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LEAD Innovation Blog

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Date: 27-Apr-2018
Posted by: Franz Emprechtinger

10 Facts about business model innovations and their implementation

 

Business model innovation, or Business Model Innovation, has become an integral part of the innovation world. Whereas in the previous century, innovations focused on products and processes in particular, today we think further ahead.

The topic has become increasingly important in recent years because the Internet and digitization in particular have provided a lot of space and potential for new business models. Through the development and publication of the Business Model Canvas around Alexander Osterwalder and Yves Piqueur, business models and business model innovation became much more tangible, explainable and feasible and thus experienced their breakthrough in management.

Case Study Business Model Innovation
These 10 facts about business model innovation and its implementation should help to sort through the complex topic and lay a foundation for continuing to deal with the field.

 

1. Every company has a business model.

Every company, whether it is aware of it or not, has a business model. The business model arises when a company is founded and develops continuously until it becomes economically viable.

 

2. A business model is the logic of how a company works.
A business model describes the logical functioning of a company. It can be explained easily with the following four elements:

  • Who are the target customers?
  • What benefits does the company create for its customers?
  • How is the benefit generated and delivered to the customer?
  • How does the company earn money?

 

3. A company can operate several business models at the same time.


The exciting thing about business models is that a company not only has to concentrate on one model, but can operate several at the same time.

For example, a construction machinery manufacturer no longer only offers its equipment for sale but also for rent. Sounds simple, but brings a higher customer benefit, new revenue streams, but also complexity. By renting, you can offer the customer an additional benefit, for example, he always gets what he needs at the moment and it does not require any investments on his part. The construction machinery manufacturer can thus tap into new customer groups. On his side, however, it requires completely new structures to handle the rental processes.

 

4. Business models offer a lot of innovation potential.

Business model innovation provides many levers for innovation to deliver greater customer value, attract new customer groups or generate additional revenue. Innovations in all functions within the company, whether through purchasing, production, marketing or sales, can revolutionise a business model.

 

5. Even small changes in the business model can deliver significant benefits.

Put simply, an app can be monetized via app sales, the sale of additional services or advertising. If the business model is based on generating income from the sale, this can become a challenge. People tend to prefer free apps and don't spend money until they are convinced of the benefits.

To overcome the entry barriers, an app can be offered free of charge. Only the important functions are enabled. But if you want to use all features, you have to pay. Even this small change in the earnings model generates considerable benefits for customers.

The example can also be applied to other areas and products and shows that even small changes in the business model have the potential to generate a high benefit.

 

6. Business model innovations are great levers to differentiate themselves from the competition.

Ikea, Dell, Cirque de Soleil, Ryanair, Apple, Hilti, Uber, Nespresso are just a few examples that have created a new market with a new business model or even transformed an entire industry.

Business model innovation has extremely high innovation potential, because on the one hand it can achieve a high degree of differentiation, e. g. it can also be found around "blue oceans", where there is almost no competition. On the other hand, groundbreaking innovations can be created because they combine all levers with product, process, marketing and sales innovations and are therefore difficult to imitate. Thus, business models have the potential to revolutionize an entire industry.

 

7. New business models can be developed systematically and systematically.

A business model innovation is no coincidence. With tools such as the Business Model Canvas from Osterwalder et. al. or the BMI Pattern Cards based on the University of St. Gallen's 4-dimensional concept, new business models can be developed in a targeted manner.

The principle of innovation is similar for all tools. The current business model is recorded on the basis of visualization tools. The presentation and analysis of the current business model alone provides clarity and starting points for improvements. It also stimulates creativity, which is used to systematically search for variations of the 4 dimensions of the business model or the 9 blocks of the Business Model Canvas following the recording of the actual model. These new opportunities can become the basis for business model innovations.

With this approach and the tools, new business models and innovations can be systematically developed in a targeted manner.

 

8. A new business model of a company does not have to be new to the world.

You don't have to reinvent everything! According to a study by the University of St. Gallen, 90% of all business model innovations are new combinations of parts of "other" or "old" business models. This results in 55 Business Model Patterns. One uses one of these business models and with a pinch of creativity, one considers how and what could be adapted from this model. Analogies allow business model innovations to be created quickly and easily.

 

9. Business model innovations do not have to be created in connection with new products or technologies.

Business model innovations can affect the distribution channel, production and value creation, pricing or services. But it doesn't always have to be inevitably connected with a new product or even with a new technology. This means that you can develop a business model innovation without developing a new product.

 

10. New business models are theoretically quick and easy to develop, but difficult to implement.

As the above facts make clear, ideas for new business models can be developed quickly and in a structured manner. Methods such as Business Model Stress Testing, Customer Experience Design or Business Model Pattern Cards quickly lead to starting points for improvements and completely new ideas.

However, the real challenge lies in implementing and implementing the new business model. On the one hand, the concepts developed on the drawing board must be tested step by step and brought to market. The best way to do this is to follow the Lean-Start-up principle "Build - Measure - Learn". On the other hand, business model innovation has a profound impact on a company's DNA and requires far-reaching changes. Much of what has worked for years (more or less well) and has been internalized by the organization must be changed at once. It may also require quite different skills, and the existing functions and jobs will become obsolete.

Business model innovation therefore requires the courage to change and support top-level change.

 

Conclusion: 10 facts about business model innovations and their implementation

Business models offer many approaches to change and business model innovation is necessary to differentiate and adapt to changing market needs. With business models, companies can develop unique customer experiences and revenue opportunities.

Business model innovation can be deliberately created. Start it.

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Franz Emprechtinger

Born in Ried im Innkreis. As former Head of Innovation, he was responsible for the entire project management and specializes in the areas of fuzzy front end and business model innovation.

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