra, S. and Singh, R.P., 2012. IT Strategy for McDonald’s. In Information Strategy Design and Practices (pp. 299-318). Springer US.
Nadolny, A. and Ryan, S., 2015. McUniversities revisited: a comparison of university and McDonald's casual employee experiences in Australia. Studies in Higher Education, 40(1), pp.142-157.
Tomlins, C.T., 2014. What's Your Business?: Corporate Design Strategy Concepts and Processes. Gower Publishing, Ltd..
Weber, L. and Prodromou, P., 2015. The digital consumer: Building attractive digital environments to increase engagement, views, shares and sales. Journal of Digital & Social Media Marketing, 3(2), pp.103-113.