A corporate business model, at its simplest, seeks to define who the customer is for a given product and to define the economic process that will deliver that product to the customer at the lowest cost. The internet age has disrupted many traditional businesses making corporate business model innovation a necessity for organizations that want to drive growth, reinvigorate their business practices and mitigate industry disruption or decline.
Business model innovation is the process of improving the creation of value by making changes to the organization’s customer value proposition and the underlying business model that delivers it. At the customer level such changes might focus on the target market area, product (or service) and the revenue model. At the operating level the aim is to improve profitability, competitive advantage and value by changing how the business produces and delivers its offering to the customer. This might include making decisions on the following:
• The point at the value chain the business operates
• The cost model that is used to ensure profitability
• The best organizational structure and business capabilities needed to achieve success
Business model innovation is most often used as a part of business transformation where a company must wholly re-invent itself to meet challenges from advances in technology or other changes to the business environment. This requires considering how best to develop, test and implement new business models and to do so rapidly in order to maintain or gain competitive advantage.
Business model innovation must also consider what the scope of the changes from innovation will be, the risk associated with these changes and whether it is a one-off process or is an ongoing process.
The following approaches to corporate business model innovation can be used:
• The business process is re-invented in response to a disruption in the organization’s industry such as changing regulation or advances in technology
• Rather than re-invent the core business, an organization develops an innovation process that looks to adapt to adjacent business models and markets through constant experimentation to add to their existing model
• The organization develops its own startups or purchases new, insurgent competitors to maintain their advantage when faced with revolutions in their industry or the need to meet changing customer needs
• The organization aggressively enters new areas of their market and/or adjacent market areas by investing in novel technologies or applications to succeed in new, heretofore untapped markets
