Innovating business model by using business model canvas

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH - NGÔ QUỐC ANH INNOVATING BUSINESS MODEL BY USING BUSINESS MODEL CANVAS: THE CASE OF PHUC HUNG HOLDINGS J.S.C ĐỔI MỚI MƠ HÌNH KINH DOANH BẰNG CƠNG CỤ MƠ HÌNH KINH DOANH CANVAS: TRƯỜNG HỢP CỦA PHỤC HƯNG HOLDINGS LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH Hà Nội - 2017 ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH - NGÔ QUỐC ANH INNOVATING BUSINESS MODEL BY USING BUSINESS MODEL CANVAS: THE CASE OF PHUC HUNG HOLDINGS J.S.C ĐỔI MỚI MƠ HÌNH KINH DOANH BẰNG CƠNG CỤ MƠ HÌNH KINH DOANH CANVAS: TRƯỜNG HỢP CỦA PHỤC HƯNG HOLDINGS Chuyên ngành: Quản trị kinh doanh Mã số: 60 34 01 02 LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH NGƯỜI HƯỚNG DẪN KHOA HỌC: TS NGÔ VI DŨNG Hà Nội - 2017 DECLARATION The author confirms that the research outcome in the thesis is the result of author’s independent work during study and research period and it is not yet published in other’s research and article The other’s research result and documentation (extraction, table, figure, formula, and other document) used in the thesis are cited properly and the permission (if required) is given The author is responsible in front of the Thesis Assessment Committee, Hanoi School of Business and Management, and the laws for above-mentioned declaration Date: 30th September, 2017 i ACKNOWLEDGEMENT I would like to acknowledge my advisor PhD Ngo Vi Dung for his wealthy advices He has guided and promptly given me a lot of instructions and comments in order to help me moving forward with the right direction to the completion of my final research I would like to express my deeply thank to PhD Ngo Vi Dung for his support since the beginning of my research that was selecting the very interesting research topic, then going through research outline, until the end of this research From this research, I can have a deep understanding of business administration in general and innovative business model of a business firm in particular I would like to thank everyone who are Phuc Hung’s staffs and Phuc Hung’s customers, who have assisted me to be fulfillment with this research’s aims and scopes They also have spent a lot of their time with my team for the interview that my team was able to collect necessary answers serving for analyzing of current performance of Phuc Hung, as well as external environment factors affecting Phuc Hung’s business model In addition, I would like to express my special thank to every member of the team who took part in and supported me in every study activities during implementation of the research Without their support, I was not able to complete my assignment of the research study Because limited time and ability so it cannot avoid some mistakes in my research I look forward to receiving comments from lecturers and colleagues in order have more completed and better achieved of research result Date: 30th September, 2017 Ngo Quoc Anh ii CONTENT CHAPTER INTRODUCTION 1.1 Rationale 1.2 Literature review 1.3 Aims of research 1.4 Object of research 1.5 Scope of research 1.6 Thesis structure CHAPTER THEORETICAL BACKGROUND 2.1 Definition of Business Model 2.2 Business Model Canvas and Value Proposition Design 2.2.1 Business Model Canvas 2.2.2 Successful application of using Business Model Canvas 10 2.2.3 Value Propositions Design 11 2.2.4 Innovating Business Model 13 2.2.5 Summary of research theoretical background 14 CHAPTER RESEARCH METHODS 15 3.1 Research strategy 15 3.2 Data collection methods 15 3.2.1 Internal Interview Form 15 3.2.2 Customer Interview Form 15 3.3 Research Process 16 3.3.1 Assemble team 17 3.3.2 Preliminary ideas 17 3.3.3 Internal interview 18 3.3.4 Customer interview 18 3.3.5 Group discussion 19 3.3.6 Design Innovating Business Model 20 3.3.7 Prototype 20 CHAPTER RESEARCH RESULTS 21 4.1 Overview of Vietnam’s Construction Industry 21 4.1.1 History 21 4.1.2 Character 21 4.1.3 Local Key Players 22 iii 4.2 Introduction of Phuc Hung 23 4.3 Key players’ current business models: Classification, Strength and Weakness 25 4.3.1 Classification 25 4.3.2 Current business models of key players 26 4.3.3 Strength 27 4.3.4 Weakness 28 4.4 Phuc Hung’s current business model: Characteristics and Performance 28 4.4.1 Characteristics of Phuc Hung’s existing business model 28 4.4.2 Performance of Phuc Hung’s current business model 30 4.4.3 Phuc Hung’s existing business model: Strength and weakness 31 4.5 Innovating Phuc Hung’s business model 32 4.5.1 Study external environment 32 4.5.2 Collection of ideas and opinions 39 4.5.3 Design Business Models 40 4.5.4 Select the most satisfactory Business model 52 4.5.5 Innovating Business Model Discussion 55 4.5.6 Recommendation 56 CHAPTER CONCLUSION, LIMITATION AND IMPLICATION 58 5.1 Conclusion 58 5.2 Limitation 59 5.3 Implication 60 REFERENCES 61 APPENDIX A: INTERNAL INTERVIEW FORM 63 APPENDIX B: CUSTOMER INTERVIEW FORM 68 APPENDIX C: INNOVATIVE BUSINESS MODEL CANVAS 71 APPENDIX D: “FIT MAP” CALCULATION SHEET 74 iv ABBREVIATION GDP: Gross Domestic Product WTO: World Trade Organization TPP: Trans-Pacific Strategic Economic Partnership Agreement FTA: Free Trade Agreement PPP: Private Public Partners FDI: Foreign Direct Investment GSO: General Statistics Office of Vietnam MOC: Ministry of Construction HNX: Hanoi Exchange Market CEO: Chief Executive Officer VND: Vietnamese Dong FPTS: FPT Security ROE: Return On Equity ROA: Return On Assets DBB: Design – Bid – Build DB: Design and Build EPC: Engineering – Procurement – Construction BIM: Building Information Modeling ERP: Enterprise Resource Planning v LIST OF FIGURES Figure 2.1: A business model – a link between strategy and operations Figure 2.2: Business Model Canvas Figure 2.3: Value Proposition Canvas Figure 3.1: Flowchart of the Research’s process LIST OF TABLES Table 4.1: Phuc Hung’s finance performance of 2013, 2014 and 2015 Table 4.2: Customer Profile ranking result Table 4.3: Value Map ranking result of “Resource Driven” business model Table 4.4: Value Map ranking result of “Offer Driven” business model Table 4.5: Value Map ranking result of “Customer Driven” business model vi CHAPTER INTRODUCTION 1.1 Rationale Vietnam is one of the fastest growing countries in the last decade As reported by World Bank: “Vietnam is a development success story Political and economic reforms (Doi Moi) launched in 1986 have transformed the country from one of the poorest in the world, with per capita income around $100, to lower middle income status within a quarter of a century with per capita income of over $2,000 by the end of 2014 Vietnam’s growth rate averaged 6.4% per year in the 2000s, but begun to slow in the wake of the global financial and economic crisis However, driven by strengthening domestic demand, GDP has accelerated to 6.3% during the first half of 2015, the fastest first-half-of-the-year growth rate in the past five years” (World Bank, 2015) “GDP at market prices (current US$) of Vietnam 2014 is $186.2 billion” (World Bank, 2015) Since the reform launched, Vietnam has been joined with serials of economic organizations in the World Vietnam has joined WTO since 2006 and Vietnam’s economy had stepped toward a deeper integration to global and regional market The newest singed trade agreement TPP will be a strong motivation and will be an opportunity for domestic economic development in general and for construction industry in particular Number of FDI (Foreign Direct Investment) firms and investment capital has been increased rapidly in recent years In 2014, “total FDI capital was VND 265.407 billion, equal to 22% total economic investment and increase 9.8% in comparison with 2013” (GSO, 2015) FDI become important part of Vietnam’s economic and opportunities are increased from this investment activity In the pathway of economic development, industrialization and modernization, the construction industry has paid an important role in the aspect of economic contribution, urban and rural development, and housing increase “The production value of the construction industry in 2014 at current prices is estimated at VND 201.203 billion and contributed 5.11% of GDP” (GSO, 2015) The development of urban and rural areas in the recent year is growing fast At the end of 2014, “there are 774 urban (increase urban in comparison with 2013), in which 02 special urban, 15 urban Grade I, 21 urban Grade II, 42 urban Grade III, 67 urban Grade IV and 627 urban Grade V Housing area for living also increase at high rate recently In 2014, there are 92 million sqm of housing increased, average housing area per person nationwide is 20.6 sqm, increase sqm per person in comparison with 2013” (Baoxaydung, 2015) These figures clearly show how the importance of construction industry to Vietnam economic During the development of socio-economic, there are many opportunities created for Vietnamese contractors In parallel challenges for local contractors are also increased from investors’ side and international contractors’ side From investors’ side, requirements of both local and international investors are higher and higher together with economic development This means that local contractors has to improve their capabilities in term of corporate governance ability, technology-innovation capability, financial and accounting status, management skill, branding development, human resources management, corporate social responsibilities, environment protection, etc., to meet high requirements from investors (FPTS Report, 2015) From international contractors’ side, which are origin from America, Europe, Japan, Korea, China, etc., they have come into Vietnam market together with several advantages of high construction technology, high management skills, good finance ability, several years of experience, etc These advantages of international contractors create a big challenge for local contractors (FTPS Report, 2015) In order to compete internally among local contractors and internationally with foreign contractors, the urgent requirement for Vietnamese contractors is to find the way to improve their capabilities, corporate strategy, as well as business model, etc., to enhance competitive advantage to survive, and sustainable develop in long-term There are some successful contractors in re-structuring their company When finding the trend of development, Coteccon, Hoa Binh Construction, Cofico, Delta Construction have had early privatization process from State – Owned enterprise Most of them today have a good position of branding, market share, and profit Moreover, they also are able to compete equally with international contractors in the civil projects of construction industry Within these contractors, innovating business model is an important solution to enhance competitive advantage for them when they are facing high requirements from market However, the above successful contractors are few in comparison with the scale of Vietnam Construction Industry There is still a big gap among local contractors with international contractors, such as: Turner Construction from America; Vinci, Colas from Europe; Shimizu, Sumitomo Mitsui, Obayashi, Taisei, from Japan; Posco, Hyundai, Dealim, Keangnam from Korea in the field of infrastructure projects, industrial projects and airport projects Contractors of these construction fields are still very slowly in changing their business models due to the embedment deeply with state-owned enterprise’s If the time allowed, the research team can complete design another one or two other prototype, as well as quantitative measurement of model’s effectiveness of different models, thereby helping Phuc Hung is able to can select the most effective model Limitation of resources: Beside limitation of time, the research team also had limitation of resources on the research study If resources allow, the research team can conduct a wider range of data collection and analyze a group of local contractors, or sampling big enough number of companies at the same level in Vietnam construction industry to study their performance From this point, it is possible to measure the effectiveness and to make higher contributions to overall development of the Vietnamese construction industry It is also able to contribute for local contractors to increase their competitiveness to international contractors, and then to help local contractors to sustainable grow on the pathway of industrialization, modernization and international economic integration 5.3 Implication Based on the finding of the above limitations of the research, the team also identified and recommended some further research implications based on the results of the study within the topic as followings: Impact of “Design and Build” business model on Revenue and Profitability ratios of Vietnamese contractors Impact of “Design and Build” business model application of domestic contractors on Growing factors of Vietnam's construction industry Customer satisfaction with contractors applied “Design and Build” business model EPC business model canvas for local contractor and its business performance measurement Using Business Model Canvas to design the trend of BIM / LEAN innovative business model of local contractors The author are looking forward for comments and feedback from readers and hope that that the research results of the case of Phuc Hung is helpful and able to be used by other researchers or teams to develop, extend to wider range of research scopes So that the research results have greater contributions to local contractors in particular and to the Vietnam’s construction industry in general 60 REFERENCES  Journal/periodical articles Aki Pekuri, Laura Pekuri, and Harri Haapasalo (2013) The role of Business Models in Finish Construction Companies Australian Journal of Construction Economics and Building, 13 (3) 12-23 Aki Pekuri, Laura Pekuri, and Harri Haapasalo (2014) Lean as a Business model IGLC-22 June 2014, Oslo, Norway David J Teece (2010) Business Models, Business Strategy and Innovation PRP – Long Range Planning Vol.43 (2010) 172-194 Lauri Koskela, Greg Howell, Glenn Ballard, and Iris Tommelein (2016) The foundation of lean construction Research Gate, August 2016  Books Alexander Osterwalder, Yves Pigneur (2010) Business Model Generation John Wiley & Sons, Inc., Hoboken, New Jersey Alexander Osterwalder, Yves Pigneur et al (2014) Value Proposition Design John Wiley & Sons, Inc., Hoboken, New Jersey Gerry Johnson, Richard Whitington, Kevan Scholes (2011) Exploring Strategy – Text and Case, 9th Edition Pearson Education Porter, M E (1998) Competitive strategy: techniques for analyzing industries and competitors: with a new introduction New York, Free Press Porter, M E (1990) The competitive advantage of nations: with a new introduction New York, Free Press  Papers/Reports FPTS Report, 2015 FPT Securities’ Construction Industry Report(2015) ICON4 Report, 2015 ICON No.4’s Annual Report (2015) IBM Report, 2010 When and How to innovate your business model (2010) Nguyen Dinh Van, 2007 Building Franchise Business Model of Mineral Drinks in Ho Chi Minh City, Master Thesis, Ho Chi Minh University of Economic (2007) Nguyen Phuong Chi, 2010 Successful e-commerce business models in the world and lessons for Vietnam, Master Thesis, Foreign Trade University (2010) Phuc Hung Profile, 2016 Phuc Hung Holdings Company’s Profile (2016) Phuc Hung Report, 2013 Phuc Hung Holding’s Annual Report (2013) Phuc Hung Report, 2014 Phuc Hung Holding’s Annual Report (2014) Phuc Hung Report, 2015 Phuc Hung Holding’s Annual Report (2015) 61 Vinaconex9 Report, 2015 Vinaconex No.9’s Annual Report (2015)  Online documents GSO (2015) http://gso.gov.vn World Bank (2015) http://www.worldbank.org/en/country/vietnam/overview  Press Baoxaydung (2015) http://www.baoxaydung.com.vn/news/vn/thoi-su/nganh-xay- dung-duy-tri-tang-truong-ben-vung.html Trithuctre (2015) http://ttvn.vn/kinh-doanh/mo-hinh-kinh-doanh-canvas-cua-googlefacebook-la-gi-5201597951449.htm 62 APPENDIX A: INTERNAL INTERVIEW FORM No 1.1 1.2 1.3 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.1 2.11 Interview Questions Agreed level Customer segments Has a large number of customer in a wide range and scale Just got an average number of customers and within medium scale Only got a small number of customers and within under average scale Value Propositions Company is capability enough to execute every scale of civil projects Company is capability enough to execute every scale of industrial projects Company is capability enough to execute every scale of infrastructural projects Company's products is able to relieve pain of outcomes for customer Company's products is able to relieve pain of obstacles for customer Company's products is able to relieve pain of risks for customer Company has capabilities of EPC contract execution (EPC) Company has capabilities of Design and Build contract execution (DB) Company has capabilities of traditional Design Bid and Build contract execution (DBB) Company's products is able to create required gains for customer Company's products is able to create expected gains for customer 63 No 2.12 2.13 3.1 3.2 3.3 3.4 4.1 Agreed level Interview Questions Company's products is able to create desired gains for customer Company's products is able to create unexpected gains for customer Channels Company's contracts are awarded mostly under opened tender Company's contracts are awarded mostly under limited tender Company's contracts are awarded mostly under nominated tender Company's contracts are awarded mostly under competitive quotation Customer relationships Customer relationships is created by collecting tendering information on public announcement Company is contacted with invitation for 4.2 limited, nominated tender, or competitive quotation 4.3 4.4 4.5 5.1 5.2 5.3 Company is fulfill with contract's warranty responsibilities Customer relationships is maintain in a proper conditions Company is able to attract customer belief and continue assigning new jobs for the company Revenue streams Company has huge revenue streams over capabilities and expectation Company has medium revenue streams as planned Company has small revenue streams under 64 No Agreed level Interview Questions capabilities and not as planned 5.4 5.5 5.6 Revenue growing is at low rate and under target rate Streams of revenue are unstable and undiversified Profit of the company is still small and profit growing at low and under target rate Profitability ratios of the company are under 5.7 industry average and not fully utilize the company’s resources Key resources 6.1 Company has high capability of key resources 6.2 6.3 6.4 6.5 Company has high quality human resource to promote the company Management Board of the company has high capability Company is balance in structure and has high quality human resource Company's finance is transparency and stability Company has capability to continue investing in 6.6 equipment as well as human resource to promote capability Company has high capability level of assets 6.7 resource which are modern model, and fit for large range of project purposes 6.8 7.1 7.2 Company owns modern technology resource which is difficult to imitate, Key activities Company process management is at high level and effective Company's purchasing materials are easy to 65 No Agreed level Interview Questions access, good price, timely delivery Highly efficient and economical construction 7.3 management, ensuring timely completion, minimizing construction delays 7.4 Machinery and equipment used to maximum productivity and maintained regularly Company modern technologies in construction 7.5 management to increase the efficiency of construction 8.1 Key partners Company has a long term relationship with many subcontractors to handle part of the work Company has a lot of source of direct labor 8.2 supply, who can provide a large number of skillful workers Company has a diversified supply source of 8.3 materials, which can be supplied in large quantities, minimizing intermediaries and with low prices 8.4 Company has a wide network of suppliers of construction machinery and equipment Costs structure 9.1 Company apply low-cost method for its products 9.2 9.3 Company apply low-price competitive strategy to win a bidding Direct cost of product is as low as possible, no method to lower down Company has optimal construction norms for 9.4 saving materials, labor and machinery as much as possible 9.5 Management costs, indirect costs, financial costs 66 No Agreed level Interview Questions are as low as possible, no method to lower down Company has fully used of the economies of 9.6 scale to lowdown direct cost of materials, machinery and labor Company has maximized the economies of 9.7 scope that support each other to create the lowest cost structure Agreed level: 1: Total disagreed 2: Disagreed 3: Could agreed 4: Agreed 5: Total agreed 67 APPENDIX B: CUSTOMER INTERVIEW FORM No Interview Questions I.1 General I.1b Type of Company I.1c Revenue II.1 Customer jobs II.1a Previous investment projects II.1b Current investment projects II.1c Project investment in next 3-5 years II.1c Type of coming project investment II.1d Objectives of coming project investment II.2 Customer pains a.1 Project outcomes a.1.1 Customers and market acceptance a.1.2 Project investment location favorable a.1.3 Building optimal functions a.1.4 Building variety of utilities a.1.5 High aesthetics of project investment a.1.6 Symbolic of project investment a.1.7 Energy saving of project investment a.2 Project obstacles a.2.1 Marco economic stable a.2.2 Monetary policy optimal a.2.3 Bank rate at 5-10% a.2.4 Market leverage a.2.5 Company's financial status a.3 Project risks a.3.1 Investment management capabilities a.3.2 Design capabilities a.3.3 Construction management capabilities a.3.4 Construction technique application a.3.5 Shortening project schedule Importance 68 No Interview Questions a.3.6 High variation costs a.3.7 Safety issues a.3.8 Surrounding natural environment impacts a.3.9 Surrounding social environment impacts b.1 Type of construction investment Importance b.1.1 Design - Bid - Build (DBB) type b.1.2 Design and Build (DB) type b.1.3 Engineering - Procurement - Construction (EPC) b.2 Effectiveness of EPC/DB type vs DBB type b.2.1 Less total investment costs b.2.2 Faster construction schedule b.2.3 Shorter completion time b.2.4 Less variation costs during project execution b.2.5 Minimization of delays during project execution b.3 b.3.1 Local contractors' capabilities Coteccons is a major contractor who has capabilities of implementing EPC/DB contracts Coteccons is a major contractor who has not b.3.2 enough capabilities of implementing EPC/DB contracts but traditional DBB contracts b.3.3 Hoa Binh is a major contractor who has capabilities of implementing EPC/DB contracts Hoa Binh is a major contractor who has not b.3.4 enough capabilities of implementing EPC/DB contracts but traditional DBB contracts b.3.5 Vinaconex is a major contractor who has capabilities of implementing EPC/DB contracts Vinaconex is a major contractor who has not b.3.6 enough capabilities of implementing EPC/DB contracts but traditional DBB contracts b.3.7 Phuc Hung is a major contractor who has 69 No Interview Questions Importance capabilities of implementing EPC/DB contracts Phuc Hung is a major contractor who has not b.3.8 enough capabilities of implementing EPC/DB contracts but traditional DBB contracts II.3 Customer gains a.1 Required gains a.1.1 High recognition of customer/ market a.1.2 Meet technical requirements a.1.3 Investment costs and outcomes price are under planned budget a.2 Expected gains a.2.1 High aesthetics a.2.2 Certified with LEED corticated of energy saving a.2.3 Having symbolic building and a land mark of local area a.3 Desired gains a.3.1 Be a typical model other projects to follow a.3.2 Be a desired project to be used and owned a.4 Unexpected gains a.4.1 Be a historical landmark a.4.2 Be a well-known destination III.1 Customer satisfaction of local contractors a Coteccons b Hoa Binh c Vinaconex d Phuc Hung Importance: 1: Non important 2: Less important 3: Slightly important 4: Important 5: Very important 70 APPENDIX C: INNOVATIVE BUSINESS MODEL CANVAS Innovative Design – Bid – Build Business Model Canvas (“Resources Driven”) 71 Design and Build Business Model Canvas (“Offer Driven”) 72 Engineering – Procurement – Construction (EPC) Business Model Canvas (“Customer Driven”) 73 APPENDIX D: “FIT MAP” CALCULATION SHEET Resource Driven “Fit Map”: Product/Service Fit Pain Reliever Fit with Gain Creator Fit with with Customer Jobs Pain Severity Gain Relevance 0 0 0 0 0 0 0 0 0 0 0 0 0 22% 15% 0% Average 13% Offer Driven “Fit Map”: Product/Service Fit Pain Reliever Fit with Gain Creator Fit with with Customer Jobs Pain Severity Gain Relevance 1 1 1 1 1 1 1 1 1 1 1 1 0 78% 77% 90% Average 82% Customer Driven “Fit Map”: Product/Service Fit Pain Reliever Fit with Gain Creator Fit with with Customer Jobs Pain Severity Gain Relevance 1 1 0 1 1 1 1 1 0 1 1 1 1 1 33% 100% 80% Average 71% 74 ... Definition of Business Model 2.2 Business Model Canvas and Value Proposition Design 2.2.1 Business Model Canvas 2.2.2 Successful application of using Business Model Canvas. .. about Business Model 2.2 Interview Customers of PHC about their needs Design Innovating Business Models by using Business Model Canvas 3.1 Work shops 3.2 Discussion of Selected Innovating Business. .. able to select the best fit business model to be recommended as a prototype for innovating a business model 2.2.4 Innovating Business Model “Why innovating business model is an essence today?