Differentiation Via Business Model Innovation
Maybe you think that BMI is the abbreviation for Body Mass Index, It is, but for business it means Business Model Innovation, a concept that was made popular in the early years of this century.
Apple is the perfect example of what an innovative business model can do for a company. In 2001, Apple stopped its focus on developing proprietary hardware and software and instead developed an innovative business model for downloading music - the iTunes online music service. The iPod was a direct result of this and to a large extent also the iPhone.
How Innovation Led To Success
Apple went from being a struggling company on the verge of bankruptcy to one of the most successful companies in the world. This was not because of new software and hardware (even though these were part of their offering), but because of the innovative business model where the download of music, a success in its own right, made it possible to also sell highly profitable hardware and software products, the iPhone and the MacBooks being star performers. Apple is still performing well, but now they need to once again reinvent themselves, or rather their business model, in order to avoid ending up in a devastating competition in a challenging business development. But that’s another story.
How about your company? Are you ready to and capable of tackling the changes going on in your industry? In most industries the need for innovation is increasing, but why always consider product innovation? Why not innovate your business model? The chances are that a successful new business model will differentiate you much more from your competitors than product innovation. So take a fresh look at competitive advantage and maybe that will reignite your growth in a challenging business environment.
Elements Of A Business Model
What exactly is a business model, you may wonder. Well, it consists of two elements:
- Your value proposition (what you are offering to your chosen target group and how you are being compensated for your product or service).
- Your operating model (your value chain – what you do yourself and what you outsource; your organization and your cost model).
So 2 times 3 levers. If you change either one of them you change your business model. But if you change two or more you have a high likelihood of introducing an innovative business model that makes you stand out from your competitors who only think about product innovation. But which levers should you change? That’s the million dollar question. The answer lies in identifying the problems, frustrations and challenges your chosen target group is facing. This insight, used in an imaginative way, shows you the way to an innovative business model that makes it possible for your company to outcompete the other players in the market.
Apple can vouch for this. They found out that it was both frustrating and challenging to download music in an easy and user-friendly way and this insight gave birth to iTunes. And you know the rest of the story so ask yourself: What could you do if you fully understood which problems, frustrations and challenges your target group experiences? Most likely you could come up with an innovative business model that would fuel your growth. Go for it!
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