Commonwealth Bank Australia: Innovation in the Business Model

This essay explores the role of innovation within Commonwealth Bank Australia's business model, examining the company's strategies and objectives. It reviews business model theory, disruptive innovation, and the impact of smart connected products. The analysis covers opportunities and threats associated with technologically advanced products and applies the Osterwalder & Pigneur business model framework to illustrate key findings related to customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partners, and cost structure. The essay evaluates the business model as both a profit formula and a value proposition, concluding that innovation is crucial for businesses to adapt to changing customer needs and market trends.

Running head: INNOVATION: COMMONWEALTH BANK AUSTRALIA
Innovation: Commonwealth Bank Australia
Name of the Student
Name of the University
Author’s note

1INNOVATION: COMMONWEALTH BANK AUSTRALIA
Introduction
Innovation is the process by which an individual or a group of people come up with an
improved version of an existing idea. The business model of an organisation is the framework
that is developed to base the operations of the business, it is like a guideline. For a business that
runs on innovation and improvement it can be said that the business model of that company is
based on innovation (Gokhberg & Meissner, 2013). Some of the examples of such organisations
are: Apple, Amazon, Microsoft etc. In this assignment the role of role of innovation in a business
model is going to be analyzed by study the strategies of Commonwealth Bank Australia.
Overview of the company
The organisation is a multinational financial institution that has its headquarters in
Sydney. The company was founded in 1911 and has a long history of ups and down in the
business, in this tenure the organisation has garnered goodwill not only among the clients but
also among the other stakeholders. The company went public in the year 1991
(commbank.com.au, 2017).
The mission of the organisation is to make the company most accessible bank in Australia.
The objectives of the company are as follows:
 To strive towards a sustainable future
 To keep up with the objectives of the shareholders
 To expand the business further (commbank.com.au, 2017)

2INNOVATION: COMMONWEALTH BANK AUSTRALIA
Literature review
Business model
According to Chesbrough (2010), a business model is a framework that is drawn in order
to initiate the process of business and develop an understanding of the process of the operations
that will run the venture. It contains the internal resources and external opportunities that build a
scope for the business to grow and expand. Not only that it will also help the company trace the
revenue network juxtaposing the particular of the cost that will be required to carry out the
operations of the business. On the other hand, Zott et al. (2011), says that a business model is
used to develop a strategic management plan to achieve the objectives and to align the interest
with the stakeholders of the organisation.
Disruption
As discussed innovation is developing new attributes to an existing idea, an
innovation is categorized as disruptive. Disruptive innovation is the idea of innovation which has
the potential of replacing existing ideas in the market. According to Christensen et al. (2015), the
organisation that can create disruptive innovation idea can use the strategy to ensure competitive
advantage in the industry.
Advantages of disruptive innovation are:
 Helps in obtaining an edge over the competitors in the market, furthermore also provide
opportunity for the company to become the market leader in the long run.
 It provides a path for the organisation explore new ideas.

3INNOVATION: COMMONWEALTH BANK AUSTRALIA
The biggest disadvantage of this kind of innovation is that there is a high rate of risk in
the process as it the target market of the company may be apprehensive of the product or service
as the idea is completely new the utility may not be known to the target market and therefore it
may not be accepted (Christensen et al., 2015).
Barriers of business model innovation
 Internal resistance to take risk in the process of innovation due to its uncertain outcomes
is one of the significant challenges faced by the company
 Following the safe route and incorporating the variables in the business model like others
in the market may end up in losing an opportunity to build a new market (Souto, 2015)
Smart connected products: Commonwealth Bank
The products which are technologically advanced and have a access to connected devices
can be called as a smart connect product. This helps an organisation in revolutionizing the
operations of the business and brings out a broader perspective of the business model is called
Smart connected products (Porter & Heppelmann, 2014).
Opportunities:
With a help of smart connected products the company has an opportunity to allow the customers
to have a wide range of services within the geographical boundaries of the home country.
It will provide the company an opportunity to fundamentally think of a change in the design as
well as the operations of the business based on the requirement of the consumers helping the
bank build a value oriented relationship with the customers which are essential for the facilities
that a finance company like commonwealth bank requires (Porter & Heppelmann, 2014).

4INNOVATION: COMMONWEALTH BANK AUSTRALIA
Smart connected products will help the company customize the services according to the
preference of the client, for an institution like bank it is important that the services are not
generalized as the requirement and the situation of each people differ from one another (Porter &
Heppelmann, 2015).
As the nature of the operations of a financial institution is based on heavy data, the cloud-based
system approach used by the smart connected products will help the bank in maintaining an
organized data based, which is very essential. Not only that the approach will also make the
server and the information that is available with the make more secure and useful as it can be
accessed by the people who are in charge at any point of time (Porter & Heppelmann, 2015).
Smart connected products also provide an opportunity to keep a check on the process. Apart
from that it also provides chances of getting real-time data and this get insightful information
(Porter & Heppelmann, 2015)
Threats:
In case of a security breach the information that is in the server can be used by the infiltrator,
thus making the approach dangerous
The incorporation of the approach in the process of business may lead to a rise in cost of the
services; this may not be entertained by the consumers and may lead to losing on the customers
in the long run
Sometimes the company might overestimate the resources and capabilities leading to a situation
of crisis in this approach (Porter & Heppelmann, 2014).

5INNOVATION: COMMONWEALTH BANK AUSTRALIA
Business model framework
Customer segment
 Individual customers
 Business clients such as other organisations and corporate
 Creditors card customers
Value Propositions
 The company is among the big four financial institutions of Australia is plays a
significant role in the economy of the country
 The company believes in sustainable development in the process of growth
 Premium and hassle-free financial services
 It provides retail banking services (commbank.com.au, 2017)
Channels
 Physical branches of the bank present in several cities all over the country as well as in
other countries of operation(commbank.com.au, 2017)
 Online and mobile banking
 ATM outlets (Osterwalder & Pigneur, 2010)
Customer Relationships
 The company has a customer care service center apart form that they use technology and
innovation in order to reach out and connect to the customers

6INNOVATION: COMMONWEALTH BANK AUSTRALIA
 The company provides facility for the people to reach out with the help of new
connectivity technologies that are available in order to make the process easy
Revenue Streams
 Policy premiums
 Financial services
 Return on investments
 Interest on credits and loans (Osterwalder & Pigneur, 2010)
Key Resources
 The company has skilled employees to look after the daily business operations
 Information technology infrastructure
 Physical infrastructure like bank branches and ATMs
Key Activities
 Providing financial support to the clients and the consumers
 Insurance policies
 Loan policies
 Calculation of the financial risks and mitigation process
 Credit card services (Osterwalder & Pigneur, 2010)
Key partners
 The shareholders of the investors are the major partners apart from that the third party
who are a part of the supply chain of the business,
 Colonial national bank (acquired)

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 Aussie home loans and wizard home loans (joint partnership)
 Security services of the banks and the ATMs
Cost Structure
 Salaries of employees
 Taxes
 Infrastructure maintenance and technology maintenance and development cost
 Operational cost
 Security service (Osterwalder & Pigneur, 2010)
Evaluation of business model
Business models as a profit formula
The business model of an organization is heavily dependent on the values and principles
that are followed in the organisation as it is a framework that is objective driven, if the objective
of the company is based on the financial growth and development then the business model is said
to be on a profit formula. This is the traditional approach of building a business model, now new
and old companies are focusing their interest not only on the profit motive of the company but
also on the environmental and societal development.
Business model as value proposition
Value proposition is the statement that an organisation utilizes in order to sum up the
reason for the target market to avail the product or services that is offered by the company. This
business model is based on this approach focuses on the customers as the main stakeholder and

8INNOVATION: COMMONWEALTH BANK AUSTRALIA
develops strategies to meet the need and changes in the requirement of the consumers. The value
proposition further leads to innovation being a significant part of the business model.
Conclusion
It can be concluded form the above discussion that innovation means development,
improvement, experiment and moving ahead. In a business situation innovation plays an
important role as a business runs as it caters to the needs and requirements of the customers and
innovation helps a company to keep up with the changing need or the change in the trend of the
requirement of the target market.

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Reference list
Chesbrough, H. (2010). Business model innovation: opportunities and barriers. Long range
planning, 43(2-3), 354-363.
Christensen, C. M., Raynor, M. E., & McDonald, R. (2015). What is disruptive innovation.
Harvard Business Review, 93(12), 44-53.
Commbank.com.au. (2017). CommBank: Business Insights Report. Commbank.com.au.
Retrieved 22 April 2018, from
https://www.commbank.com.au/content/dam/commbank/assets/business/can/move-
forward/commbank-business-insights-report-unlocking-everyday-innovation.pdf
Gokhberg, L., & Meissner, D. (2013). Innovation: superpowered invention. Nature, 501(7467),
313.
Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries,
game changers, and challengers. John Wiley & Sons.
Porter, M. E., & Heppelmann, J. E. (2014). How smart, connected products are transforming
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Porter, M. E., & Heppelmann, J. E. (2015). How smart, connected products are transforming
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Souto, J. E. (2015). Business model innovation and business concept innovation as the context of
incremental innovation and radical innovation. Tourism Management, 51, 142-155.
Zott, C., Amit, R., & Massa, L. (2011). The business model: recent developments and future
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