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Business Model Innovation

A.  To meaningfully improve outcomes by creating significant new value and capabilities

B.  For competitive advantage by enhancing the organization’s value proposition to customers

C.  To attract and retain top talent with new competencies

D.  Have more options to expand organization opportunities, relevance and revenue

To realize these significant benefits and to better position the organization for the future, companies must innovate for impact. This includes being accomplished at the different forms of innovation (especially disruptive innovation) – for competitive advantage, to create new value in the changing business landscape,  satisfy increasing expectations, to make good on new opportunities, etc.  To summarize, Business Model Innovation assists in achieving these objectives with new capabilities and revenue streams, improving the User experience, lowering costs, taking advantage of emerging technologies, being an increasingly digital and automated organization, delivering new value, etc.

  1. Incremental Innovation (H1) – that adds to a company’s established business by extending product or service capabilities.
  2. Sustainable Innovation (H2) – to improve operational efficiencies and reduce costs.
  3. Disruptive Innovation (H3) – to enter or create a new market with a new product or service that addresses a new opportunity or previously unmet need.

Business Model Innovation (BMI) is also important to better manage the changing nature of risk since organizations that fail to meaningfully innovate and evolve – miss opportunities, loose market share, destroy wealth, and / or eventually go out of business.

Given the significant advantages and consequences, being good at Business Model Innovation is about understanding –

BMI is the process of creating and delivering new value to customers – which frequently involves making fundamental changes in what an organization does and how the business operates, including its  revenue streamscost structure, and distribution channels.  With this, the ability to “ Innovate for Impact ” is essential to expand relevance and revenue with superior look ahead skills, an appreciation of what will have value, being accomplished at identifying and making good on new opportunities,  successfully adapts to new market conditions, is great at anticipating and satisfying increasingly demanding customer needs, etc.

To achieve success, Business Model Innovation includes :

  • Creating new products / services / value
  • Developing new distribution channels
  • Changing pricing models
  • Adopting new technology
  • Entering new markets

….  with a deep understanding of the business, customers, the market, changing / rising User expectations, delivering a great UX, important trends + a willingness to explore new ideas, experiment, knowing the important KPIs, and taking calculated risks. Success also necessitates a company-wide commitment to meaningful innovation with an entrepreneurial and learning culture – that rewards achievements and learnings (from failed experiments / ideas / initiatives).

Being good at BMI means delivering –

Superior Value :  whereby there is a very compelling value proposition to customers – with new and better products / services to address evolving customer needs and make good on new opportunities.

Increased Efficiency :  to increase organization and personnel productivity and effectiveness, reduce costs, streamline / simplify processes, minimize waste, etc.

Competitive Advantage :  with unique, range, or high value capabilities to – attract more customers, increase sales and market share, differentiate from competitors,  etc.

Conversely, not being good at Business Model Innovation or struggling to Innovate for Impact eventually results in the organization – becoming stagnant, not being relevant or competitive, having financial challenges, unable to find and retain top talent, unsuccessfully growing and expanding their markets, inability to offer new products or services, etc. Given the consequences, it’s clear Business Model Innovation is a crucial element in company’s strategy for viability, meaningful value creation, and to have a future.

Amazon : Amazon’s Business Model has been a game-changer in terms of customer lifetime value with subscription pricing. The company’s Prime membership program has over 200 million members worldwide, who pay an annual fee in exchange for free shipping, access to streaming services, and other benefits. This has helped Amazon increase customer loyalty and drive repeat purchases.

Airbnb : Airbnb’s Business Model innovation has been centered around its value chain. The company has built a platform that connects hosts with guests, enabling them to rent out their spare rooms or entire homes. Airbnb has disrupted the traditional hotel industry by offering a more personalized and affordable alternative. The company’s success has been driven by its ability to create a seamless and good experience for both hosts and guests.

Netflix : Netflix’s Business Model innovation has been focused on its content strategy. The company has shifted from being a DVD rental service to a streaming service, and has invested heavily in producing original content. This has enabled Netflix to change how video is consumed, differentiate itself from competitors, and build a loyal customer base. The company’s success has been driven by its ability to offer a wide variety of high-quality content that appeals to a broad audience.

By focusing on customer needs, successfully identifying and making good on new opportunities, and leveraging technology – companies can create new business models, products, services and markets – that disrupt traditional industries and behavior.

Implementing BMI can be challenging since it requires a clear understanding of the current business, market, customers, opportunity, plus what will have value, being good at “Innovating for Impact”, knowing how to personalize services and operate at scale, etc.  To become accomplished at Business Model Innovation –

Identify a Problem / Need :  To effect change, identify an issue, need or opportunity. This requires a deep understanding of the current business model, the market, where things are going, etc. Once the problem is identified, brainstorm new ideas and explore solutions.

Collaborate :  Collaboration is essential when implementing business model innovation. This involves people working with different departments, teams, and stakeholders to develop and implement new capabilities – with effective collaboration to facilitate identifying new opportunities, solutions, potential roadblocks, etc.

Experiment :  Experimentation fast tracks determining what works and what doesn’t work with an exploratory, having an entrepreneurial mindset to try new things, testing different ideas and solutions, etc.

Be Agile / Opportunistic :  To facilitate an organization moving forward and to reduce risk associated with change, organizations need adapt quickly. Being agile and opportunistic better positions an organization to win by creating and delivering meaningful new value.

Have KPI Metrics :  Measuring success is crucial when implementing business model innovation. Organizations should establish clear metrics and KPIs to assess outcomes from new ideas and solutions, making improvements, learnings from failed initiatives, determining what’s next, etc.

     +    there is a need for strategic thinking, insight on where the money is going to be, learning fast, being very open minded, a willingness to try new things, etc.

While BMI can deliver significant advantages, there is a need to address the following –

Resistance to change :  Since BMI often requires a change in the thinking and the way a company operates, resistance from people comfortable with the status quo can be expected.  Identify these people and groups and develop a strategy to deal with them with insights on how effecting change is in their and the organization best interest.

Uncertainty :  Because BMI frequently involves exploring new ideas or learning new concepts, there is a level of uncertainty about whether the new model will succeed or not. Identify these concerns and engage with stakeholders to facilitate awareness and confidence, plus make exploring and learning interesting and rewarding.

Cost :  Implementing a new business model can be costly in terms of time and resources with the need to invest in new technology, retraining employees, changing processes, modifying the supply chain, etc. Be pro-active in identifying these items and be good at communications to fast track understanding of why this is required to have a better future.

Culture and Mindset :  To effect change, get the word out that ” what got us here ” probably “ won’t get us there ”.

Legal and regulatory issues :  Identify and address any legal and regulatory hurdles to overcome.

While recognizing there are challenges and risks, Business Model Innovation is a powerful tool to increase organization relevance and revenue as well as more opportunity for those who make things happen.

Business Model Innovation is essential if the objective of the organization is to meaningfully grow, attract and retain top talent, win in the market, and create significant new value.

To be good at Business Model Innovation requires an organization be opportunistic and adaptive with a desire to meaningfully improve outcomes. To do this there is a need to reward those  –  willing to take calculated risks, experimenting with new ideas, and contributing to having an entrepreneurial and learning culture.  

In closing, given the importance of developing these competencies, all the best in making it happen.

April 13, 2023          by Business Model Analyst / CAIL          Innovation commentary                         905-940-9000