Wednesday, March 25, 2020

The Development Sequence and Cycle of Digital Business

To avoid fast obsolescence and gain long term business advantage, business management needs to have a very clear understanding of their organizational strengths and weaknesses, the business development sequence and cycle.

With frequent disruptions and unprecedented levels of complexity and uncertainty, organizations need to switch from the classic management style to the digital management flavor by having an in-depth understanding of gains and pains of business development sequence:

Value Proposition -> Business Model -> Business Strategy -> Business Architecture -> Operating Model. 




Value Proposition: Businesses value is multi-faceted and it’s interesting to see how business value is in the eye of the beholder. Not all business value is directly related to ROI. It expands the concept of the value of the firm beyond economic value or shareholder value, to include other forms of value such as employee value, customer value, supplier value, channel partner value, alliance partner value, managerial value, and societal value, etc.

Some business development activities may deliver little to no ROI financial value for the short term, but it helps to build a strong business reputation or brand in the long run. Identify stories on the basis of the "strategic" or "tactical" value, as opposed to the "business" or "customer" value components. In order to show value, first, all parties need to agree on the common value proposition, then, you need to be able to measure it.

Business Model: Business Model is a model of how the business intends to make a profit, creates and delivers “customer value.” More specifically, it is a construct of value proposition, products and services, customer channels, partnerships, cost structures, revenue structures, and required capabilities. Business Model is not a strategy, but a simulation of different strategy scenarios. It is an entire frame of elements that describe the intents and constraints of an organization. The business designers should methodologically review a list of levers for business model components, and generate a list of potential business model options systematically

Organizations exist to enable one or more business models to function. Central to a business model is the ‘value proposition’ which describes the ‘business value’ being offered. There are mapping relationships between the business model and capability model, between the capability model and process model. A strong business model is hard to copy because it focuses attention on how all the critical internal and external business elements of the system fit into a working whole to make it differentiated in the marketplace.

Business Strategy: Most businesses start with a vision and establish a set of strategies to achieve it. A business strategy is conceptual and usually consists of a set of choices about what to do. The strategy is nothing but the answer to the questions such as what are critical business issues or top organizational priorities, where should the capital and resources be allocated to get the max leverage for the business advancement.

Any organization that develops a strategy at the function level independent of direct and specific dependencies on corporate strategy perhaps does a disservice to the entire company. The executive team needs to co-develop a clear vision and cohesive corporate strategy, share the differentiating recipe for how their strategic approach will accomplish strategic goals that exceed those of their competitors, allocate capital and resources scientifically, and implement the strategy smoothly.

Business Architecture: Business Architecture contains the organizational context and is strategic in that it gives direction to the business design and transformation via gaining a systematic understanding of relationships, ecosystems, market dynamics, and the organizational interrelationship between people and processes.

Business Architecture has the visual ability to see an idea and express it in visual terms via interactive ways. It keeps the priorities in balance and facilitates the strategic planning and communicating of business initiatives, translating the abstract concept back into the real world example. It helps to blueprint the future of business and highlight changes with standardization, coherence, and visualization of business improvement initiatives.

Operating Model: The Business Model is concerned with “what,” and the Operating Model with “how.” Generally speaking, the Business Model and Operating Model are at different ends of the business development sequence; business model creation is close to the start of the process, and the operating model is at the end of the process. The business management should understand every island of operation and every workflow process to keep optimizing the business capacity, operational model, and overall organizational competency.

With today’s business dynamic, the business operation should be refined to the point that it can adapt to changing business demands in a timely fashion, it can be adjusted to meet the business priority, and be effective with the little down curve, fine-tune the premium operational model and ensure that operational business ecosystems not only function as expected but also achieve operation proficiency via continuous consolidation, modernization, rationalization, integration, and optimization.

Organizations across industrial sectors face hyper-competition and shortened business life cycles. To avoid fast obsolescence and gain long term business advantage, business management needs to have a very clear understanding of their organizational strengths and weaknesses, the business development sequence and cycle, practice entrepreneurship, explore different paths and take the alternative value creation approach to accelerate performance and unleash business potential.

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