What is stimulating new types of business models?
Response to “Rethinking the Business Model”, published by KPMG International, 2006
47% of executives review their business model plan once a year. Why? Companies need to reassess assumptions and regain sharp focus in this ever changing market. According to Rethinking the Business Model, published by KPMG International, the reasons for companies reevaluating business plans in the coming years is due to rapid change in the emerging markets, new technology expansion, and core customer needs.
"The business model is distinct from strategy, although understanding each of its components and how they interrelate can help companies to make better strategic choices.” —Joan Magretta, senior associate at the Institute for Strategy and Competitiveness at Harvard Business School (pg.10)
I observed the differences in KPMG’s business model components with the Business Model Canvas structure: The KPMG model defined a business model as “the mechanism by which a business intends to generate revenue and profits”, and its core components include value proposition, market segment, revenue-generation model, cost structure, value chain.
To my reflection, KPMG’s model is heavily market and revenue driven. However on the other hand, according to Business Model Generation, by Alexander Osterwalder & Yves Pigneur,— they defined “a business model describes the rationale of how an organization creates, delivers and capture value”, which to me is heavily focused on value as a gift to the end-customers. Although I would personally resonate with the value-driven alignment, from a statistical standpoint, KPMG’s report provides great value to peek into the current and future trends.
Two interesting statistics stood out to me as I reviewed the report:
1. One in five companies sees changing customer behavior as a threat, while a further 22% see it as a mixed blessing.
I believe this statement reflects back to the rapid change in emerging markets & core customer needs. It is unavoidable that the ever changing market environment would only accelerate in our generation progress— thus, incorporating behavior change and emotional engagement consideration into the business planning process will only becoming more critical for future organizations.
2. Over the past 3 years, the area where business models have been revised most has been in the area of cost efficiency (44%); secondly, value proposition (40%), and revenue streams (31%)
This report was published in 2006, which means the statistic was reflecting base on the market trends and activities from 2003-2006. I find this indicator very interesting that companies would prefer to "budget and save" rather than investing in new revenue streams. I wonder if there were recent studies on the similar topic, and how that would reflect our current economic performance on a regional and global scale.
(Original article submitted for Timothy Smith’s Business Models & Stakeholders class)