Business Model Innovation
A Business Model is a comprehensive description of how a firm generates value for its customers and for itself. The business model becomes visible, assessable, and adaptable due to the full illustration of this logic.
A company's business model is thus an analytical unit for systematically identifying the beginning point for Innovation, implying that corporations can alter portions of their business model to gain a competitive advantage.
Innovation is critical for businesses across all industries. However, in many circumstances, Innovation is limited to new, innovative products or technological advancements. Business model developments, on the other hand, are far more profitable. Customer behavior shifts, globalization, and technological advancements generate a "window of opportunity" for new business models to emerge.
Thus, a business model innovation is the deliberate alteration of an existing business model or the invention of a new business model that better meets the customer's needs than existing business models.
Apple Business Model Innovation
Apple's original business plan began to lose ground around the end of the 1990s. Apple's decision to sell hardware and software drove the company into a specialized market, making it tough to compete.
In response to this trend, Apple released the new iPod, iTunes, and 2007 product line in 2001, followed by the iPhone in 2007. Hand in hand was a game-changing business model that transformed online music downloads and propelled the company to the top of the industry in months.
Not only was product innovation crucial to Apple's success. The iTunes platform's success was primarily because it established a viable business model for music downloads and applications for the iPod and iPad - something that drove the music industry to sell individual songs rather than albums.
With these services, Apple makes $ 5 billion in revenue every quarter (Q4/2015) globally and secures $ 36 billion in revenue per quarter (Q4/2015) for the iPad and iPhone. As a highly beneficial "side effect" of this business model innovation, demand for Apple's computer line increased, resulting in a very profitable result of 6.8 billion dollars in sales in the fourth quarter of 2015.
As a result, Apple has demonstrated that business model innovation is far more than product, technological, or process innovation.1
Is Business Model Innovation the Right Step?2
Your business model will be influenced by what is going on in your industry or the economy. It will be precious when things are overgrowing or falling apart, as they are right now due to the COVID19 situation. As a result, businesses that reconsider their business models today are unlikely to do themselves any harm. Moreover, it could aid them in identifying any flaws in their approach and identifying new revenue streams.
Consider what the change will mean for the company and the company in particular (i.e., how it will affect customers, employees, and partners). You must also determine which aspects of the model require Innovation and whether you have the necessary skills, technology, and other resources to make the required changes
How to Ensure Your Step is in the Right Direction?3
The basic rule of thumb is to start with what you have, especially during economic uncertainty, which entails assessing your current talents and assets to determine how they may aid the innovation process. Ensuring the above keeps you from making unneeded purchases that will add to your expenses. Create collaboration with your stakeholders (customers, suppliers, partners, etc.) if at all possible so that you can benefit from each other's efforts. They will likely require support as well, making the transition easier.
In addition, it also means that your present business will not be wasted but will instead function as a stepping stone into the next phase. Creating the new business model helps to have a thorough grasp of the present situation (i.e., customer behavior, current trends, and the financial or otherwise impact). The above ensures that you are not going in blind and that the modification isn't counterproductive.
It will assist in taking methods to track and monitor progress after the design and implementation process. Moreover, it entails doing regular analyses and tests to determine which techniques are practical and not. Because the industry's or economy's stability is still unknown, be adaptable to make it easy to transition again if the need arises.
Case Study: Blockbuster Vs. Netflix 4
Take, for example, Blockbuster. The video rental network encountered several difficulties, especially when DVDs first began selling VHS tapes. Netflix founders Reed Hastings and Marc Randolph saw an opportunity in DVDs since they took up less shelf space, had better video and audio quality, and were durable and thin enough to mail. Netflix began as a DVD-by-mail service in 1997, allowing users to rent movies without leaving their homes. Netflix had the added benefit of stocking its merchandise in distribution centers rather than keeping inventory for over 9,000 storefronts and paying the exact operational costs as Blockbuster.
Blockbuster took seven years to launch its DVD-by-mail service. Netflix had gained a competitive advantage and had set its sights on developing a streaming service by that time, forcing Blockbuster to play a never-ending game of catch-up. All remaining Blockbuster locations closed in early 2014.
"The issue with Blockbuster was mainly distribution," Collier adds. "DVDs inspired Netflix, and a shift in technology prompted a shift in the business model. And those adjustments are much more difficult to duplicate. You're removing critical components of a company's operation."
As a result, legacy brands find it more difficult to innovate. Customers expect those organizations to produce a product or service, making it more difficult for teams to strategize about what comes next or consider how the market can be challenged.
"New arrivals are usually the ones who cause disruption," Collier adds. "It is already profitable for established organizations."
1Lead Innovation, 3 Oct 2018, Franz Emprechtinger, What is a Business Model innovation, Accessed 30 Sep 2021, https://www.lead-innovation.com/english-blog/what-is-a-business-model-innovation
2 Forbes, 24 Sep 2020, Razaq Juwon Lawal, Business Model Innovation: is it a Good Move? Accessed 30 Sep 2021, https://www.forbes.com/sites/forbesbusinesscouncil/2020/09/24/business-model-innovation-is-it-a-good-move/?sh=199428501b82
3Forbes, 24 Sep 2020, Razaq Juwon Lawal, Business Model Innovation: is it a Good Move? Accessed 30 Sep 2021, https://www.forbes.com/sites/forbesbusinesscouncil/2020/09/24/business-model-innovation-is-it-a-good-move/?sh=199428501b82
4Northeastern University, 2 May 2020, Lauren Landry, Business Model Innovation: What it is and why it’s important, Accessed 30 Sep 2021, https://www.northeastern.edu/graduate/blog/implementing-business-model-innovation/
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