Business Case Studies, Executive Interviews, John C Camillus on Business Model Innovation

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Executive Interviews: Interview with John C Camillus on Business Model Innovation
May 2009 - By Dr. Nagendra V Chowdary

John C Camillus
Donald R. Beall Professor of Strategic Management, Joseph M. Katz Graduate School of Business and College of Business Administration.

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  • Is there any difference between a business model and a business plan? Few mistakenly suggest that for entrepreneurship courses, it is business plan and for strategy course it is business model. Surely the truth is something else? Can you elaborate on the differences between a business model and a business plan?
    This arena is a semantic jungle. Different authorities and textbooks define the components of strategic management differently. However, there is general agreement that a hierarchy of concepts exists; for example, from identity through mission, vision, goals, and multiple levels of strategy, to objectives and action plans. To my mind, a business model, the basis for creating value, is essential for all organizations regardless of their stages of evolution from single business to conglomerate. Part of the entrepreneurial struggle is to test an initial business model and develop a workable business model. Therefore as your question implies, the rationale for excluding the concept of a business model from a course on entrepreneurship is not readily evident.

    A business plan is a blueprint for action. It translates strategies into programs of action, resource commitments, deadlines, targets, and responsibilities for execution and for monitoring of results. Business plans are essential at all stages of organizational growth. A strategy without a supporting business plan could well be an exercise in futility.

  • When it comes to business model preparation, many dismiss it as textbookish. But your report clearly advocates the importance of a business model in orchestrating a business’s success. Can you highlight the importance of understanding a business model? Why should its thorough understanding be in the greater interests of a business?
    As I mentioned, different authorities in the arena of strategic management use different terms and occasionally define and understand the same terms differently. However, at some stage in the strategic management process it is essential to articulate formally the organization’s framework for creating value and offering this value to a willing customer. This is absolutely necessary in order to ensure that managers in different functions and in dispersed locations make decisions that are mutually reinforcing rather than in conflict.

    Furthermore, the rapidly changing business environment gives rise to a frequent need for strategic innovation. Unless the “business model” is clearly and widely understood in the organization, the necessary innovation and improvements would bemore a consequence of serendipity rather than a result of purposeful and creative thought. Themore clearly the business model is formulated and the more widely it is communicated the more and better the inputs that can be provided by the employees and other significant stakeholders.

  • An IBM study (Paths to Success – Three Ways to Innovate Your Business Model) identified three types of business model innovations – industry model innovation, revenue model innovation and enterprise model innovation. Are there any illustrative examples of successful business model innovations symbolizing each of these models?
    There are several approaches to categorize business models. The IBM study, for one, proposes a useful taxonomy and provides examples that the authors view as falling into each of these categories. Taxonomies are useful to stimulate thinking about the range of possibilities for innovations in the business model. However, in my experience, business model innovations rarely, if at all, fall cleanly and solely into any of these three categories. An industry model innovation will involve both revenue and enterprise model innovation. Force-fitting an innovation into one of these categories may be a useful academic exercise for promoting understanding, but it also carries with it the potential downside of limiting thinking about possible, alternative combinations.

  • Which of these three models do you think would be most appropriate for existing companies? Which of these three models do you think would mostly suit new companies?
    In line with my answer to your previous question, I would hesitate to limit the possibilities that any organization at any stage should consider.

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