All firms have as their strategic goals accelerating growth and performance while simultaneously adding value for customers.
Although it is common for managers to place a strong emphasis on financial success, competent managers actively seek out new possibilities to generate value.
If handled wisely, Business Model Diversification enables value generation and may help managers improve performance and broaden the enterprise's objectives.
Business Model Diversification, or the use of several business models for value creation and revenue generation, has become a vital goal for firms hoping to maintain a Competitive Advantage in today's fiercely competitive business world.
Businesses with industry-breakthrough growth vary their Business Models utilizing strategies like Business Model Innovation (BMI), a technique that simultaneously affects both the fundamental business model and the value offer to clients.
BMI is a potent but underutilized instrument that may generate breakthrough development inside the core business of a company.
According to Michael Porter, strategic diversification is about combining activities that efficiently relate to and mutually reinforce one another, forming a system of activities, as opposed to a collection of isolated activities.
It takes a methodical approach to determine which activities fit together inside a Business Model and which activities might be synergistic across Business Models.
MIT Sloan Management Review research developed a methodology for evaluating the effectiveness of diverse Business Models. The methodology helped with the analysis of the Formula 1 car racing sector, the several businesses operated by Amazon Inc., and almost 50 other enterprises.
The following 3 questions served as the foundation for this study:
- What factors need to be considered while thinking about Business Model Diversification?
- How can a new Business Model's value be evaluated and optimized so that it may be added to the portfolio?
- How can the portfolio of Business Models be enhanced over time?
An 8-step approach that takes into account the complementarities in a portfolio of Business Models was created to address these problems. The Business Model Portfolio's multiple activities may be divided up and analyzed using the 8 steps. The visual map for a Business Model Portfolio Analysis is made in the following steps:
- Identify Business Models
- Identify Key Resources
- Identify Key Capabilities
- Identify Key Performance Indicators (KPIs)
- Connect Model to Resources & Capabilities
- Identify Interconnected Resources & Capabilities
- Monitor & Maintain
These steps make it possible to visualize the connections between various methods and competencies and their impact on Performance, enhancing the correlation across a portfolio of Business Models.
The following sections go through some specifics of a few processes necessary to creating a strong Business Model Portfolio:
Identify Business Models
The 1st stage in the 8-step process is to list the Business Models used by the organization.
Identify Key Resources
Find out what important resources, such as money or user data, each business model produces.
Identify Key Capabilities
Find the core competencies that each Business Model produces, such as technical and sales competencies.
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