Business Model and Disruption

The business model is a unique culture made by organizations, entrepreneurs, and companies to their style of business to increase profits of the company. The business model targets consumers by seeking to offer the best solution to beat the competitors. Smart products can act as disruptions to companies in conducting their business. The products affect business models of great companies like Volvo Group Companies. Volvo is based in Sweden and manufactures service trucks and construction equipment. The business model of Osterwalder has nine essential features that can be used to explain the influence of the Volvo Company.

Running head: BUSINESS MODEL AND DISRUPTION
Business model and disruption
Name
Institution

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BUSINESS MODEL AND DISRUPTION
Definition
The business model is a unique culture made by organizations, entrepreneurs, and
companies to their style of business to increase profits of the company. The business model that
is developed by the company is aimed at ensuring sustainability and fair competition in the
market. The business model targets consumers by seeking to offer the best solution to beat the
competitors. It does this by driving the customers to get the products, that is, advertisement
(Bocken, Short, Rana & Evans, 2014). There are different types of business models unique to
each organization. Some of the commonly used business models are; direct sales, franchise
model, freemium model and subscription model.
The business model is not constant, but are bound to change. Market portfolios might
change at a particular time making it necessary to change the model. They could be a new
government policy. Therefore, to realize profits, entrepreneurs have to change the model. These
factors are called business disruptions. Business disruptions are factors that lead to changes in
the business model and culture of a particular business. This enables the company to suit specific
current market trends (Dentchev et al., 2016). These disruptions include; rapid advancement and
technology, globalization, brand bombing, customer dependency, among others.
Smart products and the Volvo Company
Smart products can act as disruptions to companies in conducting their business. The
products affect business models of great companies like Volvo Group Companies. Volvo is
based in Sweden and manufactures service trucks and construction equipment (França, Broman,
Robèrt, Basile & Trygg, 2017). The disruption of smart products might influence opportunities in
the market or threaten them.

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Smart connected products have many, of these physical components that influence the
decision of the company through software updates, and made through to allow cars to
continually be improved and optimized with the visits to the leader (Chesbrough, 2010).
The competitive landscape being reshaped by smart products in the positive way include;
Monitoring:
Volvo cars could now be monitored and report on themselves, the progress they made,
the real environment .and creating new data management insights of different machines that are
made by the company.
Control
The company place control made software in their cars so that, it is easier to monitor any
unprecedented action by their trucks. The software can also be used to remote-control the
vehicle, therefore, increased safety measures (Schaltegger, Hansen & Lüdeke-Freund 2016).
Autonomy:
The car uses the self-coordinated product to control what happens to the car. The effect of
this is the creation of secure action by the trucks for Volvo Company. This enables the driver, for
example, to be notified of the fuel amount in the truck as it moves. The driver can control the
engine action by a single a button that is a smart product. This influences the decision of the
company.
The smart products influence the decisions in the following ways;
 There are more profound relationships between the company and customers:
The Company has to improve their market strategies and accountability to the
customers to maintain stability (Tukker et al., 2017).

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 Creates high market barriers: There are many competing companies to Volvo
based on these smart products that are readily available to all of them. They all
fight for the same platform, therefore, limiting the advertisement market. This, in
turn, creates a high market barrier for the Volvo Company.
 High fixed costs: With customers accessing so many products of the same kind,
the company has to variate product cost to the others so that customers do not
move to the cost-friendly companies. This is a model seeking to maintain the
customers while it is disrupted by the smart product.
 Feature arm races: The addition of smart products in the car sometimes does not
benefit the company since they do not fetch any revenues from the market. The
company invests in such features hoping they would improve revenue. Sadly, the
company does not carry any revenues from the smart product.
The above ways demonstrate how smart products have influenced the decision at the
Volvo Company, therefore, changing the business model.
Osterwalder Business Model
The business model of Osterwalder has nine essential features that can be used to explain
the influence of the Volvo Company. Each of these features are discussed below:
Use of critical partners, such as suppliers from whom the business sources key resources
or partners with whom the business collaborates. This illustrates that company should have good
connections with a key stakeholder (Zott, Amit & Massa, 2011). Wheel Company that supplies
wheels to the Volvo Company should be involved in the business modeling of the company. This
is to ensure they keep abreast with the smart products and induce them in their supplies (Charles
Jr., Schmidheiny & Watts, 2017).

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Critical activities a required to deliver the service or product, such as channels of
distribution, customer relationships, and revenue streams: The smart products improve feedback
(Johnson, 2016). The feedback can be used to boost the relationship between the customers. It is
easier to learn about challenges, customer demands and many more when the input is an
instance. Therefore, the stakeholders can react with the help of the smart products (Porter &
Heppelmann, 2015).
Key resources: Resources vary from human resources to physical resources that are
needed to sustain the company. With the smart products, it is easier to get the human resource for
the company through making a social advertisement. Physical machines can also be made and
used at the press of buttons (Larson & Larson, 2017).
Value propositions: These are the needs of the customers that are satisfied by the
company’s new product. The use of smart product enhances value proposition as it provides
somewhat instant feedback (Johnson, Christensen & Kagermann, 2008). There are also other
products, which when placed in the car, will help solve the customers’ needs (Porter &
Heppelmann, 2014). This includes the coordination unit that informs the driver of the engine
needs of the vehicle. The smart product thus enables the driver to hit a button that controls the
rest of the truck (Boons & Lüdeke-Freund, 2013).
Customer relationships: The smart product improves customer relationship. It
enhances communication between the company and its customers, therefore, strengthening their
relationship. It also is at a lower cost than the “one-on-one” customer-producer interaction.
Channels to reach each customer: The smart products placed in the car can enable the
producer to reach each of their customers. Furthermore, they will be able to monitor each of their
clients (Dentchev et al., 2016).

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Customer segments on which customer: This is the most valuable consideration to the
company. The dealers who sell Volvo trucks are the most important customers as they link the
company to the actual users of the trucks who buy from them. They should take part in the
production of the company in using the smart products (Rainey, 2010). They get the demands of
the customers. They also know what it takes to impress a customer using an intelligent product
(de Jong & van-Dijk, 2015).
Cost structure: The smart product costs a lot of money both to procure and install in the
trucks. Without a promising response from the customers, this might affect the revenues of the
company negatively as there is much investment to them too (Tukker et al., 2017).
Revenue streams: What does the customer pay for, to whom and through what means?
This revenue streams have significantly improved with the coming of the smart products. The
payment is electronically monitored, and this, therefore, enhances accountability. The customer
also has a more natural method of pay.
Business Models Perspectives: Business Model Canvas
Value proposition:
The value proposition in the case of business deals with what would make a customer
choose a product over the other. Unique features and values of a product over another are
essential value propositions features. The customer will go for products that solve the problem
they are facing (Ardito, Carrillo‐Hermosilla, del-Río & Pontrandolfo, 2018). The business model
canvas stresses this by making it the point of intersection between the product made, and the
reason behind the customer’s reason to buy it. It is the essential feature for most start-up
entrepreneurs since they fail to evaluate it thoroughly. Failure to evaluate the business model for
value proposition may lead the business astray.

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Value proposition Features
 The newness of the product – customers, like instead new products that second-
hand products
 Performance of the product – improved version will always attract
 Customization – products that reveal a customer’s personality
 Getting the job done -goal-oriented product
 Design –superior designs appeal to customers
 Brand and status – worldwide brands attract customers.
 Price –companies that offer free services at times get customers if they have other
models to sustain their growth
 Cost reduction – a customer would go for a pocket-friendly product
 Risk reduction- The less risk a customer derives from a product, the more value a
customer awards it
 Accessibility – easy to find products fetch
 Convenience – ease of use of a product makes the customer want to get it
Business models as a set of capabilities and resources
These are the possible firm structures that enable it to traverse changes in the
environment. They include skills of the business to have resources that integrate, configure, gain
and release funds to match, create and adapt to the market change. These structures include;
 Distinct skill
 Procedures
 Organizational structures
 Decision rules

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 Discipline
The capabilities can be divided into core capabilities that form the basis of the business.
There can also be dynamic capabilities that change the market but maintains the business model.
Conclusion
For a starting business entrepreneur, it’s logical to look at all the disruptions before
setting business models. This is to help get a perfect startup.

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