Business Model Review

Running head: BUSINESS MODEL REVIEW
Business Model Review
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BUSINESS MODEL REVIEW
Literature Review of Business Model and Disruption
According to Wirtz et al., (2016)business models are indispensable to a business
enterprise since business models elaborate on value creation, delivery and capture
mechanism. Business models were known for their comprehensive outline of revenues, costs
and profits associated with the entire business enterprise in order to deliver value to the
customers. It helps a company or organization to operate business in an organized manner. A
business model helps the company to deliver value to its customers in order to attract them by
assessing what customers want and how the company/enterprise can meet those wants.
However, in the opinion of Bocken et al., (2014) in a globalized economy customers have
more options to choose from since business transaction and access to new products have been
made easier with communication. Therefore business models are slowly re-shaping
themselves in order to help the companies becomes more customer-centric by the use of
innovation and technology. Today business models lack innovation and are imitated by other
companies. Many companies fail to create a business model that will be responsible for a
sustainable approach to business and differentiated from other business models. It is utmost
necessary to implement business models wherever there are the questions of consumer
choice, transactional expenses and heterogeneity amongst consumer products. Innovative
business models according toArmada & Martin, (2016) are the best weapon to meet customer
needs. In this context, it is relevant to take into consideration one of the most successful
business models implemented by Southwest Airlines, specifically the hub and spoke model
which was later on copied by Easy Jet. In the views of Wirtz et al., (2016) business models
must change according to the changing needs of the market with the introduction of
technologies and policies. What has been the major source of disruption for business models
is the birth of information industry. Accelerated rise of internet and innovation and made
many companies to rethink about their pre-existing business models since digital era has

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BUSINESS MODEL REVIEW
brought forth a major change in the scenario of culture. With the introduction of DVD rental
Netflix, e-newspapers, online shopping sites there has been a major shift in consumer
behavior itself. As globalization is about a fast-paced and more connected world companies
need to align their business according to consumer demands and introduce differentiation so
that it cannot be easily imitated and used by another company. Companies can only come up
with a strategic business model on a careful segmentation of the market and subsequently
creating a value proposition for each of the segment.
As opined by Wirtz et al., (2016) disruption in business models is primarily caused by
digital innovation which provides value to the consumers at a far lower cost. This disruption
has been apparent since 1997. The various facets of technology and digital innovation like
cloud computing has changed the way one executes business by bringing forth innovation in
the section of consumer interaction. Companies are grapping to come up with innovative
business models that would place them in a competitive position by customer satisfaction. In
the opinion of Christensen, Bartman& Van Bever, (2016) technology has also acted as a
boon to many companies by helping them to develop a business model that placed them in
direct contact with customers. One of the major disrupted industry that has failed to reshape
their business model is print news media industry which is plagued by workers’ discontent
and paper distribution.
LEGO and Smart-connected Products
Smart connected products are a result of wireless connectivity has vastly altered the
entire structure of industry. McDonalds, Philips and other companies with smart-connected
products are remarkable and have become emblematic of global operation. According to
Osterwalder and Pigneur (2010), there are four basic aspects of their theory and they are
product innovation that includes company’s value proposition to the targeted market segment,
customer relationship which forms of customer loyalty and trust, infrastructure or resources

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BUSINESS MODEL REVIEW
for networking and revenue model for the determination of cost and profit. Accordingly
business models are all about communication. The ground-breaking BRIXO blocks are one
of the best examples of LEGO smart-connected products, they are coated in chrome, add
light, sound and motion to any given building block.At Lego smart connected products they
have targeted a particular consumer segment by producing web connected toys with
electronic sensors, motors and lights. In this way according to Osterwalder and Pigneur
(2010) business model theory they have reoriented their business model with the help of
product innovation therefore today their profits have increased by 30% (Christensen,
Bartman& Van Bever, 2016). One of the many advantages that Lego has secured with smart
connected products is that they have now become one of the leading producers of diversified
products in an age when battery technologies and artificial intelligence have been threatening
the old-fashioned industries. Lego has adapted a business model from a traditional marketing
strategy to a viral and collaborative marketing strategy (Christensen, Bartman& Van Bever,
2016). The business model has huge room for innovation where the consumers are allowed to
manipulate the products according to their imaginative faculties.
LEGO has a clear market segmentation that targets children and young tech-inclined
professionals. Lego has acquired Osterwalder and Pigneur business model by including six
principles of using customer insights, visual thinking, ideation, storytelling and prototyping in
producing smart-connected products. Lego has studied the market carefully and therefore
discarded its old business model with a sharp decline amongst children of traditional toys. Its
business model has adapted computer modelling and computer aided design in order to keep
up in a fast-paced design world and maintain relevancy amongst consumers.
LEGO business model
Their business model is an example of business models of value propositions with
which Lego has delivered value to customers and earned revenue growth. Their smart-