Diversifying Business Model for Value Creation
Despite the fact that it is typical for managers to put a lot of focus on financial success, good managers constantly look for new ways to provide value.
Business Model Diversification may assist managers generate value, enhance performance, and surpass the company’s goals if done properly.
At the foundation of any sustainable organization is its Business Model — the system of symbiotic organizational pursuits to generate and capture value.
In today’s extremely competitive business environment, Business Model Diversification — the use of many Business Models for value creation and revenue generation — has emerged as a critical objective for companies looking to preserve a Competitive Advantage.
Businesses that experience industry-breaking growth change their Business Models through techniques like Business Model Innovation (BMI), which has an impact on both the core of the company’s operations and the value propositions it offer to the customers.
BMI is a powerful but underused tool that has the potential to lead to ground-breaking advancements in a company’s core business.
In order to create a system of activities rather than a collection of unrelated activities, according to Michael Porter, strategic diversification entails merging activities that effectively link to and mutually reinforce one another.
Finding the activities that work well together inside a Business Model and those that may have cross-Business Model synergies requires a thorough approach.
Research from the MIT Sloan Management Review created a system for assessing the efficacy of various Business Models. The research of the Formula 1 auto racing industry, the several companies run by Amazon Inc., and over 50 other firms was made easier thanks to the technique.
The following 3 inquiries formed the basis of this investigation:
· What elements must be taken into account when considering Business Model Diversification?
· How can the worth of a new Business Model be assessed and improved so that it may be included in the portfolio?
· How can the Business Models portfolio be improved overtime?
To solve these issues, an 8-step procedure that considers the complementarities in a variety of Business Models was developed. The eight phases may be used to separate and map the many operations that make up the Business Model Portfolio:
1. Identify Business Models
2. Identify Key Resources
3. Identify Key Capabilities
4. Identify Key Performance Indicators (KPIs)
5. Connect Model to Resources & Capabilities
6. Identify Interconnected Resources & Capabilities
7. Analyze
8. Monitor & Maintain
These procedures improve the correlation across a portfolio of Business Models by enabling the visualization of the relationships between different approaches and skills and their effects on Performance.
The steps required to build a solid Business Model portfolio are discussed in more detail below:
Identify Business Models
Listing the business models that the firm uses is the first step in the eight-step process.
Identify Key Resources
Find out what vital resources each Business Model generates, such as money or user data.
Identify Key Capabilities
Find the key competencies — such as technical and sales competencies — that each Business Model generates.
Interested in learning more about framework for Business Model Diversification? You can download an editable PowerPoint on Business Model Diversification here on the Flevy documents marketplace.
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