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Innovative Business Models in Contemporary Settings

All the companies strive to acquire the secret of success. In that matter, each particular business has its own secret of success. Thus, businesses require simple models, which will allow understanding and implementing the factors for success. In that regard these models should also be innovative, where models focusing functionality and productive leadership no longer can provide useful recommendations, most of which became customer oriented. In that regard, this paper provides an overview of the possible innovation in business models, which can be integrated and implemented in the contemporary business setting.

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One of the approaches proposed as business model is implementing a strategy called the ecosystem. The proposed strategy is based on the fact that successful businesses are no longer dependant only on their own efforts, where in order to maintain competitiveness, companies for not only occupy existent ecological niches, but also create new. In that sense, the business success of each unit is dependent on the success of numerous other organizations. Addressing the service oriented business, the ecosystems are not only chains of supplies and distributions, but also many organizations, whether they participate in the allocation of services or not.

An important aspect in such ecosystems is distinguishing the significant segments, where a fundamental attribute of such systems is that failures in any of its domains will result to problems in the other segments of this domain. In that regard, an approach to evaluate the ecological “health” of the business ecosystem can be seen in the methods proposed by Lansiti and Levien (2004). According to this method the business ecosystem should evaluated based on three factors, i.e. productivity, robustness, and niche creation. Productivity is measured based on the profit from the investments made into the business sector. Robustness is measured through the capability of surviving disruptions. For example, the strong growth of the software sector can indicate that the ecosystem in which this sector is a segment, in this case it is services business, is relatively robust. The third factor is niche creation, which can be measured by the degree in which the occurrence of new technologies in the system will be used to create new service and goods. Again, in the case of services business, taking as an example of hotel management, the occurrence of wireless technologies, allowed the occurrence of new services to the customers.

Additionally, strategies that can be outlined within the ecosystem are divided into four types depending on the complexity of relations and the level of turbulence and innovation. The strategies include keystone, i.e. being in the centre of business relations; niche, i.e. occupying a narrow business segment; commodity, i.e. the most ecologically neutral system with a minimal dependence of the company on the ecosystem; physical dominance, i.e. the dependence on complex business relations. In general, the business models presented are simple, where it implies monitoring the process as well as the relations within dependant sectors that influence the system.

For customer-oriented businesses, the reliance on the people as their most valuable capital plays a major role. In that regard, the ecosystem proposed as innovative model for assessment and positioning, it approaches sectors rather people. Accordingly, the focus on the customer in many business sectors, including the services sector, should be derived from the focus on the people as the most valuable capital. In “The Surprising Economics of a ‘’People Business’” by Felix Barber and Rainer Strack, the authors outline the importance of new approaches for the companies that intensively rely on people, or People Business. Services business, in that matter, is people business, where the most important distinguishing factor is the cost of the people employed to the capital invested.

An important aspect for assessing people business is the way it can be evaluated. The authors acknowledged that the standard schemes of business evaluation, i.e. relating the cost of the capital to its productivity, can no longer be effective for people business, where the approach that should be used is relating the cost of the employees in the company to their productivity. In such way, this method isolates the main driver for performance which can indicate hidden operational problems and insights into their causes.

An important aspect that should be outlined in the management of people business is the importance of relevant information. In that sense, it should be noted that the existence of such information should be combined with the ability to use it effectively to make effective decisions.

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It can be seen through the proposed models and evaluations, that innovative business models can improve the existent business schemes in terms of effectiveness. Specifically, when almost all companies became customer-oriented, the traditional models focusing on profit and increasing productivity is no longer forms a competitive advantage among competitors. In that sense, innovating business processes, in addition to improve of efficiency, allows companies to re-assess their productivity and acknowledge different problems as well as their solutions.

References

  1. BARBER, F. & STRACK, R. (2005) The Surprising Economics of a “People Business”. Harvard Business Review, 83, 80-85+.
  2. IANSITI, M. & LEVIEN, R. (2004) Strategy as Ecology. Harvard Business Review, 82, 68-78.

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