Business Model Innovation

Business Model Innovation

Have you ever wondered why hyper successful companies like Nokia or Kodak suddenly lose their edge or how could firms like Commodore computers grundig nakamichi Newsweek or Polaroid possibly fail did they not have abundant R&D resources.

Top employees and profound knowledge of their markets yes but they had another thing in common they all missed the moment when they should have left their successful path to rethink their business model they missed out on radical innovation because they were too busy managing daily business and serving current clients instead of envisioning future opportunities.

In other words today's success is the enemy of tomorrow success the innovation cycle spends faster than ever in nearly all industries innovation either increases the customer value of a product or service or it lowers their costs and therefore creates a competitive advantage ample for instance creates a high perceived customer value with its innovative new products and Dell reduces its costs and working capital through build.

To order processes but even though its importance is undisputed there are many misconceptions about innovation three myths are particularly pervasive first innovation stems from ideas nobody has had before second big success requires big resources and third innovation breakthroughs are always based on fascinating technologies luckily they are all wrong IBM did not invent the personal computer.

Apple did not invent mp3 technology and Amazon did not invent the online bookstore successful innovators learn and recombine as the Pioneers get eaten by the wolf's.

Cisco had virtually non-existent Rd Resources but out innovated the largest research lab in the world AT&T Bell Labs 14 of today's 25 most innovative firms have innovated their business model and not just their technology take firms such as.

Google Amazon or Ebay great algorithms yes but it is the business model not just the technology that is responsible for their success so what exactly is a business model innovation a business model provides answers to four questions who is your target customer what do you offer to the customer how do you create the value proposition and how do you generate revenue and a business model innovation changes at least two of these four dimensions in our research we've looked at all major business model innovations in the past 50 years they have all revolutionized one or several industries.

For instance IKEA has redefined the way we buy furniture TomTom has transformed the navigation business or eBay has changed the world of trade yet only 10% of these business model innovations or novel and introduced new business model patterns the other 90% merely adapted refined or combined these patterns for instance innovative companies often apply creative imitation they ask themselves how could a business model innovation from another industry revolutionize our own industry in total we have identified 55 business model patterns.

That are responsible for all business model innovations for example flat rate supermarket rent instead of by experience selling ecommerce or the razor and blade pattern let's have a look at this one since 1904 Gillette has been giving away razors for next to nothing but selling its blades at obscenely high prices Nespresso creatively imitated this pad selling cheap coffee machines and expensive coffee and revolutionized the coffee industry and many other companies applied the razor and blade pattern to remember.

Apple's iTunes Amazon's Kindle or Hewlett Packard's inkjet printers now what do you have to do to innovate your business model we advise you to follow four steps initiation ideation integration and implementation during initiation you analyze your current business model again who is your target customer what do you offer to the customer how do you create the value proposition and how do you generate revenue during ideation you confront this business model with the 55 business model innovation patterns and develop new models how would Miss preso conduct your business or is there a match between your product and the experience selling pattern challenge your basic assumptions.

And the dominant logic of your industry but don't try to reinvent the wheel instead use analogies and learn from other industries during integration you need to check the consistency of the business model this is important detail work where you examine all four questions regarding organizational fit finally during implementation it is time to awaken the Beast but be careful in iterative cycles you design a business model build a pilot test the pilot and return to the design pace it is important to not only gain qualitative and quantitative data to verify or falsify.

Your assumptions about your new business model but also not to forget about the soft factors of innovation thanks to incorrect management behavior and organizational resistance more than 70% of all change initiatives fail therefore keep a few rules in mind first only implement one business model at a time second clearly communicate the new business model and the need for change third don't overemphasize short-term kpi's innovation needs time fourth get top management commitment without their sponsorships business model innovation is doomed to fail and finally overcome the not invented here syndrome got that let's wrap it up then innovation.

Is the key factor to defeat path dependency and stay competitive in today's economy yet innovation is not necessarily about new technologies excessive research and development or about creating completely new ideas most of the time innovation is about learning from others and reinventing your business model not just your technology this can be done in a structured process of initiation ideation integration and implementation you analyze your business model apply the 55 innovation patterns check for inconsistencies and start implementing carefully keeping in mind success factors and pitfalls are you ready then to revolutionize.

Your own industry try to creatively learn from the Giants whose shoulders you are standing on think big and think different Steve Jobs did it so why can't you

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