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Business Models and Innovation

Discuss about the Innovation for Commonwealth Bank Australia.

Innovation is the process by which an individual or a group of people come up with an improved version of an existing idea. The business model of an organisation is the framework that is developed to base the operations of the business, it is like a guideline. For a business that runs on innovation and improvement it can be said that the business model of that company is based on innovation (Gokhberg & Meissner, 2013).  Some of the examples of such organisations are: Apple, Amazon, Microsoft etc. In this assignment the role of role of innovation in a business model is going to be analyzed by study the strategies of Commonwealth Bank Australia.

The organisation is a multinational financial institution that has its headquarters in Sydney. The company was founded in 1911 and has a long history of ups and down in the business, in this tenure the organisation has garnered goodwill not only among the clients but also among the other stakeholders. The company went public in the year 1991 (commbank.com.au, 2017).

The mission of the organisation is to make the company most accessible bank in Australia.

The objectives of the company are as follows:

  • To strive towards a sustainable future
  • To keep up with the objectives of the shareholders
  • To expand the business further (commbank.com.au, 2017)

According to Chesbrough (2010), a business model is a framework that is drawn in order to initiate the process of business and develop an understanding of the process of the operations that will run the venture. It contains the internal resources and external opportunities that build a scope for the business to grow and expand. Not only that it will also help the company trace the revenue network juxtaposing the particular of the cost that will be required to carry out the operations of the business. On the other hand, Zott et al. (2011), says that a business model is used to develop a strategic management plan to achieve the objectives and to align the interest with the stakeholders of the organisation.

As discussed innovation is developing new attributes to an existing idea, an innovation is categorized as disruptive. Disruptive innovation is the idea of innovation which has the potential of replacing existing ideas in the market. According to Christensen et al. (2015), the organisation that can create disruptive innovation idea can use the strategy to ensure competitive advantage in the industry.

  • Helps in obtaining an edge over the competitors in the market, furthermore also provide opportunity for the company to become the market leader in the long run.
  • It provides a path for the organisation explore new ideas.

The biggest disadvantage of this kind of innovation is that there is a high rate of risk in the process as it the target market of the company may be apprehensive of the product or service as the idea is completely new the utility may not be known to the target market and therefore it may not be accepted (Christensen et al., 2015).

  • Internal resistance to take risk in the process of innovation due to its uncertain outcomes is one of the significant challenges faced by the company
  • Following the safe route and incorporating the variables in the business model like others in the market may end up in losing an opportunity to build a new market (Souto, 2015)

Disruptive Innovation

The products which are technologically advanced and have a access to connected devices can be called as a smart connect product. This helps an organisation in revolutionizing the operations of the business and brings out a broader perspective of the business model is called Smart connected products (Porter & Heppelmann, 2014).

With a help of smart connected products the company has an opportunity to allow the customers to have a wide range of services within the geographical boundaries of the home country.

It will provide the company an opportunity to fundamentally think of a change in the design as well as the operations of the business based on the requirement of the consumers helping the bank build a value oriented relationship with the customers which are essential for the facilities that a finance company like commonwealth bank requires (Porter & Heppelmann, 2014).

Smart connected products will help the company customize the services according to the preference of the client, for an institution like bank it is important that the services are not generalized as the requirement and the situation of each people differ from one another (Porter & Heppelmann, 2015).

As the nature of the operations of a financial institution is based on heavy data, the cloud-based system approach used by the smart connected products will help the bank in maintaining an organized data based, which is very essential. Not only that the approach will also make the server and the information that is available with the make more secure and useful as it can be accessed by the people who are in charge at any point of time (Porter & Heppelmann, 2015).

Smart connected products also provide an opportunity to keep a check on the process. Apart from that it also provides chances of getting real-time data and this get insightful information (Porter & Heppelmann, 2015)

In case of a security breach the information that is in the server can be used by the infiltrator, thus making the approach dangerous

The incorporation of the approach in the process of business may lead to a rise in cost of the services; this may not be entertained by the consumers and may lead to losing on the customers in the long run

Sometimes the company might overestimate the resources and capabilities leading to a situation of crisis in this approach (Porter & Heppelmann, 2014).

Customer segment 

  • Individual customers
  • Business clients such as other organisations and corporate
  • Creditors card customers

Value Propositions

  • The company is among the big four financial institutions of Australia is plays a significant role in the economy of the country
  • The company believes in sustainable development in the process of growth
  • Premium and hassle-free financial services
  • It provides retail banking services (commbank.com.au, 2017)

Channels

  • Physical branches of the bank present in several cities all over the country as well as in other countries of operation(commbank.com.au, 2017)
  • Online and mobile banking
  • ATM outlets (Osterwalder & Pigneur, 2010)

Customer Relationships

  • The company has a customer care service center apart form that they use technology and innovation in order to reach out and connect to the customers
  • The company provides facility for the people to reach out with the help of new connectivity technologies that are available in order to make the process easy

Smart Connected Products

Revenue Streams

  • Policy premiums
  • Financial services
  • Return on investments
  • Interest on credits and loans (Osterwalder & Pigneur, 2010)

Key Resources

  • The company has skilled employees to look after the daily business operations
  • Information technology infrastructure
  • Physical infrastructure like bank branches and ATMs

Key Activities

  • Providing financial support to the clients and the consumers
  • Insurance policies
  • Loan policies
  • Calculation of the financial risks and mitigation process
  • Credit card services (Osterwalder & Pigneur, 2010)

Key partners

  • The shareholders of the investors are the major partners apart from that the third party who are a part of the supply chain of the business,
  • Colonial national bank (acquired)
  • Aussie home loans and wizard home loans (joint partnership)
  • Security services of the banks and the ATMs

Cost Structure

  • Salaries of employees
  • Taxes
  • Infrastructure maintenance and technology maintenance and development cost
  • Operational cost
  • Security service (Osterwalder & Pigneur, 2010)

The business model of an organization is heavily dependent on the values and principles that are followed in the organisation as it is a framework that is objective driven, if the objective of the company is based on the financial growth and development then the business model is said to be on a profit formula. This is the traditional approach of building a business model, now new and old companies are focusing their interest not only on the profit motive of the company but also on the environmental and societal development.

Value proposition is the statement that an organisation utilizes in order to sum up the reason for the target market to avail the product or services that is offered by the company. This business model is based on this approach focuses on the customers as the main stakeholder and develops strategies to meet the need and changes in the requirement of the consumers.  The value proposition further leads to innovation being a significant part of the business model.

Conclusion

It can be concluded form the above discussion that innovation means development, improvement, experiment and moving ahead. In a business situation innovation plays an important role as a business runs as it caters to the needs and requirements of the customers and innovation helps a company to keep up with the changing need or the change in the trend of the requirement of the target market.

Reference list

Chesbrough, H. (2010). Business model innovation: opportunities and barriers. Long range planning, 43(2-3), 354-363.

Christensen, C. M., Raynor, M. E., & McDonald, R. (2015). What is disruptive innovation. Harvard Business Review, 93(12), 44-53.

Commbank.com.au. (2017). CommBank: Business Insights Report. Commbank.com.au. Retrieved 22 April 2018, from https://www.commbank.com.au/content/dam/commbank/assets/business/can/move-forward/commbank-business-insights-report-unlocking-everyday-innovation.pdf

Gokhberg, L., & Meissner, D. (2013). Innovation: superpowered invention. Nature, 501(7467), 313.

Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries, game changers, and challengers. John Wiley & Sons.

Porter, M. E., & Heppelmann, J. E. (2014). How smart, connected products are transforming competition. Harvard Business Review, 92(11), 64-88.

Porter, M. E., & Heppelmann, J. E. (2015). How smart, connected products are transforming companies. Harvard Business Review, 93(10), 96-114.

Roco, M. C., & Bainbridge, W. S. (2013). The new world of discovery, invention, and innovation: convergence of knowledge, technology, and society. Journal of nanoparticle research, 15(9), 1946.

Souto, J. E. (2015). Business model innovation and business concept innovation as the context of incremental innovation and radical innovation. Tourism Management, 51, 142-155.

Zott, C., Amit, R., & Massa, L. (2011). The business model: recent developments and future research. Journal of management , 37(4), 1019-1042.

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