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When was the last time you challenged your Business Model?

Business model innovation is about looking at the entire enterprise and developing a structure that maximizes value for all stakeholders.
Validity | 28.03.2012
Business Model Innovation is becoming a hot topic these days as business leaders increasingly recognize that disruptive innovation requires not only innovative products, but also fundamentally new business models. Companies tend to think in terms of features, not problems. The trick is to try and see your offering through the lens of your customer. Are you not achieving your targets? Are you losing market share? Is your business model fulfilling needs met by rivals only? New business models spring up when a company figures out how to solve and capitalize on an unmet need.

One of the most common challenges with business model innovation that we heard is that big, successful companies get so tied up in their own culture that they develop blind spots. By focusing exclusively on the processes and standard operating procedures that made them successful, they become victims of their own success. Sony missed out on the iPod/iTunes revolution because they were so ingrained in the traditional music business.

Similarly, Kodak missed out on the digital camera revolution because they initially viewed cheap digital cameras as inferior to the Kodak brand. In both cases, they were focused internally on what they could deliver instead of looking externally at what their consumers actually wanted. The key to business model innovation is to think holistically about the entire business, not just new product development.

The point is that innovation can occur anywhere in the operation. Business model innovation is about looking at the entire enterprise and developing a structure that maximizes value for all stakeholders. The best business models, such as iTunes, “expand the pie” and increase value for the entire ecosystem.

The future is unknowable, but that doesn’t mean we should just sit back and watch it unfold. Business model innovation requires getting out ahead of the curve and delivering value in a way the market has not yet seen. I would like to suggest seven steps your organization should take when embarking on business model innovation:

1- Develop a separate, autonomous innovation team to explore future trends and the impact they would have on business.

2- This team works nearly full time on the project and include senior executives right on up to the CEO.

3- The team’s goal is not to predict the future, but rather to consider various scenarios and contemplate the impact that would have on the business if they were to occur.

4- This framework allows your organization to assess the risk and size of opportunities in new ways.

5- Once the visions are agreed upon, the team moves their ideas forward “dream big, then execute in small steps.”

6- Create a board that operates like venture capitalists, making strategic decisions about which opportunities to pursue and how to allocate resources.

7- The Innovation team would then “pitch” their ideas to the board for funding.

Business Model Innovation is a tedious task that will get faced with objections from within management teams due to the disruption it has on several aspects of the operation, but the question is can your organization deliver value in a different way or to a different group of customers? Are you tied up in your own culture that you developed a blind spot? Are new start-ups capitalizing on unmet needs your organization does not recognize? Do you want to be the KODAK of your industry?
About the author: Validity