Tagged: business model

Industrialization as a Business Model

IndustrializationWhen we talk about industrialization, we generally think of an assembly-line setup or a factory production environment where people are working on standard processes and functions. In general perspective, we can look at Industrialization as a part of a wider modernization process, where development is closely related with process, technological and innovation. Looking back at the history of Industrialization, we see it as a phase in social and economic change that transformed human groups from an agrarian society into an industrial one.

In a modern day society the definition of Industrialization has gone through a transformation. Businesses are adapting the theory of industrialization and are combining it with strategic management initiatives. The service sector in particular is now being closely linked to the process of Industrialization. The key factor in industrialization is to plan and provision services as an industry process that is subject to industrial optimization procedures, such as standardization, bench marking and quality control.

The reason why the concept of Industrialization came into picture as a business model is because in the year 1972 the service sector suffered from high degree of inefficiency and variation in quality. The reason was that each service offering was treated as an isolated entity or event. There was an anxious need for a system or process that could amalgamate all different elements of service events and standardize the offering. So more like defining and executing repeatable function with predictable result, that is accelerated by technology to achieve far higher levels of productivity. The influence came from the manufacturing sector; where with the help of automation and statistical quality control, better products could be manufactured with consistency and quality. The same theory was applied to the service industry and the results were remarkable. Two apt examples are the case of McDonalds and WalMart.

WalMart in specific has been very instrumental in adopting the Industrialization process, specifically in their supply chain management system, ex. products are always moving and the supply-demand cycles flow almost instantaneously to market demand, with inventories kept at a bare minimum always.

However, after almost a decade of business Industrialization influence, many companies and industries are now facing varied consequences. Things like low employee morale, attrition and a gradual dip in service quality are the outcomes of and industrialized working environment. Customers feel that they are missing that “personal touch” or “human factor” while doing business. Many employees of such industrialized companies feel like working in a very robotic environment where there is great dependability on processes and technology.

Latest developments in Industrialization environment show that companies are now gradually becoming more cautious about personalizing their service offerings. Employees are now been trained and empowered to customize the service encounter to the individual characteristics of customers. So we see a trend where industrialization is now been followed more as a backbone to perform a function, but the emphasis is still on giving that personal or human touch to business and customers.

Getting LEAN

Getting LEANThe typical way to start a new business or venture is to first get started with a clear cut business plan, then pitch the idea to potential investors, gather a team, introduce a service or a product and finally start selling as hard as you can. Well, according to a new research done by Harvard Business School, 75% of all start-ups fail, because most of them experience a setback somewhere in the sequence of above events. Things like running out of cash flow, or lack of a proficient team are typical reasons why start-up do not succeed.

In the last couple of years, a new methodology has started appearing, popularly known as the “lean start-up” and it favors experimental approach over elaborate planning, customer feedback over intuition and iterative design over traditional development. The term “lean startup” was first coined by Eric Ries in the year 2011, it originally generated from the philosophy based on lean manufacturing, which is the streamlined production methodology developed in the 1980s by a Japanese auto manufacturing company.

According to the theory, the lean methodology seeks to eliminate wasteful business practices and increase value producing practices during the product development phase so that startups can have a better chance of success without requiring large amounts of outside funding, elaborate business plans, or the perfect product.

So while following a lean startup method a founder or owner doesn’t begin with a business plan, they would begin with the search of a business model. The other notable element of lean methodology is – quick and responsive development. In comparison to traditional product development, where each stage occurs in a leaner sequence and has timelines attached to it, agile development builds products in short and repeated patterns. So for example a manufacturing company following the lean methodology would produce a “minimum viable product” that would contain only the critical features, gather feedback from its customers and then start with the revised and improvised version.

Many big companies are going the lean starup way as they see the tremendous cost advantage in adapting this new methodology. For example, companies such as GitHub, and cloud based services, such as Amazon Web Services, have minimized the cost of software development to millions of dollars. Even hardware companies no longer have to build their own hardware setups, since off-shore manufacturing is so easily accessible.

If we look at the history of management education, we can see it was solely focused on helping students build strategies and tools that formalized execution and efficiency of existing business. With the introduction of the lean startup method, the focus has changed to searching new business models as we launch startup venture. This new methodology is here to stay and would eventually help business owners meet challenges with a new perspective, innovate rapidly and transform the way we do business.

Working towards a global business model

Global business modelIn the age of globalization it is becoming important every day to describe the rational of your organization and its objective. Defining a clear cut business model is the first step towards drafting a business strategy. The global marketplace is changing and so it’s essential for us to analyze our business models and change it according to the market trend.

Rapid technological changes, a dynamic marketplace, challenging customers, increasing global competition, and pressure from investors are just a few factors that govern the current world economy. Global financial markets and an open trading system require organizations to deliver and serve their clients more quickly in efficiency, profitability, cost effective pricing, quality, and innovation.

The key is not just to focus on saving costs but to deliver standardize and end-to-end services to your clients. Adding value is the second most important factors for business growth and sustainability. Positioning a global business model means development of a globally unified environment, optimizing skills globally to create an assortment of business and skills to better strive, and better serve the growing needs of customers worldwide.

Flexibility in workforce is the third most important measure that needs to be considered. Being able to position the best talent and most suitable resources wherever they are required, is the key. Ongoing economic instability means businesses must abide growing and contracting faster than before, organically and through mergers and acquisitions. Hence a multi-functional shared service provides much-needed flexibility to be able sustain in the current global market place.

Last but not the least technological innovation is by far the most essential part of a global business model. Businesses that envision a global presence should never stop innovating and offering value through technology. Digitization is just one of the few examples of global innovation.

Most importantly, expect the unexpected and adapt flexibility!

Is your Corporation Socially Responsible?

corporate social responsibilityIn the past few years, great emphasis has been given to the concept of Corporate Social Responsibility, precisely defined in terms of the responsiveness of businesses to stakeholders’ legal, ethical, social, economical and environmental expectations. Over the last decade, there have been number of companies worldwide that have started promoting their business through Corporate Social Responsibility strategies because the customers and the investors expect them to act sustainable as well as responsible.

The concept of Corporate Social responsibility is now becoming a self-regulation integrated into an organizations’ business model. Its regulations generally function as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. On a broader level, “corporate social responsibility” or CSR is a mechanism though which an organization can embrace responsibility for its actions and propel a positive impact through its business activities on the consumers, employees, stakeholders, communities, environment and all other members of the public sphere.

ISO 26000 is the recognized international standard for CSR. The standard emphasizes the relationship of a business to the society and environment in which they operate which is a critical factor in their ability to continue to operate effectively. The ISO 26000 standard is becoming popular these days as it helps businesses and organizations translate principles into effective actions and shares best practices relating to social responsibility, globally and is meant for all types of organizations regardless of their industry, activity, size or location.

Social responsibility and sustainability have become important marketing strategies for businesses. Corporations are motivated to become more socially responsible because their most important stakeholders expect them to understand and address the social and community issues that are relevant to them. Generally, CSR is related to crisis i.e. whenever a company falls into a social or economical crisis they look towards the concept of corporate social responsibility. It is important that organizations understand the significance of the concept of CRS and integrate it into their business models.

Aligning a business towards a sustainability approach is always helpful in the long run. CSR is an evolving theory and with the coming of the global digital age, the theory is gaining rapid significance among business of all sizes.