When business models are a competitive advantage: Article review

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While exploring the Journal of Organization Design recently, I found Teece and Linden’s (2017) “Business Models, Value Capture, and the Digital Enterprise” (full citation below). Three main points got me excited.

First:

“The nature of competition today is so different from the primarily scale-based competition of the previous century that it deserves to be called next-generation competition (Teece 2012)… In particular, the acceleration of competition places a premium on rapidly implementing (and continuously updating) novel business models.”

Here, the authors have identified that business models are one of the most important competencies* of an organization. This is exciting for someone interested in organizational design because it means there is actually value in re-thinking structure. In fact, novel business models are so significant, they enable small companies to compete against scaled organizations. Size is no longer an advantage.

And what does a business model do? This brings me to their second point:

“A well-designed business model balances the provision of value to customers with the capture of value by the provider”, and, “Without the right balance between the creation, delivery, and capture of value, the model will not be in operation very long, at least not by a for-profit enterprise.”

These points are significant because they tie together both the creation and capture of value. Teece and Linden (2017) specifically note the importance of planning to capture value, rather than jumping into the creation first while only hoping to monetize it once it gets going.

Finally, what does it take to implement a new business model once it’s designed?

“Business model implementation, like transformation more generally, involves closing capability gaps between the firm’s current activities and those required to enact the new business model (Teece forthcoming).”

This succinct statement reveals precisely where to look when changing a business model: again, it’s about the competencies (or capabilities). What does your organization need to be able to do in order to create, deliver, and capture value?

References

Teece, D. J. (2012). Next-generation competition: new concepts for understanding how innovation shapes competition and policy in the digital economy. J Law Econ Policy 9(1):97–118 Google Scholar

Teece, D. J., & Linden, G. (2017). Business models, value capture, and the digital enterprise. Journal of organization design. Retrieved from https://doi.org/10.1186/s41469-017-0018-x

Footnotes

* For more on competencies, reference Hamel and Prahalad’s 1990 article in the Harvard Business Review.

Further Reading

Hamel, G., & Prahalad, C. K. (1990). The core competence of the corporation. Harvard Busines Review, 1990(May-June), 79-91. https://doi.org/10.1016/B978-0-7506-7223-8.50003-4

Teece, D. J. (2012). Next-generation competition: new concepts for understanding how innovation shapes competition and policy in the digital economy. J Law Econ Policy 9(1):97–118 Google Scholar

Related Journals and Organizations

Organizational Design Community

Journal of Organization Design

Exciting Calls for Papers

Fading Hierarchies and the Emergence of New Forms of Organization

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