The digital era has brought a vast change in how firms have to operate in the business context. Globalisation has allowed for us to create a mindset of the world as a unique system, a single market. These fundamental changes caused by the driving forces have brought competition to a whole new level, where barriers to entry became easy bricks to breaks, and entering different markets has become much easier to achieve. For instance, it is essential in this “new economy” for firms to adjust their business models, if not, reinvent it to cope with the fierce competition that follows. In essence, the real challenge doesn’t lie on whether firms will cope with the fast changing business environment, but whether they will make the necessary changes on time to cope with it!
Based on this article, the generic elements of a business model are:
- New customer value proposition
- Value network re-configuration
- Leadership capabilities that ensure the satisfaction of relevant stakeholders.
This article not only analyses the the different elements of business models based on past research, but it provides executives and managers with a systemic perspective of developing new business models in addition to a powerful tool — the wheel of business model reinvention (figure below).
The wheel of business model reinvention consists of the four dimensions:
- Customer sensing: refers to the relative ease of acceptance of a new value proposition (also customer value proposition).
- Technology sensing: indicates the relative strength, direction and impact of technology on new customer value and the business network.
- Business infrastructure sensing: refers to the relative responsiveness of the traditional business network to reconfigure, or to the relative ease of a new business network configuration.
- Economic/profitability sensing: indicates the relative economic feasibility and profitability of the proposed model.
In essence, the authors built this model to conclude that the closer the results are to the outer limits of the figure, the more likely it is for a business model reinvention to take place. By doing so, firms will be able to achieve new bases of sustainable competitive advantage in today’s fast changing business environment, resulting in new customer value propositions, technological innovation, and so on.
This article helped raising the bar of awareness of the fast changing environment, and how important it is to adjust the business model in order to survive. They provide the first introduction in how to reinvent the business model. Real-life cases examples would have made the reinvention model more realistic. Nevertheless, it can be concluded that in our current business world, the business model plays a crucial role in ensuring the firm survival. Do not quench your inspiration and your imagination; do not become the slave of your model (V. Van Gogh). This teaches us to be reinvent business models, not to be dependant on the past one.
Sven C. Voelpel , Marius Leibold & Eden B. Tekie (2004) The wheel of business model reinvention: how to reshape your business model to leapfrog competitors, Journal of Change Management, 4:3, 259-276, DOI: 10.1080/1469701042000212669