Business Model, Branding and Disruptive Innovation

Week 03
Business Model, Branding and
Disruptive Innovation
Lecturer : Mohammed Jahangir ALAM
Email:
Jahangir.alam@cihe.edu.au
Unit Coordinator: Dr. Mahfuz Ashraf
Email: [email protected]

Learning outcomes
To define and discuss the business model from an entrepreneurial
perspective as a theory and/or framework
To identify and discuss disruptive business models and the process by which
they are developed.
To determine the degree to which existing business models are disruptive in
the entrepreneurial environment.
To investigate the mechanisms by which low-end and new-market
disruptions develop within and among entrepreneurs.
To identify opportunities to innovate a disruptive business model within the
existing business structure.

Business model: theory or framework?
The term “business model” first appeared at the end of the twentieth century.
Some definitions are quite abstract, whereas others are detailed and
comprehensive of business functions.
The definition is based on how the business model will be used, but it isn’t
based on enough theory.
As a result, the language of business model theory has become hazy, and there
is no real general common ground.
Many people have talked about a lot of different things, which has led to a lot
of different concepts, ontologies, and frameworks. This makes it hard to get a
good grasp on the theory.

According to business model theory,
business models “reflect
management’s hypotheses about
what customers want and how an
enterprise can best meet those
needs while earning a profit” (Teece,
2007, p. 1329).
A business model framework is a theorybased description of the firm, its internal
operations, and its relationships; the
framework is frequently defined in terms of
a normative statement about what should
be included in it (Sanchez and Ricart, 2010).
A business model is the business process through which an organization (or
sometimes a person) generates revenue or captures value. In this definition the
process is simply a series of actions or operations through which an organization
generates revenue or captures value.

Business model is defined as a story plot, visual representation, or dynamic simulation of a living
organization that viably pursues and achieves a hierarchy of goals.
A business model essentially presents a cause-and-effect logic of how a living organization creates,
captures, delivers, and shares value in an ecosystem.
In human-centered living organizations, the goal hierarchy of a business model can be derived from or
directly related to the mission, vision, and/or core values of the organization.
Every business model consists of three building blocks, which are summarized using the acronym of “DNA:”
Design;
Needs;
Aspirations.
A business model can be visually documented, analysed, designed, evaluated, and managed using a DNA
Map as in

Disruptive business model:
disrupts the market by addressing to the
repressed
demands,
those demands which have been ignored by
the leading providers and manufacturers of the
industry, and
providing solutions which the current industry
has failed to deliver or is incompetent to do so.

Uber and Netflix two apps which are
on every phone right now.
Why knowing this is important
Video: Disruptive Business Model
The disruptor’s arrow of time:
integrating business model
– The planning and management of a potentially disruptive organization
involves four Disruption Questions :
1. Why disrupt system?
2. What system to disrupt?
3. What system to disrupt to?
4. How best to disrupt system?
– The above four Disruption Questions are organized in the following list:
a) Ideals/Mission/Vision/Core Purpose: Why disrupt existing business model
(DNA)?
b) Present: What existing business model (DNA) to disrupt?
c) Future: What future business model (DNA) to disrupt to?
d) Process (Strategy): How best to disrupt existing business model (DNA) in
order to obtain future business model (DNA)?

How To Develop A Disruptive Business Model?
Disruption requires a lot of
research from your end.
Once this is done, you need a
strategy

Take Advantage From The Repressed Market Demands
The best disruptive business model
ideas come from the knowledge of
repressed market demands.
For example, Airbnb came up with
the idea to create a community based
two-sided online marketplace to
help connect
travelers with local
hosts
.
How has disruptive innovations and
business models affected the solar
power industry?
a) What are the innovative challenges of
today’s markets?
b) What are the fundamentals behind
disruptive innovation?
c) What is the theory of Business Models?

Sharp Solar is a division of the multinational Japanese
Sharp Cooperation which among other things produces home appliances, office electronics, phones, flat
screens and solar power.
Sharp Solar is investing a lot in the thin-film solar cell area, including a recently opened new factory in
Japan.
This focus has made Sharp one of the leading players of the thin solar segment.
The company produces solar products that target everything from homeowners to large solar parks.
They even have a long-term strategy of being able to harvest solar energy in space and then beaming it
back to the earth.
Sharp experienced a decline in 2007 caused by raw materials shortage however they plan to take back to
number one position by solving the raw materials shortage of course

Innovation Is The Key
A disruptive business model only exists
if there is an innovative idea behind it
which support its cause.
Sony kept innovating
Nokia failed
The Innovative Challenge
the managers of the failed companies were not good enough or too risk
averse and that new-growth businesses are unpredictable.
It must be possible for an organization to consistently develop new useful
innovations, if they get the processes right, new research also points in
that direction.
The Importance of the Processes: These processes determine whether
the idea is good enough to earn funding or will be discontinued, and
powerfully influence what managers can do and cannot choose to do.
Midlevel managers play a crucial role in a company’s innovation process,
as it is them who choose which ideas will be presented to the senior
management and therefore which ideas will get the chance to win
funding.

Create A New Market
Reinventing the wheel and creating a new
market by providing an offering with a
totally new utility isn’t easy.
One such example of a brand which
reinvented the wheel is
Instagram.
New-Market Disruptions ( Business
Model A
)
New-market disruptions compete against non-consumption because they
are cheap and simpler to use.
So, they enable a whole new population to use them.
Example; Canon’s desktop photocopier was a new-market disruption
because it enabled a lot of people to conveniently make photocopies
close to their desk.
Disruptors don’t invade the mainstream market, they pull customers out
of it and into the new market.
The disruptors start by attaining customers from the non-consumption
and then by the lowest tiers of their market, incumbents doesn’t feel
threatened

Transistors Were First Used in New Markets
18
Time
Time
Performance
Different
Performance
Measure
Non-consumers or
Non-consuming contexts
Sony 1955
Sonotone 1952

Low-End Disruptions (Business Model B)
Disruptions that take their starting point in the low-end of the original
or mainstream value network are low-end disruptions.
A good example of low-end disruptions is the retailing market, where
several discount retailers have disrupted established retailers.
Customers didn’t need highly educated staff to help them purchase
many products such as paint, hardware, kitchen utensils, toys, and
sporting goods.
Many disruptive technologies are hybrids, in the meaning that they
combine both new-market and low-end approaches.
Discount Airliners targeted both the low-end of the market and the
non-consumption (people who drove or took the train).

Disruptive Innovations Occur in Either LowEnd of Existing or in New Markets
Low End Disruptions
Nucor’s steel mini-mills
Vanguard’s index mutual funds
Dell’s direct-to-customer business
model
20
New Market Disruptions
Bell telephone (telegraph)
eBay online marketplace
Transistor radios
Why?
Cannot compete with existing, sustaining products
Leaders want to incorporate new technologies into existing markets
and products

The disruptive business model of
Zipcar, an RFID-startup
Founded in the year 2000, Zipcar is a membership-based car-sharing
company that has its headquarters in Cambridge, Massachusetts, USA.
Zipcar provides vehicle reservations and usage to its members, whom it
bills by the hour or day of usage.
Zipcar’s fleet of vehicles has RFID transponders that are located on the
windshield.
These RFID (Radio-Frequency Identification ) tags make it possible for
customers to lock and unlock the doors of vehicles for their use.

The disruptive business model of
Zipcar, an RFID-startup (cont.)
Zipcar is currently a Publicly Traded company and has branches in USA,
Canada, and United Kingdom. It employs over 400 people.
Compared to traditional vehicle rental companies in the USA such as
Enterprise Rent-A-Car, Hertz, and Avis, the business model of
Zipcar is
considered to be disruptive.
Zipcar positions itself as being in the industry and business of
“carsharing” and not in the business of car rentals.
Zipcar’s RFID technology allows it to offer a type of service (online
membership and wireless carsharing) that is unique in the industry of
renting and sharing vehicles.

The disruptive business model of
Zipcar, an RFID-startup (cont.)
The business model of Zipcar is now validated,but there are constant
changes and competitive threats in the environment. For instance,
Hertz has started using RFID cards instead of keys in its car rental
service.
Consequently, Zipcar has to constantly review, adapt, and manage its
business model.
Business DNA model and map would help businesses especially scalable
RFID-startups such as
Zipcar to adaptively plan and manage business
models in their lifecycles.

Class Exercise: Find Opportunities In The
Existing Structure
You must consider following questions whenever you look for a
disruptive opportunity
Does your idea make a certain use of product easier?
Does it make the cost of the product cheaper or more affordable for the consumer?
Does it throw the intermediators out of the picture and decrease the efforts of the
consumer?
Does your business model embrace new consumer behavior?
Few More Examples Of Disruptive Business Models
Netflix
Uber
Grammarly
Video Summary: Business Model
Disruption

CASE STUDY

CASE
STUDY
(CONT.)

MAIN
LESSON

Next Week:
Why Great Companies Fail