5. Management of cost strategically

Management of Cost Strategically for Emerging Business Models

Learning Outcomes

  • EVALUATE and ANALYSE the factors acting as key drivers of change in the business environment, referred to as change drivers.

  • UNDERSTAND and EVALUATE how the dynamic business environment is giving rise to new business models.

  • UNDERSTAND and APPRAISE emerging business models relevant to Hyper Disruptive Environment, Sustainability, and Emerging Markets.

  • EVALUATE and APPLY strategies (drafting and implementation) in response to change drivers resulting in emerging business models.

Strategic Cost & Performance Management Overview

  • The business environment is inherently dynamic and ever-changing.

  • Focus on underlying elements driving changes that yield new business models.

  • Highlight various business models relevant to hyper-disruptive environments, sustainability, and emerging markets.

  • Suggest strategic responses to emerging business models.

Changing Business Environment

  • Need for environmental analysis in crafting strategies to better address opportunities and threats.

  • Business leaders must assess changes like technological advances, stakeholder expectations, and increased competition.

  • A changing environment may compel organizations to adopt new business models.

Understanding Change Drivers

  • Key elements driving changes include hyper-competition, advancements in technology, and sustainability pressures.

  • Change drivers can be classified as causes (e.g., digital technologies) and effects (e.g., advanced manufacturing).

  • Prominent change drivers:

    1. Digital Technologies: Tools and systems that generate, store, or process data (e.g., smartphones, IoT, blockchain).

    2. Business Ecosystems: A network of organizations involved in delivering a product/service.

    3. Hyper-competition: Intense competition creating market instability.

    4. Transformation and Disruption: Innovations that shift competition basis in industries.

    5. Advanced Manufacturing: Innovative technologies to enhance manufacturing competitiveness.

    6. Agile Organizations: Structures that enable quick responses to changing environments.

    7. Lean Start-ups: A model emphasizing quick iteration and feedback to develop business ideas.

    8. Start-ups vs. Incumbents: The strategic dynamic between new and established companies.

    9. Intrapreneurship: Entrepreneurship within an organization to foster innovation.

    10. Innovation Hubs and Incubators: Spaces fostering new ideas and start-up growth.

    11. Supply Chain Partnerships: Collaborations to optimize supply chain efficiency.

Technological Advancements Impact

Digital Technologies (5.4 - 5.8)

  • Internet of Things (IoT): Enables continuous connectivity of smart devices, enhancing operational insights.

  • Robotics: Enhances operational effectiveness and frees up human labor for complex tasks.

  • Artificial Intelligence (AI): Provides insights and analytics, transforming decision-making processes.

  • Automation: Implements technologies to perform tasks traditionally done by humans, enhancing efficiency.

  • Cloud Technology: Facilitates service delivery via the internet, enhancing business agility and scalability.

  • Autonomous Vehicles, 3D Printing, Digital Twin, Augmented Reality, Mobile Internet, Blockchain: Emerging technologies reshaping industries to improve efficiency and customer engagement.

Business Models in a Disruptive Environment

  1. Hyper Disruptive Models: Focus on creating, disintermediating, refining, or re-engineering services/products.

  2. Value Proposition: Must provide significant value to outcompete in the market.

  3. Types of Business Models:

    • Free Model: Core product is free, premium paid by advertisers (e.g., social media).

    • Subscription Model: Regular fee for ongoing access to services/products (e.g., OTT platforms).

    • Freemium Model: Basic service free, charges for advanced features (e.g., SaaS).

    • Digital Platform Model: Facilitates transactions between buyers and sellers, earning through fees (e.g., e-commerce platforms).

    • Service Ecosystem Model: Integrated products/services that lock customers into a system, minimizing competition.

    • Experience Model: Products/services enrich customer experience, making switching hard.

    • On-Demand Model: Charges for immediate access to products/services, offering convenience.

  4. Models Relevant to Sustainability: Incorporates social/environmental considerations into profitability plans.

  5. Models for Emerging National Markets: Customized to align with local consumer needs and market dynamics.

Strategies and Responses to Change

  • Creating New Business Models: Understand change drivers' implications on strategy.

  • Strategies include:

    • Digital Technology Responses: Innovate product offerings while optimizing existing services.

    • Value-Based Strategies: Focus on capturing customer value through ecosystem collaborations.

    • Short-Term Benefits in Hyper-Competition: Foster environments conducive to continuous innovation.

    • Responding to Transformations/Disruptions: Implement proactive strategies to maintain market position while navigating industry changes.

Conclusion

  • The changing business environment compels organizations to rethink and adapt their business models. Understanding and strategically responding to change drivers (such as digital advancements and hyper-competition) is crucial for survival and success in today's marketplace.