Business models age faster than ever before. They are challenged by increased marketplace volatility and the rising diversity of attractive customer segments.
What is the solution?
Best addressed is this challenge with business model innovation an important strategy for driving value-creating growth. It can be deployed to both defend and disrupt. It helps to decline competitiveness and to seize new opportunities to disrupt.
In today’s blog post, I will share more about business model innovation which is a design thinking-based approach and is focused on business model design.
- ⇒ What is business model innovation?
- ⇒ Why is business model innovation so important?
- ⇒ What questions support this process?
- ⇒ What are the four approaches to business model innovation?
- ⇒ Summary
What is business model innovation?
Business model innovation describes the innovative processes of how an business creates, delivers and captures value as opposed to how to create a new product or service. It enhances the advantage and value creation by making mutually supportive changes both to an company’s value proposition to customers and to its underlying operating model.
At the core it’s about fundamentally rethinking your business.
Why is business model innovation so important?
The average business model lifespan has fallen dramatically in the past decades. As a result, business model innovation supports companies to reinvigorate and to drive growth or defend against industry disruption or decline.
Product and service innovation are important, but business model innovation can deliver more lasting competitive advantage, especially in disruptive times.
What questions support this process?
There are a several critical questions companies need to answer before they determine how to drive growth through business model innovation. Good questions to start with are:
- What are the new customer needs?
- How can your company realign their key resources?
- What processes and profit formula should your company use to create a new value proposition?
- What results need to be achieved to gain a real competitive business advantage?
- What risk is appropriate?
- How broad should the scope of the effort be?
- How can the company discern which new business model is the best?
- What cost model is needed to ensure attractive returns?
- What company structure and capabilities are essential to success?
To answer those questions it is important to understand that there are four distinct approaches in designing the path to growth.
What are the four approaches to business model innovation?
Understanding the four distinct approaches to business model innovation can help to make effective choices in designing the path to growth:
The reinventor approach
Application: Fundamental industry change, e.g. new regulations.
In this situation, the company must reinvent its customer-value proposition and realign its operations to profitably deliver on the new superior offering.
The adapter approach
Application: The current core business is unlikely to combat fundamental disruption.
Adapters explore adjacent businesses or markets and must build an innovation engine to persistently drive experimentation to find a successful “new core” space with the right business model.
The maverick approach
Application: Scale up a potentially more successful core business.
Mavericks (e.g. startups or innovative established companies) employ their core advantage to revolutionize their industry and set new standards. This requires an ability to continually evolve the competitive edge or advantage of the business to drive growth.
The adventurer approach
Application: Expands the business by exploring or venturing into new or adjacent territories.
This approach requires an understanding of the company’s competitive advantage and placing careful bets on novel applications of that advantage in order to succeed in new markets.
- Key Point #1: Business model innovation is an innovative processes of how an business creates, delivers and captures value.
- Key Point #2: It enhances the advantage and value creation of the company.
- Key Point #3: There are four distinct approaches in designing the path to growth.
I´m available to support you to reimagine your business. Business model innovation will help you to create new growth in your company by creating new value for your customer.
Contact me for a complimentary 30-minute strategy session:
Coming up next month
In my next blog post, I´ll share how to use the Core Competencies Analysis.
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