What do business owners need to know about business model innovation?

What do business owners need to know about business model innovation?

Business model innovation can consist of adding new activities, linking activities in novel ways or changing the way a party performs an activity.

  • Novelty, lock-in, complementarities and efficiency are four major business model value drivers.

  • Within organisations, business model choices often go unchallenged for a long time.

Products and services can be copied, the business model is the differentiator.” The business model we choose will determine the success or failure of our strategy”. Sounds familiar?

Organisations are increasingly focused on innovation in their business models and operations as key mechanisms for driving change.

Indeed, CEOs stated that approximately two-thirds of their efforts are now targeted at business model and operational innovation. Furthermore, fully 61% of CEOs who have a primary focus on business model innovation fear that changes in the business model of a competitor could likely result in a radical change to the entire landscape of their industry.

The IBM Global CEO Study 2006

Successful timing of business model innovation depends on the economic environment, the specific market and industry conditions, and a set of internal factors impacting the organisation.

Successful companies are innovating their business model in three ways:

  • Revisiting the enterprise model to reduce cost through new partnership models and by reconfiguring the organisations asset mix

  • Using strong financial resources to introduce alternative industry models and disrupt competitors

  • Rethinking revenue model and value propositions to respond to a different set of customer behaviors and market requirements.

Not every organization needs to innovate its business model immediately, but the capabilities need to be established in order to act when the time is right. We can help you to map your business model, focus on areas and give facilitate your strategic planning session.

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