Business Process Innovation and Online Innovations - Research Proposal Example

REPORT ON THE INNOVATION IN E-BUSINESS: A CASE ANALYSIS OF AMAZON, WAITROSE & MONEY POLO Contents Executive Summary 3 Introduction 4 Theoretical Analysis 5 Innovation 5 Competitive Advantage & Innovation 6 Business Process Innovation & Online Innovations 6 Methodology 7 Amazon, USA 7 Traditional Business Model 7 Amazon’s Online Business Model 8 Critical Evaluation of Amazon’s Online Business Model 9 Amazon: Evolutional or Revolutional? 10 Waitrose, UK 10 Traditional Business Model of Waitrose 11 Online Model 11 Critical Evaluation of Waitrose’s Online Business Model 12 Waitrose’s Online Model: Evolutional or Revolutional? 13 Money Polo Bank, Cyprus 13 Traditional Business Model: Money Polo 13 Online Model of Money Polo 14 Money Polo Online Portal: Evolutional or Revolutional? 15 Conclusion 15 Bibliography 17 Executive Summary This report examines the role of e-business in attaining and promotion innovation in businesses. To this end, the report examines the theoretical elements and aspects of innovation and its role in creating and maintaining competitive advantage amongst businesses. Based on the background, the paper examines the cases of three companies; Amazon, a US based e-commerce entity, Waitrose, a British supermarket chain and Money Polo, a European online banking entity based in Cyprus. The report identifies that firms use e-commerce either as their primary mode of existence or they use it opportunistically to attain competitive advantage and grow gradually. Introduction Most nations around the world today run on the free market economy model where consumer sovereignty is the main focus of the economy (Sheshinski, Strom, & Baumol, 2012). This implies that consumers are allowed to choose their products and services freely without being forced by the government as the case was in imperialist times and in other totalitarian and controlled economies like Communist nations (Fitzgerald, Wankerl, & Schram, 2011). Consumer sovereignty implies that businesses are required to improve their services and product offerings regularly in order to entice consumers and get them interested in choosing to use their products (Baumol, 2013). Therefore innovation has become an important and vital part for the survival and growth of businesses around the world in the 21st Century (Menelly, 2010). There are various levels and categories of innovations, but the most fundamental form is product innovation in the production sector and process innovation in the service industry (Saperstein & Rouach, 2012). This paper examines the concept of innovation in the service sector by examining business process innovation in Internet-based businesses. To this end, the paper will seek to attain the following ends: 1. A critical review of theoretical elements and aspects of innovation in business processes; 2. An evaluation of the yardstick for the innovation of internet based businesses; 3. A critique of a sample of three online businesses to evaluate their fundamental elements and aspects of innovations; 4. An inference of the main elements of innovation and competitive advantage in the businesses under review. Theoretical Analysis In order to conduct a thorough and a critical analysis, it is important to conduct a basic inquest into the meaning of some basic terms and some basic concepts that are necessary to conduct the critical evaluations. Therefore, this section will define core concepts and ideas relating to innovation, competitive advantage and business process innovation in the service sector. Innovation An anonymous quote states that innovation is “anything but business as usual”. This implies that innovation is virtually anything that is different from the usual way of doing business. However, some technical definitions of innovation provide more insight into the concept of innovation. “Innovation consists of the generation of a new idea and its implementation into a new product, process or service leading to the dynamic growth of a business or a national economy.” (Urabe, Child, & Kanogo, 2013, p. 3). This definition indicates that innovation is about the modification and utilisation of a new idea or a new concept to solve problems in a better way and manner. Another definition of innovation indicates that it is “an idea, practice or object that is perceived as new by an individual or a unit of adoption” (Shavinina, 2013, p. 116). This indicates that innovation is seen to be new or modified and people use it to resolve issues. A more practical definition of innovation asserts that it is the “process whereby new and improved products, processes, materials, and services are developed and transferred to a plant and/or market where they are appropriate” (White & Bruton, 2011, p. 19) This indicates that innovation is about the development and utilisation of a new idea and a new concept to attain various ends in the production system. This will enable a plant or organisation to attain better results in its operation. Competitive Advantage & Innovation Schumpeter indicates that every entrepreneur who puts together a new combination, that is to be put together to provide better products and services that will put it ahead of other producers in the industry (Audretsch & Heblich, 2010). This is because innovation puts a business ahead of its competitors. Therefore, inventions and innovations are to be diffused into the business environment by leading the business to become better in its provision of services and products (Sarkar, 2012). Competitive advantage is a competency or new technology that allows a firm to operate more efficiently than other firms in the same industry (Porter, 2008) This indicate that competitive advantage is about the ability of firms to innovate and stay ahead of other competitors. There is also a dimension of efficiency that comes with competitive advantage and innovation. Business Process Innovation & Online Innovations Business process innovation involves the utilisation of new technology to attain enhanced results in the operation of a given organisation (Brocke & Rosemann, 2010). This involves the envisioning of new work strategies, the actual process design activity, and the implementation of change in all technological, human and organisational dimensions (Saxena, 2009). Business process innovation involves the complete change in the way business is done and this changes the entire business model of an organisation (Kirchmer, 2013). The use of the online elements and electronic platforms has changed the business processes of firms and this involves the changes in the way things are done. These changes include various modifications in the way things are done and the electronic and information technology systems improve and modify the way things are done. Methodology In order to conduct this research, the model that will be used to conduct the research will involve the critique of three main businesses that are involved in the use of online business platforms. Thus, a sample of three firms in the US, UK, and Cyprus will be studied. The critical review will include the examination of the traditional business model and how it is done. From there, the research will move on to evaluate the online business model used by the firm. The critique of these two elements will culminate in the identification of the innovation components that have occurred in the firm. From there, the research will examine if the changes are existing or revolutionary. This will bring to bear the innovations and changes. This will also provide the basis for the examination of the actual changes that have occurred in the organisations. Amazon, USA Amazon came into existence in July 1995 when the founder, Jeff Bezos got the vision of creating an online store that will enable people to buy and sell online with ease and flexibility (Amazon Website, 2014). The main business idea is to provide an electronic commerce system that will enable consumers and other retailers to create shops at a fraction of the cost and sell to a wide array of consumers. Traditional Business Model The traditional system of commerce from inception was to walk to a given location, bargain and purchase a given product. With the concept of work and the concept of money and modernisation, supermarkets and specialised departmental shops became common around the world. As of the early 1990s, most people who needed anything had to walk to a given shop to acquire a given product. Also, the issue of scarcity meant that some products in the United States were in abundance in one state and were also short in other parts of the country. Hence, the prices of goods were extremely high and consumers constrained by geographical distance had to settle for expensive products due to these constraints. In case an American national moved to a place like Europe or any other part of the world, that individual had to forgo certain products that were not sold in the new country. Additionally, a person who wanted to be a retailer had to raise capital, purchase a shop and become a registered seller. Amazon’s Online Business Model The Amazon online business model of Amazon is one that creates a platform for different sellers to register and integrate into the Amazon system. On the registration, they could showcase their products with prices for potential consumers to see. This could be displayed to consumers in all 50 states and all nations around the world. All what consumers need is a connection to the internet. This display is at a minimal cost to the sellers because being listed on Amazon does not demand any real estate costs and costs of furniture and fittings of a traditional office or shop. This allowed numerous ordinary persons to set up online shops on Amazon. Amazon keeps stocks that are just necessary for transfers to be done. Also, Amazon was able to negotiation large scale contracts with delivery companies like Fedex and DHL in order to deliver large volumes of products at a lower price. Figure 1: Amazon Business Model (Fritscher, 2013) Critical Evaluation of Amazon’s Online Business Model Basically, the creation of an online store model by Amazon brought diverse consumers of different products in the United States of America together. This enabled the consumers to get a convenient system of ordering, paying and gaining their products in the comfort of their homes. This meant that the customers of Amazon did not have to travel great lengths in search of products and services and they could purchase products from other states without having to move from their homes. Secondly, American consumers and to a large extent consumers in nations with Amazon outlets today have the benefit of comparing prices of products from different sellers. This is literally a window shopping right behind the computer of your home. And in the traditional system, it was rare for consumers to find out different prices and different offers on such a scale. Thirdly, the impact of Amazon meant that consumers and sellers could be reached beyond the United States. Amazon facilitated internationalisation and this meant that Americans outside American and foreigners could purchase American products without having to go through so much stress. Fourthly, Amazon’s business model was one that promoted diversity and an all-inclusive system and process. This is because one needs very little capital to set up an Amazon shop and sell through it. Finally, Amazon’s innovation created a major system and approach through which consumers could pay through diverse systems and processes. This is because one could pay with a card or other online payment systems that had real-time updates that were convenient for different sellers around the world. Amazon: Evolutional or Revolutional? Amazon’s online business model can be seen as revolutionary. This is because it changed the way consumers purchase products and how sellers sell. It brought together different stakeholders including delivery companies, banks/credit card companies, buyers and sellers through the power of the Internet. And this allowed these stakeholders to get better deals and high-volumes of convenient approaches and systems. This is a major innovation that is so different and unique and it allowed the stakeholders to get an improved and enhanced system of doing things and gaining benefits like convenience, speed, accuracy, internationalisation and diversity. Waitrose, UK Waitrose is a British chain of supermarkets that focuses on food (Witzel, 2010). The company was founded in the year 1904 and it has grown steadily to integrate a wide diversity of products that are available in their over 322 locations in the UK (John Lewis Partnership, 2014). Waitrose is a leading British seller of food and food related products and they source the best products to provide meals for the British consumers (Waitrose, 2014). Traditional Business Model of Waitrose Waitrose, unlike its competitors like Tesco and ASDA is focused on the British consumers. They are positioned as an indigenous entity that provides various services to businesses and individuals in Britain. The normal approach was to locate shops in highly accessible parts of the UK including CBDs, malls and high end communities. Waitrose ran traditional adverts and marketing campaigns that consumers saw that attracted them to go to Waitrose at the end of the day or during weekends. The closest Waitrose got to dealing with deliveries included the use of traditional posts and contracts to distribute products to consumers in the various entities around the UK (Waters, 2010). This system had issues because there was a lot of paper-based mails and contracts that had to be dealt with. And it was only appropriate for large corporate entities and could not be used by ordinary members of the society. Two main things induced Waitrose to pursue an online business strategy. First of all, Waitrose needed to provide better services to the convenience of the homes and offices of more people, particularly busy individuals (Piercy, 2012). Secondly, the Waitrose risked losing their market share to other competitors that had invested in online sales platforms (Piercy, 2012). Online Model When Waitrose decided to go online, they had to create a separate online unit. The unit began with the creation of an online platform which automatically induced the need for changes and modifications. This automatically led to the creation of a strategic warehouse unit with points in different parts of the UK. With these created, there was the integration of the online sales unit with the warehouse, payment portals including the major UK banks and payment cards. This was complemented with the creation of an efficient transportation and distribution network and system for the distribution of Waitrose’s systems. Figure 2: Waitrose’s Online Business Transformations Critical Evaluation of Waitrose’s Online Business Model The online business model of Waitrose is one that sought to bring the products closer to consumers. This means that they were able to sell and provide a convenient system through which consumers could order products from Waitrose and get it within a short time in the most important sections of the UK. The main idea is to provide speed, and convenience in the sales and distribution of products. This implies that consumers can easily make an order. All they need is a connection to the Internet. To encourage the attainment of competitive advantage and convert sellers to repeat clients, Waitrose has a system of encouraging consumers to register and create accounts that enabled them to make purchases in less than 30 seconds. This is to enable Waitrose to create a control of the market share and get consumers bounded to Waitrose. Waitrose’s Online Model: Evolutional or Revolutional? Waitrose’s online business model appears to be one that is evolutional rather than revolutionary. This is because the change is in response to the need to adjust to meet the demand of consumers who mainly use the Internet to order products. Hence, this was one that the company used to survive and remain competitive. Money Polo Bank, Cyprus Money Polo is a specialised online bank operated by a Cyprus based Mayzus Financial Services. The company is a small one and has registered various wings in Britain and the Czech Republic. They mainly work through the domain name moneypolo.com and other related domains that is used to run their money transfer and internet banking entity that concerns itself with the Traditional Business Model: Money Polo Money Polo (formerly UWC Financial Services) is mainly involved in the business of wire transfers, electronic payment, foreign exchange management and debit card issuance. These are mainly functions that were fundamentally reserved to major banks that had an international wing and a far-reaching unit and an international focus. The traditional approach was to get people to open bank accounts in these countries. And once the bank account was opened, they could request for services like international debit cards (which often came with further verification procedures) and other wire transfer activities which are time consuming and demanding in terms of money laundering regulations in the international front. These challenges made it difficult for banks to reach customers in the developing world and the former Soviet Union. Some countries in the developing world lack the infrastructure to authorise international financial transactions. In some countries, the banking system is so localised and they do not have the capability to conduct international banking. Hence, there was the need for some kind of business model that would provide specialised international banking systems and processes to help people who needed these services in obscure parts of the world. Online Model of Money Polo The online model of Money Polo involves mainly reaching consumers in different parts of the world and utilising the convenience of the Internet to attain this end. To this end, Money Polo has a website and several domain names presented in different languages that are a means of reaching different consumers in different parts of the world from Cyprus. Once they make contacts, Money Polo uses a specialised electronic system to review and analyse transactions and check for evidence of money laundering and/or fraud. These systems are innovative and they are checked regularly. Where standards are met, Money Polo uses online systems to connect with other partners mainly in the European Union and either wire money, give out an international debit card or conduct an international money transfer. Therefore, Money Polo utilises technology and innovation to continuously improve their services through improved speeds and improved scrutiny of consumers from high-risk regions like Russia and Africa. Figure 3: The Online Business Model of Money Polo Money Polo Online Portal: Evolutional or Revolutional? It appears that Money Polo’s system has hybrid elements of evolutional growth and revolutionary business aspects. This is because Money Polo’s system involves traditional international banking systems that existed and continues to be utilised in the industry. However, the specialised nature of Money Polo’s operations is exceptional and exclusive, hence it can be seen that they have brought about a revolution in international banking. This is because there is hardly any other entity that specialises in the area Money Polo operates. The exceptional aspect of Money Polo lies in the fact that the use innovation as a means to improve their system of managing risks of working with consumers from high risk nations. This is a continuous process that enables Money Polo to improve significantly and live above the risks of gaining regulatory loopholes that could be detrimental to their reputation. Conclusion Innovations involve the presentation of better and more efficient systems of doing business or conducting a business that existed in the past. Innovation improves existing production systems and models. The case studies examined in this report indicates that the convenience, speed, accuracy, extended scope of communication, internationalisation, efficiency and improvement in services has caused firms to integrate elements of e-business and automation into the conduct of their business. This has caused businesses to consider various degrees of innovation. Typically, some firms like Amazon are a direct consequence of the integration of e-business and use e-business as their basis of existence. On the other hand, most businesses, including Waitrose use e-business opportunistically to meet their ends of seeking competitive advantage. Other firms use a blend of evolutionary and revolutionary trends in the utilisation of online models to survive and grow. Bibliography Amazon Website. (2014, June 23). Amazon Investor Relations. Retrieved July 22, 2014, from Amazon.com: http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-faq Audretsch, D. B., & Heblich, F. C. (2010). 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