New business development
Encyclopedia
New business development concerns all the activities involved in realizing new business opportunities, including product
or service design
, business model design
, and marketing
.
When splitting business development into two parts, we have: ‘business’ and ‘development’. The first things that come into mind when looking at business are: economics, finance, managerial activities, competition, prices, marketing, etc. All of these keywords are related to risk and entrepreneurship and clearly indicate the primary scope of the term ‘business development’.
Development is very abstract and can be linked with some of the following keywords: technological improvement, cost reduction, general welfare, improved relations, movement in a (positive) direction, etc.
In the traditional definition of Business development
, Business Development is mostly seen as growing an enterprise, with a number of techniques. The mentioned techniques differ, but in fact all of them are about traditional marketing. The main question in these issues is: how to find, reach and approach customers and how to make/keep them satisfied, possibly with new products. (Kotler, 2006) Since this definition is limited and lacks some essential factors in business developing, a complete new definition of Business Development will be introduced. Of course, the theory on “traditional” marketing is still correct and can be adopted from the old definition.
When supplying a solution, it is important to focus on the total offering you give instead of only focusing on the product or service. An offering is a package consisting of different proportions of physical product, service, advice, delivery and the costs, including price that are involved in using it. Hereby the advice, adaptation to the customer and the costs are the most important factors to get the right combination within the offering. (Ford et al., 2006; Hakansson et al., 2004)
Drawing on contingency theory
, an idea central to new business development is that different product-market- technology combinations can require different marketing strategies and business models to make them a success (Tidd et al., 2005). To chart the factors that are involved and create synergy between them, new business development draws heavily upon the fields of technology
and business networks.
The new business development process is to recognize chances and opportunities in a fast changing technological environment. Often uncertainty arises because of new technology and their new markets.
Furthermore technology can be analyzed by the concept/framework of value configuration as introduced by Stabell Fjedstad (1998). The framework consists of three value configurations, which are an extension of the value chain model by Porter: the value chain
(transformation of inputs in products), the value shop
(solving customer problems) and the value network
(linking customers). These configurations overcome some of the issues with the traditional value chain model, which is only helpful for traditional manufacturing companies. In practice firms are not pure instances of a single distinct value configuration, multiple combinations of configurations can be found within one firm (Stabell & Fjeldstad 1998).
The value creation process can also be understood from the perspective of Schilling. Schilling talks about value in the sense of technological functionality, installed base and complementary goods of a product. (Schilling, 2003). It may be clear that technology plays an important role in this value creation process, and in general contributes to the process of renewing the match between problem and solution.
It is important to recognize the effect social relations have on economic action, including business development (Ford et al., 2006). Granovetter also argues that social relations in a network lead to trust between partners, an important factor for stable development in a dynamic environment.
By focusing on these new activities, it becomes difficult to keep every activity up-to-date and to maintain the competitive advantage (Ford et al., 2006). Companies therefore increasingly concentrate their investment and their activities on only a few activities which they believe to be their core business, otherwise their competitive advantage is easily lost. Because they concentrate on just a few activities, they need business relations for the other activities (Ford et al., 2006).
Relationships are usually based on resource ties, activity links and/or actor bonds (Ford et al., 2006). A company should therefore analyze their firm itself, their relationships and their business networks in terms of activities, actors and resources. In this way, a company can determine where there are new opportunities for relationships and where resources, technologies and/or skills can be developed, integrated or exploited from other companies (Ford et al., 2006). In this way, business development can be established with help of this business network.
Nowadays, marketing is about the exchange of heterogeneous resources between dynamic, cooperating partners in network-like structures (Hakansson et al., 2004). It is about relationships, not about selling products. So, business marketers should be busy finding, developing and managing of relationships within the complex network that surrounds them (Ford et al., 2006). Blois (2004) provides three ways in which a firm can evolve from market to network mechanism. These are entrepreneurial alertness (being alert to value-creating opportunities), path dependence
(historical events cause solutions to problems and become “locked in”) and replaceability (irreplaceable contributors get much attention of others trying to influence them).
It is still questionable to what extent these networks are involved by social relations, since the mentioned authors don’t agree on this. Therefore, enterprises have to cope with the problem of how to maintain their network contacts.
Product design
-Introduction:Product design is the process of creating a new product to be sold by a business or enterprise to its customers. It is concerned with the efficient and effective generation and development of ideas through a process that leads to new products.Product designers conceptualize and...
or service design
Service design
Service design is the activity of planning and organizing people, infrastructure, communication and material components of a service in order to improve its quality and the interaction between service provider and customers....
, business model design
Business model design
Business model design refers to the activity of designing a company's business model. It is part of the business development and business strategy process and involves design methods.Business model design includes the modeling and description of a company's:...
, and marketing
Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
.
When splitting business development into two parts, we have: ‘business’ and ‘development’. The first things that come into mind when looking at business are: economics, finance, managerial activities, competition, prices, marketing, etc. All of these keywords are related to risk and entrepreneurship and clearly indicate the primary scope of the term ‘business development’.
Development is very abstract and can be linked with some of the following keywords: technological improvement, cost reduction, general welfare, improved relations, movement in a (positive) direction, etc.
In the traditional definition of Business development
Business development
A subset of the field of commerce, business development comprises a number of techniques and responsibilities which aim at:1. Researching new types of business/products/services with an emphasis on identifying gaps in the mitigation of needs of potential clients .2. Attracting new customers3...
, Business Development is mostly seen as growing an enterprise, with a number of techniques. The mentioned techniques differ, but in fact all of them are about traditional marketing. The main question in these issues is: how to find, reach and approach customers and how to make/keep them satisfied, possibly with new products. (Kotler, 2006) Since this definition is limited and lacks some essential factors in business developing, a complete new definition of Business Development will be introduced. Of course, the theory on “traditional” marketing is still correct and can be adopted from the old definition.
When supplying a solution, it is important to focus on the total offering you give instead of only focusing on the product or service. An offering is a package consisting of different proportions of physical product, service, advice, delivery and the costs, including price that are involved in using it. Hereby the advice, adaptation to the customer and the costs are the most important factors to get the right combination within the offering. (Ford et al., 2006; Hakansson et al., 2004)
Drawing on contingency theory
Contingency theory
Contingency theory is a class of behavioral theory that claims that there is no best way to organize a corporation, to lead a company, or to make decisions. Instead, the optimal course of action is contingent upon the internal and external situation...
, an idea central to new business development is that different product-market- technology combinations can require different marketing strategies and business models to make them a success (Tidd et al., 2005). To chart the factors that are involved and create synergy between them, new business development draws heavily upon the fields of technology
Technology
Technology is the making, usage, and knowledge of tools, machines, techniques, crafts, systems or methods of organization in order to solve a problem or perform a specific function. It can also refer to the collection of such tools, machinery, and procedures. The word technology comes ;...
and business networks.
The new business development process is to recognize chances and opportunities in a fast changing technological environment. Often uncertainty arises because of new technology and their new markets.
Technology
Innovative technology provide important opportunities for new business development. For a company it is important to keep products and processes up to date, to stay competitive (Ford et al., 2006). Continuous investment in innovation for both products and processes makes it more difficult for others to offer a large technological functionality advantage (Schilling, 2003). Many companies need technological development to stay competitive. Technological development can occur through making decisions about acquiring, exploiting and managing technologies. These decisions should be made by involving the research and development staff, purchasing staff and marketers. (Ford et al., 2006) The customers are also important (Schilling, 2003; Ford et al., 2006).Furthermore technology can be analyzed by the concept/framework of value configuration as introduced by Stabell Fjedstad (1998). The framework consists of three value configurations, which are an extension of the value chain model by Porter: the value chain
Value chain
The value chain, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.-Firm Level:...
(transformation of inputs in products), the value shop
Value shop
The value shop was first conceptualized by Thompson in 1967. A value shop is an organization designed to solve customer or client problems rather than creating value by producing output from an input of raw materials....
(solving customer problems) and the value network
Value network
A value network is a business analysis perspective that describes social and technical resources within and between businesses. The nodes in a value network represent people . The nodes are connected by interactions that represent tangible and intangible deliverables. These deliverables take the...
(linking customers). These configurations overcome some of the issues with the traditional value chain model, which is only helpful for traditional manufacturing companies. In practice firms are not pure instances of a single distinct value configuration, multiple combinations of configurations can be found within one firm (Stabell & Fjeldstad 1998).
The value creation process can also be understood from the perspective of Schilling. Schilling talks about value in the sense of technological functionality, installed base and complementary goods of a product. (Schilling, 2003). It may be clear that technology plays an important role in this value creation process, and in general contributes to the process of renewing the match between problem and solution.
Business networks
Traditional marketing is usually based on economic models (Williamson, 1975). In those pure economic models there is no room for negotiations and special treatments for different companies. A technological environment however can be very uncertain and therefore competitors have to rely heavily on their business networks. It is then that special treatments and negotiations are necessary.It is important to recognize the effect social relations have on economic action, including business development (Ford et al., 2006). Granovetter also argues that social relations in a network lead to trust between partners, an important factor for stable development in a dynamic environment.
By focusing on these new activities, it becomes difficult to keep every activity up-to-date and to maintain the competitive advantage (Ford et al., 2006). Companies therefore increasingly concentrate their investment and their activities on only a few activities which they believe to be their core business, otherwise their competitive advantage is easily lost. Because they concentrate on just a few activities, they need business relations for the other activities (Ford et al., 2006).
Relationships are usually based on resource ties, activity links and/or actor bonds (Ford et al., 2006). A company should therefore analyze their firm itself, their relationships and their business networks in terms of activities, actors and resources. In this way, a company can determine where there are new opportunities for relationships and where resources, technologies and/or skills can be developed, integrated or exploited from other companies (Ford et al., 2006). In this way, business development can be established with help of this business network.
Nowadays, marketing is about the exchange of heterogeneous resources between dynamic, cooperating partners in network-like structures (Hakansson et al., 2004). It is about relationships, not about selling products. So, business marketers should be busy finding, developing and managing of relationships within the complex network that surrounds them (Ford et al., 2006). Blois (2004) provides three ways in which a firm can evolve from market to network mechanism. These are entrepreneurial alertness (being alert to value-creating opportunities), path dependence
Path dependence
Path dependence explains how the set of decisions one faces for any given circumstance is limited by the decisions one has made in the past, even though past circumstances may no longer be relevant....
(historical events cause solutions to problems and become “locked in”) and replaceability (irreplaceable contributors get much attention of others trying to influence them).
It is still questionable to what extent these networks are involved by social relations, since the mentioned authors don’t agree on this. Therefore, enterprises have to cope with the problem of how to maintain their network contacts.