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Business Model innovation

When talking to innovation managers and executives I usually find a diversity in answers on the question “Are business model innovations relevant? And what is a business model innovation anyhow?”

A Business Model innovation is NOT a revolutionary let’s-get-rid-of-all-the-old-stuff-completely activity. It’s NOT:

  • “Start-ups can easily overthrow corporate behemoths”
  • “Classic management / financials are not relevant – Substitute currencies e.g. „share of eyeballs“ count”
  • “Corporate executives need to operate like Venture Capitalists”
  • “Corporations are obsolete – In the Internet era, networks count and everyone is a free agent”
  • “Go ahead and destroy your business. If you don‘t, someone else will”

Rather it is a structured way of analysing the somponents of a business model and creatively explore new, value-promising configurations.

[slideshare id=5120980&doc=businessmodelinnovation-100903050425-phpapp01]

The components of a business model are.

  • Customer segments: Who are our customers?
  • Value Proposition: What are the convincing benefits our product / service offers?
  • Customer Relationship: How do we contact and interact with our customers?
  • Distribution Channels: How do we get our products / services to the customers?
  • Revenues: What is the level of payment, what type of pricing is best?
  • Cost: What are the main cost factors?
  • Strategic Partners: What are the strategic partners we need to produce our product / service?
  • Key Activities: What are the key value-adding steps we have to manage?
  • Key Resources: What are the key assets we have and are needed for serving the customers?

And there are five key ways in which to think about Business Model innovation:

  • Blue Ocean strategies
  • Unbundling strategies
  • Long Tail startegies
  • Multi-sided platform strategies
  • FREE business models