Core Concepts

Question 1

Why is it hard for companies to successfully change their business model?

Answer 1

Few companies understand their current BM well enough.

They don’t study the dynamics and processes of BM development

Question 2

What does the CVP consist of?

Answer 2

Profit formula
Key processes
Key resources

Question 3

What does the profit formula consist of?

Answer 3

 Revenue model: price*volume
 Cost structure
 Margin model: The contribution needed from each transaction to achieve desired profits
 Resource velocity: how fast inventory needs to be turned over along with fixed assets. How well resources need to be utilized

Question 4

Steps how to change the business model

Answer 4

• Designing a profit formula
• Identifying key resources and processes
• Creating a CVP

Question 5

When to change the business model?

Answer 5

• The opportunity to address through disruptive innovation the needs of large groups of customers, which are shut out of the market
• The opportunity to capitalize on a new technology by wrapping a new business model around it
• The opportunity to bring a job-to-be done focus on where one does not yet exist. Basically, a customer job, which is not fulfilled. For example, Fed Ex focused not on making deliveries cheaper but focus on speed and reliability of receiving packages.
• The need to fend off low-end disruptors such as Tata
• The need to respond a shifting basis of competition. As what defines an acceptable solution In a market will change over time.

Question 6

How can firms learn from customers

Answer 6

In order to access such fragmented knowledge, the company must construct a customer portfolio breadth

Question 7

What are the elements of the customer portfolio breadth?

Answer 7

• Size of firm’s customer potfolio – the number of customers the firm has relations with.
• Diversity of firm’s portfolio - Terms of differences in market domains between the firm and each of its customers.
• Diversity in customers’ demands can help

Question 8

Importance of customer portfolio breadth

Answer 8

• Firms with ties to many and diverse customers will acquire more knowledge than firms with smaller and less diverse customer portfolios.
• Can help ventures learn leading to knowledge assimilation and utilization.
• Diversity in customers’ demands that ventures engage in BM and organizational adaptation and overcome potential inherent tendencies to stick to the status quo
• The larger the portfolio, the higher the likelihood of obtaining useful feedback – “wisdom of the crowds” effect.

Question 9

Effect of emerging industries connected to BM change

Answer 9

In an emerging industry, where information is scarce and uncertainty high – a firm’s customer portfolio will be an important source of knowledge that will help a firm shape and adapt its business model. Learning from customers is a likely factor of BMA

Question 10

Which are the multiple goals that lead to mission measurement paradox in SE?

Answer 10

The conflict of social goals and business behaviour.

Social goals are hard to measure, while financial goals are easily quantifiable

Question 11

What is a mission measurement paradox?

Answer 11

The ‘disconnect between mission, objectives, and impact measurement’

Question 12

Mission drift due to ease of measuring outcomes

Answer 12

To deviate from the normative mission and to be more inclined to ‘follow the money’ by prioritizing a strategy aimed at maximizing resources. Since financial measures are much easier

Question 13

Which are the typical challenges, which SE’s face?

Answer 13

The governance challenge
The mission measurement paradox
The legitimacy challenge

Question 14

Governance challenge

Answer 14

Governance defines systems and processes concerned with direction, control and accountability; it determines for what and to whom an organization is accountable. Main difference stems from two main factors:

• the origins of the main sources of funding (philanthropic donations or governmental support or own revenue)
• the way the governing board is composed

Question 15

The legitimacy challenge

Answer 15

social enterprises need to be seen as economically fit but to be perceived as trustworthy and accountable.

Question 16

Why does the BMC not fit SE?

Answer 16

It isn’t

(1) blending social and economic objectives;
(2) effectively communicating the objectives and their coherence with the use of resources and, more generally, the strategy;
(3) assessing, or more precisely quantifying its results in terms of output, outcomes and impact
(4) adopting the best governance mechanisms that enable the pursuit of mission values and objectives

Question 17

Which are the blocks, which SE replaced in the BMC canvas

Answer 17

Social value proposition
Non-targeted stakeholders
Customers and beneficiaries 
Customers and beneficiaries engagement
Income

Question 18

Which are the NEW blocks in the SE canvas

Answer 18

The mission values
The objectives
The impact measures
The output measures
The governance

Question 19

Difference between business model adaptation and business model innovation

Answer 19

• Adaptation – the process by which the management actively aligns the firms business model to a changing environment. For example, changes in preferences of customers, supplier bargaining power and technological changes
• Innovation – Defined as the process by which management actively innovates the business model to disrupt market conditions

Question 20

Drivers of BM adaptation

Answer 20

• Need to adapt to external stakeholders
• Changes in competitive environment
• Opportunities brought by new information and ICT technologies

Question 21

Hindrances to BM adaptation

Answer 21

• Willingness to experiment
• The ability to develop leadership and organizational capabilities
• Structured and interdependent operational activities and their structures might lead to rigidity

Question 22

Threat-rigidity theory

Answer 22

Firms confronted with external threats are more likely to respond with caution, exhibit an inward-looking tendency, and to fall back on known and routinized patterns of actions.

Question 23

Prospect theory

Answer 23

Managers are more sensitive to losses than gains of the same magnitude. So companies, which face unfavorable conditions are more likely to respond with BMA, as they have little to lose, whereas more successful companies are more risk-averse since they have “more to lose than to gain

Question 24

Trial and error learning

Answer 24

Retaining actions, which produce favourable results and discarding those who do not

Question 25

Organizational search

Answer 25

Trying actions and correcting and adjusting them during testing leads to learning.

Question 26

The stages in the Naturhouse case study?

Answer 26

• Stage 1 Exploration - Initial business model design and testing
• Stage 2: Exploration - Business model development
• Stage 3: Exploitation -Scaling up the refined business mode
• Stage 4: Exploitation and further exploration- Sustaining growth through organization-wide learning

Question 27

Difference between single and double loop learning

Answer 27

In single-loop learning, individuals, teams, or organizations detect deviations from the ‘rules’ and modify their actions according to the difference between expected and obtained results, but do not question the fundamental design, goals, and activities of their organization’.
In contrast, double-loop learning ‘questions changing fundamental aspects of the organization’, promoting deep changes in the ways it both behaves and performs.