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Business Model Design : Activity System Perspective

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Question:

Discuss about the Business Model Design for Activity System Perspective.
 
 

Answer:

Introduction:

All focal firms commit themselves towards the provision of a blueprint and a way that can enable them to satisfy their customers as well as maximizing profits entirely. With that in mind, there is need to conceptualize a business model. In simple words, it is defined by a substance, a combination of rules defining behavior and administration of a deal designed so as to create value through the proper use of a commercial enterprise opportunity (Zott &Amit, 2010). It is also a combination of different components which include the business system and a profit model. The system is designed for the production and delivery of goods and services from the enterprise while profit fashion is specifically geared towards the realization of the benefits from the sale of a product (Itami and Nishino, 2010). After identification of a business gap, the opportunity is taken advantage of, and a quality created to the involved parties as this is the primary goal of a business model. The figure below illustrates a simple version of the layout of the elements according to Itami and Nishino, 2010.

Business models as systems are conceptualized in building block terms. Nine components describe this namely; customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships and cost structure.  (Baden-Fuller & Mangematin, 2013). This is intuitively a simple method for portraying, envisaging, assessing and replacing the models. 

Conceptualization in a business model involves managers' technological and strategic identification of different activities which is quite a challenging task since the number of potential events is always significant. A three-phase research is conducted, the first one being the pre-understanding phase whose main objective is gathering any information concerning the primary and secondary data (Behrangrad, 2015). The second one is the model development phase which involves fine-tuning the collected data conceptualization in collaboration with participant firms, and finally, there is the interpretation phase during which the management approaches the final conclusions.

Business models as systems are of great importance and thus they play a significant role in solving both static and dynamic problems. The static view of a business model puts into account the understanding of the latter’s distinct taxonomies and typologies. The business model, in this case, helps in hierarchically and typically identifying the most suitable approach that will yield maximum profits as well as advocate for the prevention of future problems (Chesbrough, 2010).  Dynamic problems also known as the longitudinal problems of business models, arise as a result of poor capturing and lack of understanding of the impact of learning and the commands learning brings about business models. These templates as systems ensure that managers get a clear knowledge of the firm before actual conceptualization. It also helps in identification and determination of future underlying invisible assets for the company.

Bearing in mind that the primary goal in a focal enterprise artwork is to make use fully and actually exploit the current market gap by creation of monetary gain for the parties involved, as well as satisfying the customers' wants and needs, different firms sharing similar objectives and ambitions come together and work towards adequate provision of goods and services and ensuring full satisfaction of their customers thus creating a strong bond that will enable them to outdo their competitors (Teece, 2010). A firm usually has to determine the sharing of power and the division of labor with its trading partners. This also enables customers to learn more about the companies' technologies and the modes of delivery while the firms get a chance to learn the reactions of their clients to different goods and services.

Business models are mainly designed in such a way that they always prioritize technological advancements and innovation. They advocate for new business ideas to realize the maximum profits possible. Engagement with customers enables a firm to identify their needs and thus looks forward to innovative mechanisms that will match the demand and supply of goods and services. In other words, to fully satisfy their customers. Technological innovation is viewed as activities where the enterprise fashion focuses on identifying the users and the customers and indicating whether the latter pay for what they use or is it paid for by other clients (Teece, 2010). E.g. In the case of television, the users don't exactly pay for the services, but they are instead paid for by others such as the advertisers.

 

According to Zott & Amits (2010), a simple definition of this business artwork is given as portraying a matter, form, and administration of business activities made with the aim of creating a quality via thorough exhaustion of the available commercial enterprise opportunities. Each business choice approached by the management involves a fundamentally distinct business model due to the implication of different set of activities, the potential to perform them and the resources available. A business model is aimed at benefiting all the involved participants by ensuring total value creation. Zott and Amits (2010) noted that the primary goal of a focal firm enterprise model is to fully make use of the available commercial gaps and opportunities by the enhancement of quality for the involved parties. The business model encourages entrepreneurial managers to plan their future design, helps them in analyzing and enables them to improve their current models for them to be futuristic.

They gave an example of FriCSo, an upcoming engineering company which has applied a friction reduction technology thus achieving significantly in a technological breakthrough. There are always many options to weigh to make maximum profits and minimize the costs of production (Saebi & Foss, 2015). FriCSo came up with this idea after discovering that there was clear and mass applicability to the products due to serious industrial applications which involved moving parts such as manufacturing machines and ship building. After choosing the target industry, they came up with the best kind of company that could fully commercialize the intellectual properties. Each choice an entrepreneur makes will always have its connections for the businesses’ potential of performance (Neubauer & Lank, 2016).  A business model emphasizes on the best model that a firm should adopt for it to match itself with the existing forms of original equipment manufacturers (OEMs).

 According to Itami and Nishino (2010), business models are made of two elements which include a profit model and a business system. Itami and Nishino, (2010) argues that the profit oriented model is highly recognized and profiled because companies operate with a primary goal of maximizing wealth and profits.  They further postulated that these two business model elements cannot work if applied at the same time in one company and this means that businesses should adopt the most viable model as per the market needs and corporate company goals. The internal and external operations of a firm are determined by the market systems and the profit model of the enterprise, and therefore managers should be sensitive in choosing either in the two. Application of one model assists in the easy management of company objectives as well as their achievements.

Kodama's (2009) article ‘Boundaries Innovation and Knowledge Integration in the Japanese Firm' has inspired and helped me understand business models. With a very simple example, the article explains how and why Japanese companies applied new leadership models in high-tech fields. Many countries such as South Korea learned the development and better techniques of production from the Japanese. In simple terms, one only needs to come up with the different business idea and implement the most suitable business model to make their business dreams a reality. To my understanding, a business model is the determinant factor in the success of every business.

Zott and Amit (2010) article ‘Business Model Design: with the view of a business model in an Activity System Perspective’ has effectively contributed to my understanding of a business model. With the simple view of an enterprise artwork or fashion (business model) as portraying the substance, combination of rules defining a behavior, and administration of a deal designed so as to create value through the proper use of the available opportunities, they have enabled me to understand that an enterprise model is a combination of occurrences which a business set up performs, how and when it delivers them (Crane & Matten, 2016). It is also straightforward and precise that a business model may be understood as the nature of goods and services a firm provides to its customers, and the activities performed to deliver such services.

I other words, it is clearly evident that a business enterprise system is a vital instrument in a firm which is viewed as a physical object that manifests how a company undertakes its commercial activities and how its stakeholders timely and adequately acquire the services. A good business model represents physically the possibilities of more and future theoretical development which is separate from non-essential matters. What makes different firms not to be equal in performance is only that they think differently and have different perceptions towards the business activities that determine the vertical value chain.

 

References

Amit, R., & Zott, C. (2012). Creating value through business model innovation. MIT Sloan  Management Review, 53(3), 41.

Baden-Fuller, C., & Mangematin, V. (2013). Business models: A challenging agenda. Strategic Organization, 11(4), 418-427.

Behrangrad, M. (2015). A review of demand side management business models in the electricity market. Renewable and Sustainable Energy Reviews, 47, 270-283.

Chesbrough, H. (2010). Business model innovation: opportunities and barriers. Long range  planning, 43(2), 354-363.

Chesbrough, H. (2013). Open business models: How to thrive in the new innovation landscape. Harvard Business Press.

Crane, A., & Matten, D. (2016). Business ethics: Managing corporate citizenship and  sustainability in the age of globalization. Oxford University Press.

Itami, H. (2010). Killing Two Birds with One Stone: Profit for Now and Learning for the Future.  https://www.elsevier.com/locate/lrp, page 364-369.

Mitsuru, Kodama, (2009). Boundaries Innovation and Knowledge Integration in the Japanese Firm

Neubauer, F., & Lank, A. G. (2016). The family business: Its governance for sustainability.  Springer.

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

Teece, D. J. (2010). Business models, business strategy, and innovation. Long range planning, 43(2), 172-194.

Zott, C., Amit, R. (2010). Business Model Design: An Activity System Perspective. Journal of Management,  216-226

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