Now a days, we are living in challenging environment, in such an environment wherein we must make an extra effort to survive in the competition, I am pondering upon is the old wine in new bottle a feasible option in today’s scenario? Of course, not! We must keep changing our business models considering both micro and macro-economic factors. In fact, it’s no more 9 hours fixed job in any organization, its 24*7 commitment (including weekends), so we can visualize the changing environment, which is quite associated with changing models.
A business model is a model which describes the rationale of how an organization creates, delivers, and captures value, in economic, social, cultural or other contexts. In other words, business model is essentially a blueprint of how services or products would be created and how the revenue would be generated. A changing business models is a necessity for any organization in order to avoid emerging risk and to seize opportunities. Now days, organization is not just focusing on products, also on services.
Digitalization is one of the changes; companies pursue new economic activities in virtual market online. The existing business model is digitally mapped and/or new digital products are developed. Information, communications, processes and services are networked via digital platforms. Digital transformation leads to fusion of online and offline, disruptive technologies and radical changes of entire industries. Automation, optimisation, autonomy of processes as well as more flexibility and individuality of products and services are just some of the benefits and opportunities of digitalization. We, as customer already being well versed with online websites like Amazon, Flipkart, Snapdeal, OYO, Uber etc., however, it’s also amazing to know that Deloitte (Professional Services) innovated themselves by founding Deloitte Digital Today, a competence center where all technical, digital and creative competencies come together to support their client base on their digital transformation journey.
Another key change is that mergers and acquisitions are now integral part of business-as-usual planning rather than on-off events. There are numerous motives behind M&A of the company like for economies of scale, increasing the market share or for availing tax benefits. Now, inorganic growth through M&A is a way through life. Deals activity is now part of everyday stream of business activity in industry. However, blending of enterprises not only composite the financials, technology & employees, trust aspect also build at an expedite pace. Successful acquisitions at faster pace exude company’s adaptability with changing scenario.
Changing technology is also an essential factor to take into account. Finance, both accounting & reporting team keep an eye on detailed features of every finance related technology, be it SAP, People Soft, Sage, Hyperion, Smartview Essbase, BI, Host, SEI, Geneva, Coupa etc., keep reassessing the decision due to changing scenarios to obtain best fit for the organization.
Artificial Intelligence and robotics also aid in processing & analysing financials, in mergers and in risk management, however, with such moves, visualization of naming the organization as mathematical corporation is quite fascinating.
Changing business model affects taxation. With technology changes, companies are also changing the way they do business, changing their supply chain and when they change supply chain, they need to make sure that they take tax into account, to make sure they do not create any pitfalls and to make sure they take advantage of opportunities as it presents. Further, rise of virtual organizations and more frequent travels create implications for payroll taxes and tax effective employee compensation as well as corporate taxes (e.g., in creating permanent establishment issues).
Further, it’s amazing to know that many global companies have changed their revenue models, basically by converting capex into opex. Microsoft is a great example. The company was traditionally selling software upfront which was capex for the users. This did make Microsoft grow, but equally there was a parallel market for its products, and it was not scaling up beyond a point. Once, it took a bold step of disrupting its revenue streams which enables software become an opex, variable expense for the customers, the base of the customers increased, so did the company. Another example is that of automobile industry. It added another revenue stream of mobility-as-a-service and opens a whole new set of customers who can experience the new set of offerings at a very early stage of their life and career. It’s soft leasing model, with easy exit options. This model basically meets customer aspirations of driving their desired vehicles via fixed little payment without necessarily owning it, also giving customer the flexibility to change their vehicle model whenever they want.
However, one cannot forget that government policies imperatives also have bearing on a business model. The demand generated is primarily driven by how policy is set. There is far more requirement of innovating the policy and regulatory regime by the Government in timely manner.
Indeed, changing the business model from time to time is indispensible part of industry and one should accept this fact and keep striving to survive in this competitive environment rather than simply putting old wine in new bottle, which is impossible in today’s scenario.
[This article only for academic purpose]
(This article is intended for academic purpose only. Author can be reached at garimamittal@live.in for academic discussion.)
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