Discuss about the Innovation and Business Development for Maintaining Sustainability.
Business model refers to a plan that companies utilize in order to implement successful business operation (Noyen et al., 2014). Previously, companies use to follow a particular business model for a certain period of time. However, in the present extremely competitive business environment, organizations have to focus on several factors at the time of introducing any business model for the maintaining sustainability in the market. Therefore, organizations have to made several changes in the business process to maintain the effectiveness of the business model. In this essay, the focus will be on the Bitcoin innovative business strategy that bypasses clearinghouses and traditional banks with its implemented block chain technology. Bitcoin represent internet currency that has able to revolutionize the payment system and technology. In this essay, comparison will be made on the traditional business model of the banks with the innovative business model strategy of Bitcoin to establish the significance of timely up-gradation of the business model in order to maintain its position in the market.
As per the article by Zhang & Wen (2016), financial network represents a technological platform that businesses utilize for maintaining the effectiveness of the operational process. Traditional banks utilize conventional business model for the fulfillment of the operational process. For instance, traditional banking business model utilize close platforms like credit card for the effective utilization of e-commerce. On the other hand, Bitcoin represents digital monetary ecosystem that utilizes innovative technology to gain popularity in the market. The block chain technology that Bitcoin has implement in its business model has able to create major impact on the business processes in the banking sector. However, Bitcoin’s innovative business model has created several new compliance and regulatory challenges. It has increased the interest in identifying the source from where the money has come from. In this situation, maintaining the anonymity of the Bitcoin makes developing data trail a complex task. As mentioned by Brito & Castillo (2013) the Sacramento Kings basketball team, Zynga and Overstock.com have started to accept Bitcoin payments. In fact, it has been identified that several political candidates are collecting donations through the utilization of the Bitcoin system. Over the past few years, the number of Bitcoin user is growing in a very rapid speed.
Bitcoin is based on some complex and heavy data crunching, that has completely changing the traditional way of payment in the e-commerce sector. Bitcoin also has developed an ecosystem where it will have its share of losers and winners. As per the article by Hanley (2013) that Bitcoin innovative disrupters are those that have the greater possibility of becoming the winner. The article also mentioned several analogies between the pioneers of California Gold Rush and the Bitcoin innovative disrupters. California Gold Rush has able to create wealth for the miners who have jointly entered in the San Francisco area. However, it has able to create groundswell of laid foundation and entrepreneurship for the future utilization of the operational process. Bitcoin’s business model is very different from any other financial institution. In the Bitcoin business model, transactions are cryptographically authenticated and cannot be reserved (Barnett, 2014). It reduces the risk of online payment method.
Many studies have highlighted that Bitcoin is among the most popular technology network that has the potential to affect the business model of the banking sector. It highlighted new type of financial assets namely crypto currencies. Bitcoin business model has provided more security in the online transaction. Therefore, majority of the people are being influenced to use more and more Bitcoin for their online transaction. As a result, it not only increasing the popularity of the Bitcoin but also creating threat for the conventional banking technique. It has been assessed that business model of Bitcoin is utilized in such away so that it can provide more financial benefits for the users. For instance, it has been assessed that transaction of Bitcoin is equal to 0.71% of the credit card transaction (Bonneau et al., 2014). In addition, studies have able to identify that there is still lot of space for crypto currency to grow into. As per the article by Tan & Low (2015) $11.2 billion dollars worth of transaction happens in USA per day. On the other hand, Bitcoin’s transaction is measured around $78 million worldwide. The transaction amount of Bitcoin has increased almost 450% in past five years.
On the other hand, tradition business model of the banking sector utilize credit card for the effective implementation of the online transaction process. However, banks have developed several rules and regulations regarding for the effective utilization of credit card in the online transaction processes. Existing business model of the banks use four steps before approving any online transaction processes. On the other hand, Bitcoin use only three steps to implement the same process safely. As a result, it has been identified that traditional business model demands more time from the people to implement the online business transaction process safely. Furthermore, in traditional banking structure, people have to consider several factors like market deflation or inflation at the time of depositing money. As a result, it increases the possibility of risk for the people. On the other hand, Bitcoin have only issue regarding the risk factor, which is if someone can able to breach security of the wallet. Thus, it highlights the fact that if people can able to maintain the security level of their wallet, they will definitely able to reduce the possibility of any risk. One of the prime effects of this rude awakening seems to have been a surge of interest in this virtual currency. As a result, people have utilized more than 40 online exchanges for the effective utilization of the Bitcoin. The increase in popularity of Bitcoin has raised questions against the effectiveness of the implemented business models of the traditional banks.
As per the article by Bonneau et al. (2014) it is high time for the banks and other financial institution to modify their existing business model so that they can able to compete with the newly developed virtual coins like Bitcoin in an effective manner. The article has also mentioned that banks will have to consider several factors in order to increase the effectiveness of the business model. Firstly, banks will have to consider security issue to maintain its popularity in the market. For instance, several services allow people to create their Bitcoin wallet but the security of the wallet is similar to the infrastructure of the web that people rely upon (Hindle et al., 2015). Therefore, banks also have to develop an extremely secure banking service so that people does not have to face any security issue at the time of making any online transaction. Furthermore, Bitcoin does not use any central entity. Therefore, if anyone hack Bitcoin wallet, there is no guarantee that people will get their Bitcoin back. Business model of the banks can utilize this factor to enhance the trust level of the people and also assure them that no matter what people will get their money back in an appropriate manner (Malhotra, 2013). Secondly, business model of the banks will have to highlight the viability of real money or credit card compared to Bitcoin. Now, Bitcoin has able to increase its range for the transaction in past few years but still there are lot area where use of Bitcoin is not acceptable. For instance, people cannot buy their groceries with the use of Bitcoin. On the other hand, credit card can be utilized anywhere and for any purpose. Thus, updated business model of the banks will have to highlight the benefits of utilizing traditional transaction system so that people does focus too much on the utilization of virtual money. As per the article by Kazan, Tan & Lim (2015) business model of banks will have to highlight the kind of difficulties that people will have to face at the time of putting real money in the Bitcoin wallet. Furthermore, business model of traditional bank will also have to provide several financial assistances to the people so that they do not feel any requirement for utilizing virtual money. However, it has been identified that initially financial institutions do not able to evaluate that utilization virtual money can actually damage their position in the market (Ali, Clarke & McCorry, 2015). However, increasing popularity of virtual money has enforced them to modify their business model so that have impact on the online transaction processes of the people.
From the above discussion, it can be assessed that innovation of new technique will create disruption in the operational processes of the traditional business. Therefore, every business will have to evaluate all the factors that can actually affect the business processes of the organization. For instance, emergence of virtual money has affected the popularity of the traditional online transaction processes like credit card. As a result, banks will also have to modify and innovate a new business model in order to maintain its popularity in the market.
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