2010 BusinessModelsADiscoveryDrivenA

Subject Headings: Business Model, Business Model Analysis, Organizational Decision Making.

Notes

The business model concept offers strategists a fresh way to consider their options in uncertain, fast-moving and unpredictable environments. In contrast to conventional assumptions, recognizing that more new business models are both feasible and actionable than ever before is creating unprecedented opportunities for today's organizations. However, unlike conventional strategies that emphasize analysis, strategies that aim to discover and exploit new models must engage in significant experimentation and learning - a “discovery driven," rather than analytical approach.

The Business Model has evolved as a popular term, and as a focal concept for strategy. Key drivers have been the emergence of the commercial Internet, enabling ubiquitous communications and increasingly cheap ways to convey vastly more rich amounts of information, and making it possible for businesses to do things they simply never could before. ‘Conventional rules tie us down? ’ the dot - com entrepreneurs seemed to trumpet, ‘no way e we have a superior business model ! ’ Of course, as became rather evident rather quickly, old-fashioned ideas like having profits e or failing profits, even revenues - continue to matter. Nonetheless, the idea that a company can create a competitive advantage by doing something differently e adopting a new business model - has remained with us. Some observers have gone so far as to suggest that a business model offers a new way of analyzing companies that is superior to traditional concepts such as position within an industry.1 It is worth, therefore, reflecting a bit on where the concept might take us and what we might expect from business models in the future.

The concept of ‘the business model’ is appealing because it suggests a change to the way that strategies are conceived, created and executed against. In highly uncertain, complex and fast-moving environments, strategies are as much about insight, rapid experimentation and evolutionary learning as they are about the traditional skills of planning and rock-ribbed execution. Modeling, therefore, is a useful approach to figuring out a strategy, as it suggests experimentation, prototyping and a job that is never quite finished.

Business model analysis also gives us a sense of firms in action. But this dynamic perspective is not central to two ideas about the genesis of competitive advantage that are well-accepted in strategy: the industry positioning view or the so-called resource-based or dynamic capability view. The positioning school has long proposed that what firms need to do to succeed is to find a truly differentiated and defensible position within an industry and execute relentlessly against that position. The capability school argues instead that advantage stems from having difficult-tocopy resources that are often built up over long periods of time. The dilemma is that neither of these perspectives give management much latitude for action. Having selected a position in an industry, it is hard to pluck a firm out and move it to some other position; similarly, after a firm has spent time and effort assembling a compelling resource endowment, order of magnitude shifts are quite difficult. But making business model decisions does fall into the realm of managerial choice, and is therefore exceptionally useful to inform managerial decision-making.

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	Author	volume	Date Value	title	type	journal	titleUrl	doi	note	year
2010 BusinessModelsADiscoveryDrivenA	Rita Gunther McGrath			Business Models: A Discovery Driven Approach						2010