Introduction
Strategic management literatures have shown the increasing need for corporations to realize the prolonged competitive advantage in the current unpredictable and turbulent business environment.
In fact, most discussions and analyses show how modern economies and technology have altered the nature of traditional business models in most companies that range from product to technical corporations.
However, modern project managers hardly understand how business models are sustained, appraised, shaped and what they actually denote (Doumeingts & Ducq 2001, p.147).
Therefore, modern project managers must comprehend business models in order to develop guidelines and frameworks that can help an organization to utilize the resources efficiently for survival and competition.
The potential and use of business model
Research on business models is still an immature field though it has proved its relevance.
The key segments where business-models have enhanced are in the formation of apparatus and conceptions that venture supervisors might exploit to transform, evaluate, plan, converse, comprehend, and seize the corporation trade rationales (Jones, 1960).
The subsequent sections clearly highlight the generalized reasons why modern project managers must understand the concept of business models.
Sharing and Understanding
Modern project managers need to comprehend business models as they assist in sharing and communicating, understanding, visualizing and capturing business logics (Kaplan & Norton 1992, p.1).
Allocating and conversing
Nearly all corporations have trade logics that are supposed to be captured, visualized, and comprehended. This can only be realized through business models. The knack to distribute and converse such business ideas with shareholders is just a preceding rational outcome.
According to Galper (2001, p76) claims, to formalize and express business models in a concrete manner may assist modern project managers in sharing and communicating their business understanding to other shareholders.
Such ability is significant to any dialogue among individuals with diverse backgrounds including engineers, system architect and modern project managers (Aguilar-Savén 2004, p.133).
Comprehending
The current business models have become very complicated especially those that have well-built e-business and ICT elements. The associations between the decisive success factors and different business model elements are not often directly observed (Chesbrough & Rosenbloom, 2002).
Thus, the social systems modeling process can help modern project managers to understand and identify the relationships and appropriate constituents within the specific project domain (Magretta 2002, p.87).
Furthermore, within the business models there are visual symbols that can enhance modern project managers understanding of any task that lies ahead.
Visualizing
Modern project managers are human beings and they are rather incomplete in their capacity to process any multifaceted information (Kaplan & Norton 2000, p.171). This can be revealed practically and tentatively.
In case business venture data is processed through diagrammatic coordination of trade models it can boost the scale at which the involvedness could be effectively managed.
By comprehending business models, modern project managers can use the conceptualization process in capturing the business concepts with minimal effort and they will be able to present the outcomes graphically (Weill & Vitale 2002, p.21).
Capturing
Even though business models for corporations are simplified symbols of their business concepts, they are hardly described clearly in an abstract manner. Studies show that modern project managers are usually unable to communicate their business models clearly (Weill & Vitale, 2001).
Besides, since modern project managers draw on diverse intellectual models, they find it difficult to comprehend business models in a similar way. Therefore, a mutual and generic concept that can be used to describe and understand business models is essential.
The frameworks offered by business models can serve as a shared language among the shareholders while project managers can use them to carry out what each party comprehends easily (Reich & Benbasat 1996, p.55).
Analyzing
The concept of business models may help project managers to analyze corporate business logics. In fact, through comprehending business models, modern project managers can be well positioned to understand that the concept is a novel analyzing unit (Mahadevan, 2000).
Thus, comprehending business models may assist modern project managers in improving the measurement, comparison, and observance of corporate business logics.
Measuring
Comprehending and capturing business models can help modern project managers to classify appropriate measures that must be followed to improve project management. Such capability may aid in the selection of executive information system indicators that can be used to monitor project strategy execution.
This can be via the use of a balanced-scorecard plan that has innovative, internal business and clients as well as business perspectives (Bernus, 2001, p.114).
Tracking and observing
Corporate business logics are continuously changing due to external and internal pressures. Hence, modern project managers must comprehend business models in a structured way to be able to handle specific issues that eventually change (McKay & Radnor, 1998).
Comparing
Just like an eventual observance of corporate business models, a structured plan might allow modern project managers to evaluate their business models against the ones being held by rival corporations. This is founded on the fact that business models are comparable when they are comprehended in similar ways.
When project managers understand and compare their business models to those that other companies have they are better placed to generate some insights that can foster the innovation of business models (Timmers 1998, p.4).
Managing
According to Rappa (2004, p.33), business models play an important role of improving the firm business management logics. Comprehending business concepts can therefore support current project directors in restructuring the execution, altering, scheduling, and scheming of corporate trade models.
With better comprehension of business models, modern project managers can quickly react to any adjustments within business surroundings.
Designing
It is often difficult to design a business model in which all its elements are coherent and reinforce each other. That is, it is not easy to design a business model where individual elements are optimized in the project.
Due to these complexities modern project managers must base the success of their projects on the interactions between each element in the model.
This understanding is even compounded by the fact that modern technology that is being adopted in business today adds to the variety of business models that one can imagine (Lechner & Hummel, 2002).
Conceptualization of a business model that identifies the vital building blocks together with their relationships enables managers to draw a protracted business model.
Planning, changing and implementing
In situations where business projects require novel model or need to change the present one, conceptualization and visualization of the model would be essential in improving planning, transformation and implementation.
In situations where there is evidence that elements can change models can easily be transformed. Incidentally, Linder and Cantrell (2000) anticipated a change model where transformations taking place in the firm as well as its future profitability are based.
Responding
Appreciating, planning and putting into practice business models generate the source in which modern managers can suitably respond to the outside demands.
Proper understanding of the concept of business model supports modifications that lead to a new form of model (Petrovic & Kittl, 2001). This is very important in tentative and fast shifting competitive business environment.
Aligning
The business model forms the conceptual bridge that aligns the organization of the whole business, strategy, and technologies used. Chesbrough and Rosenbloom (2000) assert that business model act as a connecting construct amid expertise and the cost-effective significance of the company.
Modern project managers can use the concept of the business model as a significant tool to promote development, advance current business processes and align information systems (Osterwalder & Pigneur, 2003).
Improving decision-making
The concept of business model enhances communication and understanding of the business logic. Therefore, managers or decision makers can use the business model concept to be more informed and enhance their decision-making process (Hayes & Finnegan, 2005).
Moreover, the business model has become an innovative component of examination (Stähler, 2002) that is observable and comparable. Business model concept supports classification of new procedures that are essential in decision-making.
Prospect
Through simulations and portfolios, modern project managers can use the business model to define probable prospect for the firm. The concept of business model is an important tool that supports innovation and prepares the business for the future.
It is essential for business managers to apply the concept to drive forward their projects and ensure complete implementation of the undertaken projects.
Innovation
Modular and formal business model is capable of creating and improving changes as well as the increase in response abilities within the company. The business model concepts can promote innovation within organization.
Specific sets of elements of a business model together with their interrelationships can become a building block for a very new concept (Burgi & Victor, 2004). The designers can experiment and test with these elements to create innovation or very different models.
This capability is restricted only by sets of pieces supplied (Beresford, 2001). Amit and Zott (2001) unequivocally understand the concept of business model as a focal point for innovation.
Consistent with Mitchell and Coles (2003) assertions, improvements resulting from the concepts of business model add more value to the firm.
Portfolios for business models
According to the evolutionary theory law of excess diversity by Allen (2001), the firm should maintain a selection of business models to prepare for the future. The assertions by this theoretical perspective are that evolutionary strategies of firms require good quantity of diversified internal quality.
Allen further suggests that businesses require varied potential strategies to be implemented in volatile and changing environments (Andriani, 2001). Many business models that companies have will enable them to cope with changes in the environment.
Simulating and testing
Modern project managers always expect the testing and simulating of business models. However, simulations normally do not envisage any prospect. Managers perform simulations and testing as a way of undertaking low-risk investigations without incurring additional organization costs (Sterman, 2000).
Testing and simulating business models makes managers to formulate future prospects (Richards & Morrison, 2001).
Conclusion
Business models concept becomes a very important tool for business managers especially at this time when the business environment is volatile and highly competitive. The reality is that appropriate application of the business model concept not only enhances the organization capabilities, but also increases its competitiveness.
Thus, modern project managers should build business concepts that enhance the realization of future prospects and add more value to the business. Through comprehending business models, modern project managers might have suitable management strategies.
References
Aguilar-Savén, R 2004, “Business process modeling: Review and framework”, International Journal of Production Economics, no.90, pp. 129-149.
Allen, PM 2001, “A complex systems approach to learning in adaptive networks”, International Journal of Innovation Management, vol.5 no.2, pp.149-180.
Amit, R & Zott, C 2001, “Value creation in e-business”, Strategic Management Journal, vol.22 no.6, pp.493-520.
Andriani, P 2001, “Diversity, knowledge and complexity theory: some introductory issues”, International Journal of Innovation Management, vol.5 no.2, pp.257-274.
Beresford, K 2001, “European patents for software, E-commerce and business model inventions”, World Patent Information, vol.23 no.3, pp.253-263.
Bernus, P 2001, “Some thoughts on enterprise modeling”, Production Planning & Control, vol. 12, pp. 110-118.
Burgi, P & Victor, B 2004, “Case study: modeling how their business really works prepares managers for sudden change”, Strategy & Leadership, vol.32 no.2, pp.28-34.
Chesbrough, H & Rosenbloom, RS 2000, The role of the business model in capturing value from innovation: evidence from XEROX Corporation’s technology spinoff companies, Boston, Massachusetts, Harvard Business School.
Chesbrough, H & Rosenbloom, RS 2002, “The role of the business model in capturing value from innovation: evidence from Xerox Corporation’s technology spin-off companies”, Industrial and Corporate Change, vol.11 no.3, pp. 529-555.
Doumeingts, G & Ducq, Y 2001, “Enterprise modeling techniques to improve efficiency of enterprises”, Production Planning & Control, vol.12, pp.146-163.
Galper, J 2001, “Three business models for the stock exchange industry,” Journal of Investing, vol. 10 no.1, pp.70-78.
Hayes, J & Finnegan, P 2005, “Assessing the potential of e-business models: towards a framework for assisting decision-makers”, European Journal of Operational Research, vol.160 no.2, pp.365-379.
Jones, G M 1960, “Educators, electrons, and business models: A problem in synthesis”, Accounting Review, vo.35 no.4, pp. 619-626.
Kaplan, RS & Norton, DO 2000, “Having trouble with your strategy? Then map it”, Harvard Business Review, vol.78 no.5, pp.167-276.
Kaplan, RS & Norton, DP 1992, “The balanced scorecard–measures that drive performance”, Harvard Business Review, vol.70 no.1.
Lechner, U & Hummel, J 2002, “Business models and system architectures of virtual communities: from a sociological phenomenon to peer-to-peer architectures”, International Journal of Electronic Commerce, vol.6 no.3, pp.41-53.
Linder, J & Cantrell, S 2000, “Changing business models: surveying the landscape”, Accenture Institute for Strategic Change, vol.4 no.1, pp.22-29.
Magretta, J 2002, “Why business models matter”, Harvard Business Review, vol.80 no.5, pp. 86-92.
Mahadevan, B 2000, “Business models for Internet-based e-Commerce: An anatomy”, California Management Review, vol.42 no.4, pp. 55-69.
McKay, A & Radnor, Z 1998, “A characterization of a business process”, International Journal of Operations & Production Management, vol.18, p. 924.
Mitchell, D & Coles, C 2003, “The ultimate competitive advantage of continuing business model innovation.” Journal of Business Strategy, vol.24 no.4, pp.15-21.
Osterwalder, A & Pigneur, Y 2003, “Towards strategy and information systems alignment through business model ontology”, Proceedings of the Annual Conference of the Strategic Management Society, vol.34 no.7, pp.6-11.
Petrovic, O & Kittl, C 2001, “Developing business models for e-business”, Proceedings of the International Conference on Electronic Commerce, vol.16 no.9, pp.44-54.
Rappa, M 2004, “The utility business model and the future of computing services”, IBM Systems Journal, vol. 43 no.1, pp.32-43.
Reich, BH & Benbasat, I 1996, “Measuring the linkage between business and information technology objectives”, MIS Quarterly, MIS Quarterly & The Society for Information Mgt, vol. 20, p.55.
Richards, I & Morrison, J 2001, “Using flight simulators to build robust dotcom strategies”, Working Paper Accenture, vol.4 no.1, pp.14-19.
Stähler, P 2002, “Business models as a unit of analysis for strategizing”, Proceedings of the International Workshop on Business Models, vol.21 no.3, pp.43-61.
Sterman, JD 2000, Business dynamics: systems thinking and modeling for a complex world, Boston, McGraw-Hill.
Timmers, P 1998, “Business models for electronic markets”, Journal on Electronic Markets, vol.8 no.2, pp.3-8.
Weill, P & Vitale, M 2002, “What IT infrastructure capabilities are needed to implement e-business models?” MIS Quarterly, vol.1 no.1, pp. 17-34.
Weill, P & Vitale, MR 2001, Place to space: Migrating to e-business models, Harvard Business School Press, Boston.