Business model innovation

What is business model innovation?

Traditional, purely product-oriented business models often no longer work in the age of digitalisation. Many previously successful companies fail again and again for the simple reason that they do not adapt their business model to the ongoing changes. In the meantime, there are various new and digital business models. The special feature of a digital business model is that it describes an exchange of a service and a service in return via digital technologies.

The innovation of a business model in general is defined by the following aspects. On the one hand, by a change in the value proposition, a change in take-up and, on the other hand, by an adjustment of the underlying business model. With regard to the value proposition, changes may concern the choice of target segment, the product or service offering and the payment model. A change in consumption can refer to a one-time use, a possible subscription service or, for example, a pay-per-use model. In terms of the business model, the focus is on how profitability, competitive advantage and value creation can be increased by delivering the value proposition.

A current and much sought-after topic

As digitalisation has received a considerable boost from the pandemic, the topic of business model innovation has also increasingly come to the fore. But if we look more closely, we see that the topic has always been with us. In terms of technology and digitalisation, Google, Microsoft, Amazon and Apple are probably the best examples of business model innovation. With the advent of Spotify and podcasts and social media, many new or adapted business models have emerged, most of which are digitally focused. Start ups in particular are known for shaking up and disrupting industries and trying out and also establishing new exciting business models. But also more and more companies already existing on the market see the young competition and become active: for example, in the area of the shared economy, such as ShareNow by Mercedes and BMW.

All these business model innovations have as a common driver that they respond to the declining competitiveness of companies. This is due to the increasing volatility of the market and increasing customer segments. This is because it makes business models age all the faster these days - and if these new potential opportunities are not seized, companies are left behind. Especially in dynamic times like these, companies have to be mindful and react proactively. This also means that "old" business models are slowly dying out.

Prerequisites for business model innovations

Transformation does not simply mean implementing a new technology or making a simple change in the business. First and foremost, leadership must embrace the idea of business model innovation and let go of the old. Once a transformative mindset is in place, it must be transferred to the entire leadership team and then to the employees. After all, innovation and the associated mindset should at best be understood and embedded throughout the entire company. As already described in the articles Frugal Innovation and Innovation without a Budget, companies do not necessarily need a huge budget for innovation. Business model innovations do not necessarily need this either and can often be scaled quickly and easily. This is also shown by the numerous business model innovations in start-ups that also had and have little budget available.

How does a business model innovation come about?

From a methodological point of view, there are countless concepts and models for creating a business model innovation. The Business Model Canvas by Alexander Osterwalder and the Business Model Navigator by the University of St. Gallen are presented here.

Business Model Navigator of the University of St. Gallen

Here, a business model consists of 4 dimensions. If at least two dimensions are changed in a coordinated way, one can speak of a business model innovation.

1. The customer: (Who) is the target customer and what are their needs,
2. The value proposition: (What) is the value proposition and with which benefits (products or services) do we offer it,
3. The value chain: (How) is the value proposition delivered or how is the service produced,
4. The earnings mechanics: (Why) is the business model profitable?

Business Model Canvas by Alexander Osterwalder

Here is a business model built in 9 parts:

1 Key partners, 2 Key activities, 3 Key resources, 4 Value Proposition, 5 Channels, 6 Customers, 7 Customer Relationships, 8 Costs, 9 Revenue.

Each of the 9 parts is questioned individually and all thoughts about it are written down so that a harmonious business model emerges in the end. This can be done digitally as well as by handicrafts and with Post-Its. The method is extremely transparent, comprehensible, flexible and pays particular attention to the customer experience (customer centric).

Business model and open innovation

It is often the case that business models are developed or transformed by the management level. However, employees, customers, partners and research also offer helpful input. Opening up to the outside world creates a differentiated view of the situation, the problem. Use your existing network and develop new business models together with partners and externals. AnyIdea offers you everything you need to enable open innovation, digital ideation, co-creation and intrapreneurship and supports you in finding and developing new business model innovations.