BUSINESS MODEL INNOVATION – A GAMBLE OR A MANAGEABLE PROCESS?

Purpose: Any business model innovation process involves a certain level of uncertainty, complexity and, in effect, risk. A sloppy approach towards the management of risk may result in catastrophic, sometimes even fatal, consequences to a company’s core business. Although risk, risk appetite and risk management are relatively well-established concepts, their role in business model innovation is not well understood. The objective of this paper is to investigate how the risk associated with the innovativeness of a business model innovation, an organization’s risk appetite, and its risk management approach interact to affect the success or failure of a business model innovation process. Design: Retrospective case studies of business model innovations undertaken by three industrial companies provide the empirical basis for this paper. These companies were selected based on their relatively successful, yet somewhat different, business model innovation experiences over the years, and focused on the, in total four, cases in which they failed to implement their new business model attempts successfully. The reasons that led to these failures are discussed. Findings: Important factors explaining the business model innovation failure of these cases, appear to be the company’s risk appetite, the risk associated with the radicality, reach and complexity of the business model innovation, the management of risk, and especially the association between these factors. Originality:  There are many lessons to be learnt from the aftermath of a failed attempt in terms of what not to do and what to improve a next time. The cross-case analysis produced six testable propositions that enhance our understanding of business model innovation success/failure, with particular focus on: characteristics of the business model innovation; overall innovation management; risk, risk appetite and risk management; and interactions and fit between these constructs. Keywords: Business Model Innovation; Risk Management; Retrospective case studies

Reviewing the Framework of Risk Management: Policy and Hedging

Purpose: The main purpose of this study is to evaluate different policies for managing the business risks in an effective manner.   Theoretical framework: In order to identify the hazards within the organization and evaluate several risk factors, risk management is necessary. This is a method of “analysing and evaluating” the risks, which are associated with the hazard. After making identification the risks need to analyse properly. Evaluation of the risks is based on the position and activities of the firms. Hazard identification is a process of finding out the hazards, then making a list of those hazards and after that characterizing.   Design/methodology/approach: The deductive approach is the best approach to understand the structure of the study. The deductive approach focuses on the evaluation of different theoretical views for finding out the pattern related to the generic views of a particular research topic.   Findings: It is identified that the risk management is one of the major parts of business companies, which creating specific policies. The usage of hedging can lead to an effective risk management process.   Research, Practical & Social implications: Businesses can benefit more from a strong foundation for managing risks. Risk assessment is applicable to all industries and is not just related to businesses or companies.   Originality/value: This study is different from the previous studies because it examined the risk management framework (policy and hedging) in detailed way

Risk leveling in business environments. A novel approach for macro risk management

Purpose: The purpose of this study is to presents a specialized risk management approach and a structured risk management methodology for optimizing the macro business environments in turbulent business spheres. Design/methodology/approach: In this work, we present a specialized approach called ‘Risk Leveling’, and an organized risk management methodology known as ‘Risk Leveling in Business Environments (RLBE)’. The Risk Leveling approach guides on how to deal with the contextual turbulences in order to attempt the ideal business settings, and the RLBE methodology provides an operational procedure to evaluate and manage the macro risks in a designated way. RLBE follows a multi-tier approach towards divergent risks and focuses on balancing the risky macro environs facing the business (segment). While observing risk mitigations, this approach recommends utilizing the available resources in a systematic and efficient way. The RLBE procedure directs how to reduce the risks to match them with the enterprises’ risk tolerance; it also attempts to diminish the mutual risk disparities giving rise a context in which no risk is seen too big or too small comparative to the others. In order to actualize the desired, the RLBE process utilizes a mix of group decision methods (i.e. Brainstorming, Delphi, Three Point Estimates), analysis tools (i.e. Analytical Hierarchy Process (AHP)), and philosophies (i.e. As Low As Reasonably Practicable (ALARP)) in an orderly fashion. Findings: Risk Leveling procedure presented in the study adopts the standard risk management process, attempts to pacify macro risks, and strives to achieve risk leveled environments for the industry. During its course to pursue the best business settings, RLBE favors to conserve the scarce organizational resources by utilizing them systematically. Originality/value: This approach can be practiced by the regimes to pacify and regulate the macro risks in the turbulent market segments.Peer Reviewe

Integrated Project Delivery: Managing Liability Risks for the Design Professional

In today’s construction industry a paradigm shift is happening and along with it a complete new way of thinking. This paper was written to help identify the liability changes design firms in the construction industry may expect to face through the use of Building Information Modeling (BIM) and Integrated Project Delivery (IPD). The traditional delivery methods and tools utilized in the construction industry have led to an entrenched set of standards and legal precedents. Design firms have been able to rely on this when entering into agreements for their services and thus been able to anticipate the level of liability they may be accepting. The use of IPD and BIM introduces a complete change in these standards and precedents previously set. The extent of these changes is too broad and largely unknown to address within the scope of this document. As part of the management of risk, the identification of the potential changes to the design firms’ liability is crucial. This paper identifies the major areas of concern and provides some examples where a design firms’ liability may change. The reader should use this information as a springboard for investigating how these changes may affect their business and how to address them to manage their risk. This paper does not identify all possible changes in liability or risk nor does it provide specific methods for addressing these risks as each firm will need to individually evaluate the potential changes based on their business model and services offered. Given the potential impact, adjustments will likely be required in all areas of the design firms’ business. Each firm will not only need to identify all the potential risks due to the changes in liability but they will also need to identify what procedures will need to be modified to mange the risks. Once these procedures have been identified they will need to be implemented in the design firms’ culture. Since the necessary modifications extend beyond a trivial modification of a single process, a change management model should be followed. This paper provides the reader with a suggested change management model and approach to identify design firm specific risks from liability changes and incorporate the proper procedure modifications to address these risks in the design firms’ culture. The suggested model employs an 8-step process based on John Kotters’ book Leading Change, and utilizing a committee approach as part of the process. If implemented properly the change management model and committee approach suggested should provide the reader the tools necessary to help ensure a successful transition is achieved from traditional methods to the use of BIM and IPD

Using Design Briefs to Empirically Replicate and Extend the ‘Designence’ Model of Strategic Design Value

Despite increasing attention from academics and practitioners Design Management lacks a widely-agreed upon empirical measure. This paper proposes a new conceptualization of Design Management based on the view of design as a “managed process” within organizations (Bruce and Bessant, 2002, p. 38). We employ an expert rating procedure of product design briefs and Exploratory Factor Analysis to derive eleven factors of information elements contained within these document that constitute Design Management: F1 Insights into Customers; F2 Business Model; F3 Product Aesthetics; F4 Authenticity; F5 Symbolic/ Experiential Value; F6 Functional Value; F7 Promotions/ Distribution; F8 Sustainability; F9 Production/ Development; F10 Project Management; F11 Risk/ Safety. Further, we clarify the strategic role of Design Management by relating these factors to measures of firm performance at the product project- and competitive advantage-levels. Our findings are rationalized using the Balanced Score Card for Design Management approach, made up of: (1) Customer Perspective; (2) Process perspective; (3) Learning and Innovation perspective; and (4) Financial perspective. Our results confirm the overwhelmingly positive relationship between Design Management and firm performance and highlights the differential effects of individual factors across the two measures

A decision-making approach for investigating the potential effects of near sourcing on supply chain

Purpose - Near sourcing is starting to be regarded as a valid alternative to global sourcing in order to leverage supply chain (SC) responsiveness and economic efficiency. The present work proposes a decision-making approach developed in collaboration with a leading Italian retailer that was willing to turn the global store furniture procurement process into near sourcing. Design/methodology/approach - Action research is employed. The limitations of the traditional SC organisation and purchasing process of the company are first identified. On such basis, an inventory management model is applied to run spreadsheet estimates where different purchasing and SC management strategies are adopted to determine the solution providing the lowest cost performance. Finally, a risk analysis of the selected best SC arrangement is conducted and results are discussed. Findings - Switching from East Asian suppliers to continental vendors enables a SC reengineering that increases flexibility and responsiveness to demand uncertainty which, together with decreased transportation costs, assures economic viability, thus proving the benefits of near sourcing. Research limitations/implications - The decision-making framework provides a methodological roadmap to address the comparison between near and global sourcing policies and to calculate the savings of the former against the latter. The approach could include additional organisational aspects and cost categories impacting on near sourcing and could be adapted to investigate different products, services, and business sectors. Originality/value - The work provides SC researchers and practitioners with a structured approach for understanding what drives companies to adopt near sourcing and for quantitatively assessing its advantage

Aligning capital with risk

The interaction of capital and risk is of primary interest in the corporate governance of banks as it links operational profitability and strategic risk management. Senior executives understand that their organization's monitoring system strongly affects the behaviour of managers and employees. Typical instruments used by senior executives to focus on strategy are balanced scorecards with objectives for performance and risk management, including an according payroll process. A top-down capital-at-risk concept gives the executive board the desired control of the operative behaviour of all risk takers. It guarantees uniform compensations for business risks taken in any division or business area. The standard theory of cost-of-capital assumes standardized assets. Return distributions are equally normalized to a one-year risk horizon. It must be noted that risk measurement and management for any individual risk factor has a bottom-up design. The typical risk horizon for trading positions is 10 days, 1 month for treasury positions, 1 year for operational risks and even longer for credit risks. My contribution to the discussion is as follows: in the classical theory, one determines capital requirements and risk measurement using a top-down approach, without specifying market and regulation standards. In my thesis I show how to close the gap between bottom-up risk modelling and top-down capital alignment. I dedicate a separate paper to each risk factor and its application in risk capital management

Big data and risk management in business processes: implications for corporate real estate

PurposeThe purpose of this paper is to improve understanding of the integration between big data (BD) and risk management (RM) in business processes (BPs), with special reference to corporate real estate (CRE).Design/methodology/approachThis conceptual study follows, methodologically, the structuring inter-textual coherence process – specifically, the synthesised coherence tactical approach. It draws heavily on theoretical evidence published, mainly, in the corporate finance and the business management literature.FindingsA new conceptual framework is presented for CRE to proactively develop insights into the potential benefits of using BD as a business strategy/instrument. The approach was found to strengthen decision-making processes and encourage better RM – with significant consequences, in particular, for business process management (BPM). Specifically, by recognising the potential uses of BD, it is also possible to redefine the processes with advantages in terms of RM.Originality/valueThis study contributes to the literature in the fields of real estate, RM, BPM and digital transformation. To the best knowledge of authors, although the literature has examined the concepts of BD, RM and BP, no prior studies have comprehensively examined these three elements and their conjoint contribution to CRE. In particular, the study highlights how the automation of data-intensive activities and the analysis of such data (in both structured and unstructured forms), as a means of supporting decision making, can lead to better efficiency in RM and optimisation of processes

Facilitating organisational decision making: a change risk assessment model case study

Purpose: This paper aims to take the challenge to propose a novel modelling approach named Change Risk Assessment Model (CRAM), which will contribute significantly to the missing formality of business models especially in the change risk assessment area and decision-making. Organisational change risks are assessed with the aid of analytic hierarchy process (AHP) in an attempt to define the internal dynamics of organisational change management within project management eliciting also risk cause-and-effect relationships. Design/methodology/approach: The study discusses interviews/survey/AHP. Findings: The study presents the following findings. Change risk factors assessment (identification and prioritisation) recommendations (see Case Study) integration of change management; project management; risk management top four risk factors, namely, leadership, communication, project management team and culture. Research limitations/implications: As projects can be different in a variety of factors (quality, scope), an exhaustive list of risk factors cannot be identified. There is a continuous risk identification process throughout the projects’ life cycle. For example, many risks can be classified initially as unknown and can be refined after the initiation phase of the project. AHP factors limitation (eight per level) possible bias (survey analysis). Practical implications: With the aid of modelling and especially CRAM, business change risks can be assessed numerically and prioritised. Several risk factors and related attributes were identified and categorised. This empowers project managers or other stakeholders to make proper decisions about whether to take on or abandon respective organisational or project changes. Social implications: One of the values of CRAM is that it can be regarded as a global change risk assessment method that can be applied regardless of project type, size or organisation. Moreover, it has the advantage that it can be used by any kind of project, as the method is designed to be tailored to specific needs, taking significant environmental change risk factors into account. AHP has numerous uses in operational research, in project management and in general in areas where decisions (evaluation and selection) have to be made. The analysis of the case study presented, indicated that it is vital to assess the degree (impact) that each risk attribute poses to address complex organisational decisions. Originality/value: CRAM aims to bridge the gap between theoretical and applied work in the integrated research field of change management, project management and risk management. Furthermore, the approach attempts to develop a novel systematic methodology (model) for assigning probabilities in attributes (criteria) pair-wise comparison and more specifically, modelling and assessing change management risks, adding a different perspective and technique to the research area