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.
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