Business model innovation can bring a lot of opportunities if executed correctly.
Learn business model innovation opportunities and barriers and how you can use open innovation to help your company grow and develop.
Business model innovation has caused a disruption within the business world because there can be a lot of opportunity for businesses to profit. In short, business model innovation is a concept that focuses on supply of an existing product that is produced by an existing system to an established market, meaning that the improvements made to a business model comes from a close examination and evaluation of the company. The main objective of business model innovation is to identify new revenue sources through improving the value of existing products and how they’re delivered to the consumer. To better understand the business model innovation concept, it’s best to examine where it stems from: open innovation.
Open innovation is a concept coined by UC Berkeley’s Haas Business School professor, Henry Chesbrough. He came up with this idea after being constantly frustrated about the overwhelming gap between the academic world and the business world. He found that academia was not a very useful or insightful resource for the business world. Open innovation is Chesbrough’s answer to this gap. This concept is essentially a different approach to innovation, based on the idea that due to the open knowledge available today, no company could innovate on its own. This means that the best way to innovate businesses is to practice sharing knowledge. For example, in the early 2000’s, Apple was able to create one of the most impactful products of recently history, the iPod, through open innovation. Open innovation and business model innovation have quickly spread and grown in the business world as many companies have adopted these concepts.
Though business model innovation can bring a lot of great results, it does contain barriers. One of biggest barriers companies tend to face when adopting business model innovation can be found within the essence of the concept. The key attributes of business model innovation are novelty, efficiency, and lock in complementarities, meaning that experimentation is necessary for innovation. However, this experimentation may conflict with firm assets, meaning that companies may not feel as open about experimenting because it might negatively affect their product and systems. Therefore, to counter this barrier, companies must be fully invested in change and improvement and will need to find internal leaders who will head the change and ensure results. When executed correctly, business model innovation can be potentially beneficial and bring a lot of opportunity.
Due to the free nature of business model innovation, one of the biggest challenges of executing correctly is establishing a disciplined framework that is reliable. By using the following tactics, managers may obtain a better ability of identifying opportunity:
- Creating a more focused business model – Creating a more focused business model can help decrease noise and help you identify opportunities, especially when aiming to appeal to distinct markets. The downside for this is relying too much on one product because consumers still need complementary products.
- Divide and conquer decisions – In most cases, when building a business, most decisions are made in a single sitting when creating a business model. An emerging idea within the startups community is to split up this process to find more opportunities to leverage.
A key secret to sustaining and maintaining a successful business that is continuously growing is to realize when change is needed and hard decisions need to be made. Business model innovation is about thinking and rethinking about the goals of your business and ensuring it is aligned and realigned when necessary to meet those goals.