Semester 2 Alternative Assessment 2020/21

End-of-Module Assignment

Module Code: MS802

Module Name: IS Strategy & Innovation

Assignment Title: Semester 2 Assessment

Student Details:

Student ID Programme Student Name Contact Details (Email, Telephone)

(as per registration)
+353 89 941 7062
20234085 M.Sc. ISM ANIRUDH RAO
[email protected]
I hereby declare that this assignment submission is our own original work. We have read the
University Code of Practice for Dealing with Plagiarism* and are aware that the possible penalties for
plagiarism include expulsion from the University. We have attached a list of all sources that were
consulted in the preparation of this assignment e.g., books, journals, Web sites etc.

Signature Date

Anirudh Rao 19/05/2021

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Table of Contents
Question 1 ............................................................................................................................................... 3
Definition ........................................................................................................................................ 3
Why business models are important. ............................................................................................. 3
9 building blocks of Business Model Canvas ................................................................................... 4
Why business models need to adapt to survive in this digital economy. ....................................... 5
Question 2 ............................................................................................................................................... 6
Lean Startup Approach ....................................................................................................................... 6
Customer Development Model ...................................................................................................... 8
Challenges faced when implementing Lean Startup. ................................................................... 10
References ............................................................................................................................................ 11

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Question 1
The foundation for any company that wants to be “built to last” is to have a business model that
actually supports that objective. Explain what is meant by the term ‘business model’ and critically
discuss why it is necessary for organizations to design or adapt their business model to survive in
today’s digital economy. Using examples to support your answer, describe the nine (9) building
blocks of the Business Model Canvas as per Osterwalder and Pigneur (2010)

Definition
A generally accepted model definition of a business model does not exist. There are many
definitions that exist. One of them being “a statement, a description, a representation, an
architecture, a conceptual tool or model, a plan, an assumption, a structural template, a
method, a framework, a pattern, and a set” (Marko Peric, 2017) and the other “A business
model is a conceptual tool containing a set of objects, concepts and their relationships with
the objective to express the business logic of a specific firm. Therefore, we must consider
which concepts and relationships allow a simplified description and representation of what
value is provided to customers, how this is done and with which financial consequences.”
(Alexander Osterwalder, 2005) Osterwalder further went on to further simplify it as it as a
way to describe the elements and relationships that describe the business a company does.

There is a difference between strategy and business model in that business models are
systems that show how business fit together while strategy also includes competition. It also
includes execution and implementation (Alexander Osterwalder, 2005)

Business model implementation and management include the realisation of business model
into concrete elements which are business structure (example HR), business processes, and
infrastructure and systems(buildings, ICT) (Alexander Osterwalder, 2005)

Why business models are important.

Business models is what constitute the core of the company. They can be divided into
categories- one of selling and one of developing and running (Magretta, 2002) Business
models dictate how companies then operate. They provide valuable feedback for every
system, every decision and very initiative (Magretta, 2002) They are the managerial
equivalent of a scientific hypothesis i.e.., this is how you test and then make changes.

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Any company that fails is because their business model failed o encapsulates their
objectives and test their hypothesis. When a business models are “built to last”, they
withstand all failures and last the test of time.

One example is of the Silicon Graphics which built interactive television in the 1990s.
However, they failed miserably as no customer was interested. This is because their
business model failed to consider customer feedback and value proposition.

9 building blocks of Business Model Canvas

There are 9 common building blocks among business models are:
1. Value Proposition
2. Target Customer
3. Distribution channel
4. Relationship
5. Value configuration
6. Core Competency
7. Partner Network
8. Cost Structure
9. Revenue Model

Value proposition A company creates values by solving problems or rather offering

solutions to customers. This is essential as its what the customer sees and identifies with
especially when making a purchase or decides to make a purchase. Example is Netflix is
providing entertainment solutions and a customer can watch hundreds if movies without
running to the DVD store and worry about availability.

Target Customer are segments addressed by the value proposition ie., the segment for
which the value is being created. For example, for Instagram the average age might be 13-
35 age group primarily.

Distribution Channels are the channels used by the company to target the customer
segments for value proposition. This is how they reach clients and communicate with them.
For example, for many resellers Amazon is a distribution channel.

Relationship is the relationship that has been or is to be established with the clients.

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Value Configuration is how the activities are configured to implement the business model.

Partner Network is the network of key partners and why they’re motivated to join this
project.

Cost Structure is the resulting Cost Structure of the model.

Revenue Model is the revenue streams that are being generated by the business model.

These building blocks are part of a “Business Model Canvas” that acts as a template for all
the existing and the ones that are going to come in the future These help to improve or
identify the business model development.

Why business models need to adapt to survive in this digital economy.

Technology has impacted tremendously to expand market reach of several companies. They
have also lowered costs and have also enabled new products and services (OECD, 2014) Not
only that the new digital economy has enabled new and innovative business models. They
have impacted new ways to increase value propositions and created new distribution
channels with better reach. Also new payment mechanisms have been created such as UPI
in India or GooglePay pr AmazonPay. New startups enabled by these changes are posing a
tougher challenge to older monoliths making the competition fierce. Advertising and
communication have taken new shape with people using social media to interact and
advertise directly to consumers. ICT has empowered global supply chains as well to aid
transportation and distribution of goods.

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Question 2
“The Lean Start-up approach has been promoted as a way to nurture product innovation in
established companies.” (Märijärvi et al., 2016) Answer the following question, using examples to
illustrate your answer: a. Critically evaluate how the Lean start-up approach helps entrepreneurs in
established companies to generate successful product innovations. Include in your answer an
overview of the Customer Development Model and the challenges of applying the model in new
product development in established companies, and limitations of the Lean start-up approach.

Lean Startup Approach

The lean startup has been presented as a new approach for creating continuous innovation
in companies. It is known to be built upon preexisting management techniques from lean
manufacturing, design thinking, customer development and agile environment (Ries, 2011)
and is also known to be developed from ideas presented in Steve Blank’s Customer
Development Methodology. The Lean Startup has been proposed as a good approach that
minimizes risk and fails-fast. It does not rely upon building an elaborate prototype that does
not exactly is based on customer feedback. It ensures that you do not have much invested.
(Jukka Märijärvi, 2016)

It tries to ask 4 main questions in the beginning,

1. “Do consumers recognize that they have the problems the company is trying to
solve?”
2. “If there was a solution, would they buy it?”
3. “Would they buy it form the company?”
4. “Can the company build a solution for that problem?” (Ries, 2011)

An experiment is more than a theoretical enquiry in a Lean Startup model as it also the first
product (Ries, 2011) It allows managers to test their campaigns. They can learn by taking
early feedback from customers or early adopters and develop what is the MVP.

Build Measure Learn

The Build Measure Learn feedback is the core component of Lean Startup approach. In this
one can test their hypotheses by building something small for early adopters, measure the
feedback and learning from it. (Tools, n.d.)

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 BUILD MEASURE LEARN MODEL

The aim of this exercise to reiterate until we achieve what the customers want. Ries
advocates to start creating as soon as possible with the MVP (Ries, 2011)

Minimum Viable Product (MVP) is nothing but a ‘version of the product that enables a full
turn of the Build Model Learn cycle with minimum amount of effort and least development
time. It lacks many features that are essential later on (Ries, 2011) It is important that the
company is able to measure the impact of the MVP because that’s what will help us learn.
To make changes in the product known as ‘pivoting’. To continue is called ‘persevere’ (Jukka
Märijärvi, 2016)

If the product is successful, it will help the manager in making their campaign successful,
enlisting employees at each iteration eventually coming up with a proper product that
already has key specifications and features required. (Ries, 2011) Through this is how we
validate Product Market Fit. (Denis Dennehy, 2019)

The three conditions for acquiring PMF are,

i. The customer is willing to pay for the product which we have already discussed.
ii. There is an economy viable way to acquire customers.

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 iii. The market is large enough for business.
(Denis Dennehy, 2019)

In his book, Erick Ries defined a startup “a human institution designed to create a new
product or service under conditions of extreme uncertainty” (Ries, 2011) . Later, in the Lean
Start-up 2015 conference is “approachable to big and small companies and also public
organizations” (Jukka Märijärvi, 2016) This evident enough that Lean Startup approach is
applicable to companies of all sizes and especially when companies face uncertain
conditions.

One example of a company using lean startup apart from may others is Oulu. Oulu wanted a
mobile payments platform which they implemented by getting a few new hires and
veterans from Oulu Financial group. Years later, the mobile payments branched into its own
company Pivo. (Jukka Märijärvi, 2016)

Another major example of a company implementing lean startup successfully is General

Electric. General Electric is an American multinational conglomerate. GE spends more than
$5billion on innovation and they have used a lean startup for transformation. This is not just
for internal startups like in many major companies but also companywide. Their lean startup
approach is named FastWorks and has roots in the agile approach. This approach helped
them in making Flowmeter into a $100M business. They iterated their MVP multiple times
to finally become successful. This has led to them even scaling their lean startup approach.
A few of their strong set of values such as “Customers define their approach”, “Stay lean
and go fast”,” Learn and adapt to win” etc.. (Jukka Märijärvi, 2016)

Customer Development Model

A major influencer of lean startup model has been the Customer Developmental model. It
was designed to solve problems with Product Development model and has rigor and
flexibility as its strengths. It is a model that focuses “on understanding customer problems
and needs” to move from strength to strength till it becomes a full-fledged organization.
(Blank, 2007)

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 Customer Development Model

After the customer’s wants and needs are identified, a sales model that can be replicated is
developed. Customer Creation tries to focus on creating and driving end user demand and
then finally Company building tries to transition from a learning phase to a full-fledged
organization with all the features and learning from the previous stages (Blank, 2007)

One important feature of Customer Development Model is that going back is seen as a key
feature of learning and discovery.

But there are challenges with this model, especially with big companies,

1. The Customer Development model can render you short sighted and suck in all the
resources that you have fueled by momentary validation.
2. Companies can fall into biases that confirm their biases than test them.

Instead of a cohesive product that large companies do, one can even fall into multiple
features trap using hundreds of talents.

A large company is a well-oiled unit with a lot of resources. They do not have the cash or
resource problem that in a startup will help them stay focus with low investment and low
risk.

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Challenges faced when implementing Lean Startup.
Lean Startups require organization wide assistance (Denis Dennehy, 2019) . As these affect
the organizations culture, there is bound to be some conflict regarding this culturally and
otherwise. This therefore requires support from upper-level management.

There should be a common understanding regarding the MVP (Denis Dennehy, 2019) .
Management often does not have an understanding that MVP is a means for learning but
not exactly product development and this misunderstanding can often provide detrimental
to achieving the goals.

There is also the issue of handover as in how long a company can wait until it’s passed to a
bigger business unit for a widespread rollout (Kirsner, 2016)

There is also the issue of adapting existing employees who are finetuned with specific skills
to adapt to work as innovators.

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References
Alexander Osterwalder, Y. P., 2005. CLARIFYING BUSINESS MODELS: ORIGINS,PRESENT, AND FUTURE
OF THE CONCEPT.

Blank, S., 2007. The four steps to the epiphany - Successful startup strategies for products that.

Denis Dennehy, L. K. P. O. K. C. D., 2019. A Lean Start-up approach for developing minimum. Journal
of Decision Systems.

Jukka Märijärvi, L. H. M. K. K. Y. X. M. R. S. J. H. M. K.-O. H. J., 2016. The cookbook for successful

internal startups. s.l.:s.n.

Kirsner, S., 2016. The Barriers Big Companies Face When They Try to Act Like Lean Startups. [Online]
Available at: https://hbr.org/2016/08/the-barriers-big-companies-face-when-they-try-to-act-like-
lean-startups

Magretta, J., 2002. Why Business Models Matter. [Online]

Available at: https://hbr.org/2002/05/why-business-models-matter

Marko Peric, J. D. V. V., 2017. The Constructs of a Business Model Redefined: A Half-Century
Journey.

OECD, 2014. The digital economy, new business models and key features. In: s.l.:s.n.

Ries, E., 2011. The Lean Startup. 1st edition ed. s.l.:crown business.

Tools, M., n.d. The Build-Measure-Learn Feedback Loop. [Online]

Available at: https://www.mindtools.com/pages/article/build-measure-
learn.htm#:~:text=Eric%20Ries%20pioneered%20the%20idea,quickly%20and%20cheaply%20as%20p
ossible.

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