TO REPLICATE OR TO RENEW?
-Gulam Mustafa
In this article we distinguish two pure types of business models innovation namely
replication and renewal and show how their performance affects differ with various levels of
environmental dynamism. The alignment between a firm business model and its external
environment is crucial for it to survive or prosper.
The speed with which new technologies are emerging in the market, the businesses need to
inherit the new innovation in the business models to survive in the market. The two main types
of business model innovation are replication and renew. Replication flourishes in relatively
stable environment. Renewal however, has a particular positive effect in environment where
there is a moderate level of dynamism.
Dynamism: The nature of Businesses is dynamic, meaning they constantly adapt to respond to
consumers’ wants and needs. Entrepreneurs spot gaps in the market and develop new ideas for
products and services.
Every organization has a business model, either explicit or implicit, but in today's rapidly
changing business environments, business model innovation has become even more important
and is a crucial factor in explaining differences in firm performance. Innovation of a business
model occurs not only when the components of the model change, but also when those
components are combined in different ways to create and capture value.
Explicit: stated clearly and in detail, leaving no room for confusion or doubt.
Implicit: Suggested though not directly expressed.
Research on business model innovation falls into two main types; renewal and replication.
Business model renewal is about the introduction of new components or new interdependencies
between those various components which go beyond the framework of an existing model in
order to create and capture new value. it Involves a radical appraise' of a firm's present business
model in order to arrive at a new or more sustainable competitive position for the firm.
Business model replication can be described as the recreation of a successful business model in
which a firm develops or upscales component of its existing model so as to create and capture
more value. It leverages those existing components—and the interdependencies between them—
by refining and adjusting its current model, or by using the model more widely across different
parts of the firm. This can be done either geographically and/or over time.
Replication is not about cloning the original model, but creating one that is broadly similar.
Their effect on Business Firms.
Firms benefit most from business model renewal in moderately dynamic environment.
Business model renewable is needed to respond to changes to existing business model and to
adapt to changing environment conditions for instance by introducing new components or new
complementary effects in new market business model renewal target customer niches that are
underserved by the industry or sometimes even create new markets for industries.
Whereas business model replication seems to be beneficial for firm performance in
relatively stable environment.
Replication provides cost advantages and can increase total revenue by correcting mistakes
getting rid of inefficiencies and upscaling for increasing the competitive advantage of an existing
business model for instance in a more dynamic environment replication allows an organisation to
become better at doing things that are similar. At the same time however business model
replication becomes less valuable environmental dynamism may affect a fence key success factor
and can we can a business model or make it ineffective. However, when the context is not
appropriate high levels of interdependency can easily become a weakness for the frame and in
dynamic environment business model components can lose their complementary effects on the
same performance.
Hence, we can't consider anyone business model as the best. As the both business model
innovation is interdependent have the potential to be comfortable and can complement one
another over a long run having a sufficient level of both replication and renewal is likely to be
the best way of achieving success for the firm.
We can say that it depends on the managerial choices regarding the business model. Top
managers can play a vital role in realising a sufficient level of both types of business model
innovation by ensuring that one type is not focused on too heavily. There must be a better
understanding of how business model renewable and replication affect firm performance and this
may provide them the foundation for successful business model innovation in descriptive world.
