As business digitalization and efficiency increases, we will increasingly see companies reaping the rewards by implementing innovative business models and improving productivity. Innovation is important for all companies, but especially those in sectors that rely on existing infrastructure such as telecommunications, utilities, and finance. The point of this paper is first to examine the impact of the digitalization phenomena on the evolution of sustainable innovation. Second, the paper looks at the effect of digitalization on the utility costs of firms. The final section examines the impact of digitalization on economic performance.
We begin with the recognition that innovation is necessary for a company to remain competitive. Innovation is necessary in order to provide a competitive edge against the other firms that occupy the same space in the market place. In a competitive economy, firms must evolve their business models to operate successfully alongside other firms. The primary drivers of change in firms include productivity, information technology, network, and the focus of attention. Innovation is necessary for firms to become more productive and reduce the costs associated with operations.
Many firms will adopt innovations without considering how these innovations affect their competitors. When firms adopt new technologies, they often fail to consider how these new technologies will affect their competition. They often fail to consider the impact that these technologies will have on the capability of their firm to innovate. Failure to consider the impact of competition on innovative capacity has implications for the design of business models. The ultimate solution to the problem of competition and the rise of the next-generation competition is the implementation of regulations that control the activities of firms. Regulations must be tailored to address the specific firms’ needs to ensure maximum innovation.
The ability of a firm to change quickly and to compete effectively is under sustained assault from the other firms in the industry. Innovation must be able to deliver quick results. The speed of change is a factor that must be considered in all business models. Innovation must be able to deliver capabilities that can provide positive results quickly and sustain a firm’s competitive advantage. Competitive edge is a key factor to all business models.
New business models are necessary to stay ahead of competitors and to remain relevant in a changing market. When a firm innovates it must demonstrate its uniqueness. Firms that adopt new business models will face stiff opposition from existing competitors, often from businesses that are too large to effectively compete. Innovations must be able to offer a unique solution to the problems that face the market.
There are a number of business models that could provide a firm with the innovation and capabilities to stay ahead of its competitors. Examples of relevant business models include innovation applied to supply chain, manufacturing, information systems and other capabilities. The firm must carefully determine the best business model for its needs based on a detailed analysis of its market, the competition, and its own unique capabilities. A thorough business model design should identify the firm’s unique capabilities, the costs associated with implementing the innovations, the impact on employees and customers, and the benefits to the firm and the industry.
A Google scholar study on business models has found that only six of the ten firms analyzed were truly innovative. The remaining firms had some innovative capabilities, but their business model was not highly competitive. Some of these six firms failed to adopt a dynamic capability concept, which required both innovation and a dynamic capability structure. In short, most of the firms in this study did not properly define their business model and were content to just use the generic performance definition.
Start-ups may wish to look into Internet-based business models if they wish to start their businesses quickly and inexpensively. The services of an experienced consultant are vital when start-ups wish to incorporate innovative technologies in their business models. For the start-ups it is also essential to determine their unique capabilities before selecting the right business models. Consultants will help the start-ups to properly identify the existing obstacles and identify a plan for overcoming these barriers. Furthermore, successful start-ups will be able to reduce their operational expenses by incorporating novel business models, cutting marketing costs, and increasing revenue by focusing on a few core activities.