What gives your company a competitive edge is strategically valuable resources (the ones enabling enterprise to perform activities better or more cheaply than rivals). These can be physical assets (a prime location), intangible assets (a strong brand), or capabilities (a brilliant manufacturing process). For example, Japanese auto companies have consistently excelled through their capabilities in lean manufacturing.
Strategically valuable resources have five characteristics:
1) They're difficult for rivals to copy. Some resources are hard for rivals to copy because they're physically unique; for example, a desirable real estate location. Others must be built over time, such as Gerber's brand name for baby food.
2) They depreciate slowly. Disney's brand name was so strong that it survived almost two decades of benign neglect between Walt Disney's death in 1966 and the installation of Michael D. Eisner and his management team in 1984.
3) Your company—not employees, suppliers, or customers— controls their value. Your company does not lose a critical resource when a key employee leaves.
4) They can't be easily substituted for. Because of easy substitution, the steel industry lost a major market in beer cans to aluminium can makers.
5) They're superior to similar resources your competitors own. A maker of medical-diagnostics test equipment bested rivals at designing an easy interface between its machines and people who use them. Armed with this capability, it expanded into doctors' offices, a fast-growing segment of its market. There, office personnel, not just technicians, could operate its equipment.
To keep your edge sharp, build your strategies on resources that pass these five tests. Regularly invest in those resources. And acquire new ones as needed, as Intel did by adding a brand name—Intel Inside—to its technological resource base.
The capitalist system is under siege. In recent years business has been criticized as a major cause of social, environmental, and economic problems. Companies are widely thought to be prospering at the expense of their communities. Trust in business has fallen to new lows, leading government officials to set policies that undermine competitiveness and sap economic growth. Business is caught in a vicious circle.
A big part of the problem lies with companies themselves, which remain trapped in an outdated, narrow approach to value creation. Focused on optimizing short-term financial performance, they overlook the greatest unmet needs in the market as well as broader influences on their long-term success. Why else would companies ignore the well-being of their customers, the depletion of natural resources vital to their businesses, the viability of suppliers, and the economic distress of the communities in which they produce and sell?
Companies could bring business and society back together if they redefined their purpose as creating "shared value"—generating economic value in a way that also produces value for society by addressing its challenges. A shared value approach reconnects company success with social progress.
Firms can do this in three distinct ways: by reconceiving products and markets, redefining productivity in the value chain, and building supportive industry clusters at the company's locations. A number of companies known for their hard-nosed approach to business have already embarked on important initiatives in these areas. Nestlé, for example, redesigned its coffee procurement processes, working intensively with small farmers in impoverished areas who were trapped in a cycle of low productivity, poor quality, and environmental degradation. Nestlé provided advice on farming practices; helped growers secure plant stock, fertilizers, and pesticides; and began directly paying them a premium for better beans. Higher yields and quality increased the growers' incomes, the environmental impact of farms shrank, and Nestlé's reliable supply of good coffee grew significantly. Shared value was created.
Shared value could reshape capitalism and its relationship to society. It could also drive the next wave of innovation and productivity growth in the global economy as it opens managers' eyes to immense human needs that must be met, large new markets to be served, and the internal costs of social deficits—as well as the competitive advantages available from addressing them. But our understanding of shared value is still in its genesis. Attaining it will require managers to develop new skills and knowledge and governments to learn how to regulate in ways that enable shared value, rather than work against it.
A definition of business model. By defining business model, authors systematically divide business model into four main components which are Customer value proposition (CVP), Profit formula, Key resources and Key processes.
Three key sections are raised as key steps to achieve a successful business model. Being matched with the definition, they are creating a Customer value proposition, designing a Profit formula and identifying key resources and processes. By displaying the flow chart (Page 5), authors vividly sequence the elements of a successful business model in which CVP plays a fundamental role and leads to the design of a profit formula. Key resources and processes are often seen as practical factors contributing to the CVP.
Since changes of business model may not always happen, which is also agreed by authors in this article that stories of business model innovation from well-established firms is rare, authors discuss the situation calling for a new business model and the situation where old model will work respectively.
It is concluded that in order to chase transformative growth, many companies resort to technological innovation or product innovation, while as presented in the opening case, enveloping new technology or product in a different business model may get unexpected achievement and such attempt seems to be more popular and feasible in today's rapid changing world.