Business Model Innovation of Small and Medium-sized Enterprises on the Basis of Value Creation Logic of Balanced Score Card〔＊〕

Ge Hongpeng，Yang Gongsui

（1.Ludong University，Yantai Shandong 264025；2.Shandong University of Finance and Economics，Jinan Shandong 250014）

Ⅰ.Value creation logic based on Balanced Score Card and business model innovation

The theory of Balanced Score Card，which is made up of Strategy Map，Balanced Score Card and Strategy－centered Organization，is the excellent strategic management tool in the globe.It helped GE，Mitsubishi，Thornton Oil Company and other well－known international companies achieve a strategic breakthrough，creating good performance for the shareholder and stakeholder.The key point in the value－creation logic of the theory is that the dimension of learning and growth is the basis，supporting and driving the internal business processes to create and pass the value，realizing something from nothing，satisfying the needs of the customer，creating the value for the customer，shareholder and stakeholder，realizing the goal of the customer and the strategic goal of the enterprise’s finance.

The core of the business model is value creation，the basic logic of which is how the enterprises provide products and services to the customers and get profit from them in a certain value chain or value network，to be simple，how to make money for the enterprise.（Timmer，1998；Linder etc，2000；Rapper，2001）

In summary，most of the scholars and experts analyzed the procedures of value creation of the enterprise through aspects of value chain and value network.They divided the procedures of the value creation into main activities such as supply，production and sales，and minor activities such as finance，research and development，and they held that any deep exploration in any links would realize the business model innovation.Because small and medium－sized enterprises are in a relatively weak position in the production size，the research and development capacity and the marketing channel，their competition is not powerful in the industrial value chain，either.It is hard for them to innovate through simple component integration.It is possible to get successful business model innovation to combine the strategy management with value creation procedures and gather advantageous resources under the guidance of enterprise strategy.

Ⅱ.Analysis of the Business Model of small and medium－sized enterprises based on value creation logic of the Balanced Score Card

（1）Business Model based on overall cost leadership

Overall cost leadership requires enterprises to provide product and service with high quality and low cost，creating the value for customer and the enterprise.

During its implementation，the key procedure inside the enterprise is the operation management.Cooperation with excellent suppliers and distributors should be enforced，and through internal efficient operation to get fast response and satisfy the needs of the customer and lower the operation cost.The second is the customer management，which requires knowing the main needs of the biggest clients to reduce the variety of the product and service and lower their costs.It is also an important factor of lowering the cost to concern the safety and regulation to lower the accident rate.

The dimension of learning and growth should be required to respond fast，improve working efficiency and lower the cost of product and service by reforming organization processes，enhancing information management and improving the proficiency of workers.

（2）Business Model based on product leadership strategy

The product leadership strategy emphasizes the characteristics and functions which the vanguard customers like and they are willing to pay a higher price for them，which require product and service of the enterprise are excellent，which are better in speed，accuracy，size and energy consumption than their competitors.

During its implementation，the key procedure inside the enterprise is innovation procedure.The strict and efficient research and development capacity and concerns about the development period at any time are required to keep the lead in products and services.The focus of the operation management procedure is not on lowering the cost，but on maintaining the flexibility and quick response to release production capacity and realize value creation.The procedure of customer management should concern likes and dislikes of the vanguard customers and do well in publicity，experience and promotion.Meanwhile，the enterprise should care about the regulation and social procedure of new products to be on the market to ensure the successful implementation of the strategy.

（3）Business Model based on whole customer solution

The whole customer solution emphasizes the long－term relationship between enterprise and customer and tries best to get comprehensive solution and more extra service before and after sales and high quality relationship with the customer.

The model emphasizes that workers should possess deep technical basis，sensibility to the customer’s preference and technique to provide different products and services for the target customer.The information system should care about the information of the customer to help the employee to catch marketing chances and facilitate the development of the enterprise.

（4）Business Model based on Lock－in strategy

Lock－in strategy requires the enterprise to create long term sustainable value through creating high conversion cost for the customer.

The business model emphasizes coordination between human capital and internal operation management，which require the information system to satisfy the needs of the customer and auxiliary manufacturer，build enterprise culture inside the enterprise to make a fast response to the customer to ensure successful implementation of the Business Model.

Ⅲ.The Business Model innovation based on value creation logic of the Balanced Score Card

（1）To investigate the customer’s needs and make clear the strategic orientation and goal

Firstly，market research should be done to fully master the customer’s needs and select the customer group according to their consumption capacity and habit to decide the valued customer group.Secondly，the target customer group should be subdivided according to the value proposition to form different differentiation groups.The researcher should go into the grassroots level and contact with the customer to know their selection standards and reasons for buying products and services.In the course of visual strategy exhibition，we should invite the customer to participate in the strategic selection and communicate with him to study which element is the most valued one，make sure the elements the enterprise should get rid of，reduce，add or create，and form the special value curve of the enterprise.Finally，according to the mission and the vision of the enterprise，combining the external political，economical and law environment，and the competitive advantage of the enterprise，the strategic orientation and development goal should be set with reason，including the strategic goal of the finance and the goal of the customer value.We should make use of new and adjusted development strategy to lead the business model innovation of small and medium－sized enterprises.

（2）To make use of the strategy map to decompose the enterprise strategy and make sure the combination of the key procedures

Firstly，combined with the value curve，we should make use of the strategy map to decompose the strategy development goal of the enterprise and make sure of the strategic tasks and goals of operation management，customer management，innovation procedure，regulation and social procedure.Secondly，we should subdivide the strategic tasks inside the enterprise internal management procedures to form concrete action plan.Finally，we should analyze，evaluate and select action plans from different departments to make sure of the key internal procedures and the concrete action plans.

Using the strategy map，after much decomposition，we can change the strategic goal into tasks of different internal procedures and the goals of different action plans，change the expected products and services for the target customer into concrete action plans of different internal departments and employees.An Airline company implementing the overall cost leadership，under the guidance of the strategy，provided punctual and cheapest service with high quality.After the enterprise used the strategy map to decompose the overall strategic tasks，the task for operating was to fast turn over on the land to ensure the goal of the punctual and cheapest service and the finance goal of reducing the number of the planes and improving the income through the rapid turnover.

（3）To coordinate and integrate intangible assets to support strategy action plans

Firstly，we should implement strategy groups，strategy IT combination and reform schedule according to the internal key procedures and action plans through the strategy map.Secondly，the strategic preparation of the human capital，information capital and organization capital should be measured and make sure of the distance with others and the disadvantages.Finally，develop ment，coordination and integration of the intangible assets should be made to improve the strategic preparation，support the strategic action schedule and implement the strategic goals.

To ensure the successful implementation of the strategy，the work groups and information groups should be firstly practicable.Secondly，the distance of the intangible asset preparation should be measured.Finally，through developing and improving the technique of the ramp management staff，new information supporting system and the coordination with the staff on the land should be developed to improve coordination with human capital，information capital and organization capital to support action plans.

In summary，the strategic orientation of the enterprise can be set through market research to master the needs of the customer and their value propositions.The strategic goals of finance and customers can be set according to the mission and vision and the strategic orientation of the enterprise.The strategic action plans can be formed by using the strategy map decomposition.Development，coordination and improving the intangible assets’strategic preparation can ensure the successful implementation of the strategic action schedule.The new combination of the strategic action supported by the developed and integrated intangible assets is the Business Model innovation based on value creation logic of the Balanced Score Card.

Ⅳ.Conclusions

In the fierce competition of the market，small and medium－sized enterprises are hard to implement the business model innovation through deep exploration into certain local links in the industrial value chain because of insufficiency in the competitive advantage.However，the innovation based on value creation logic of the Balanced Score Card can be successfully implemented through market research，differentiation strategy，coordination of the tangible assets and intangible assets，cooperation with external stakeholders such as suppliers，distributors，technical cooperation units and auxiliary manufacturers to transform the growth mode of enterprises and promote healthy development.

Notes：

〔1〕Robert Kaplan，David Norton，Liu Junyong，Sun Wei（trans），Guangzhou：Guangdong Economic Press，2012.

〔2〕Scott M.Shafer，H.Jeff Smith，Jane C.Linder，The Power of Business Models，Business Horizons，2005（48），pp.199－207.

〔3〕Gary Hamel，Innovation as a Deep Capability，Leader to Leader，2003，27 （Winter），pp.19－24.

〔4〕Gao Chuang，Guan Xin.Achievement Ways and Evolution Institution of Business Model Innovation — An Theoretical Explanation Based on the Innovation of Value Chain，China Industrial Economy，2006（11），pp.83－90.

〔5〕Xu Di，Weng Junyi，Business model and its innovation，Commercial Economy Studies，2004（29），pp.43－44.