Abstract
Increasingly high technology firms are required to develop new products or solutions in emerging markets which are outside of their existing business operation. This may necessitate that firms realign themselves and their business model so that they are able to create value in a new and emerging market. This chapter develops a framework for business model renewal based on case study research into firms entering the emerging sector of mobile networking. The framework presented here is focused on innovation strategies and the associated enterprise realignment for managing technology and innovation. The theoretical basis for this work is from a synthesis of literature drawn from the fields of strategic management, entrepreneurship and innovation management. This framework recognises the importance of the legacy basis/expertise of firms both in terms of resources and market credibility.
TopBackground
The extent literature on strategic management and how firms compete puts great emphasis on a firm’s capabilities. This perspective is the resource based view (RBV) of the firm and is based around the recognition and development of core competences (Prahalad & Hamel, 1990). Firms often have a competitive advantage based on capabilities specific to the firm (Lockett et al, 2009), which has enabled them to build credibility in a given market. With the market changes that are occurring in today’s Information Age firms can find themselves in a situation where they are outside of their existing expertise and product base. This requires them to alter their organisation in order to provide products and services to the new market i.e. it requires Enterprise Realignment involving regenerative dynamic capabilities (Ambrosini et al, 2009). This recognises that firms often seek to utilise their legacy which gave them credibility in the market by various means including sector expertise (Davenport et al, 2003) as shown in Figure 1.
Figure 1. Enterprise realignment: the aspects of legacy
One example from the field research of the influence of legacy on Enterprise Realignment is given by a company that was originally a technology manufacturer of high performance audio and video products requiring broadcast quality. The firm’s legacy expertise has influenced their product development of Bluetooth firmware modules which are based around advanced DSPs (digital signal processors), that is derived from their technological capabilities developed in the broadcast field. In addition, their Bluetooth enabled handheld mobile devices and auxiliary devices utilises their core product capabilities of miniaturisation and ergonomically designed plastics.
The ability to renew competences in order to achieve congruence with the changing business environment is referred to as dynamic capabilities (Fahy, 2000 and Easterby-Smith et al, 2009). These dynamic capabilities are the engine which enables a firm to achieve new and innovative forms of competitive advantage (Eisenhardt & Martin, 2000). Dynamic capabilities are argued to be a key part of the rationale underpinning strategic management according to Teece et al (1997). They argue that a firm’s focus should be on developing the firm’s capabilities – not its products.
Key Terms in this Chapter
Enterprise Realignment: dynamic alterations to a firm’s business model including organisational, management and strategic changes so that they are able to create value in a new market.
Business model: the architecture of a firm including the business processes and resources that enable customer value and its competitive basis.
Application Provision: the value of the firm’s offering to the targeted market with essential attributes being provided for the end user’s context.
Industry Position: the positioning of the firm in the sector to secure competitive advantage by establishing value chain leadership along with technological differentiators.
Value Chain: the position of the firm within the value network of a sector linking suppliers and customers, including identification of potential complementors and competitors.
Business Model Renewal: innovation management that goes beyond improvements to products or services but also on the way that the businesses operate including their organisational structures and business processes.
Bespoke Development: the development of a product or solution for a specific customer contract.