BUSINESS MODEL INNOVATION AND STRATEGIC PLANNING

Business model innovation hints at developing new ways of creating, delivering, and capturing value. Rather than making incremental improvements to existing products, services, or processes, business model innovation represents more transformational or even disruptive changes to the way a company operates.

Traditionally companies have focused innovation efforts on product design, features, and engineering. But intense global competition requires companies to also rethink business models, especially with the rapid pace of technological change and evolving customer expectations. Business model innovation opens up entirely new market opportunities that were previously unavailable.

An example is the transition from selling products to “as-a-service” or subscription business models. Companies like Adobe went from selling packaged software to offering their tools on a monthly cloud-based subscription plan. This delivered more continuous value to customers while also creating a recurring revenue stream. It was a fundamental shift in their underlying business model.

Some hallmarks of business model innovation include challenging assumptions about current operations, leveraging new technologies to deliver unique value propositions, incorporating input from a wide range of stakeholders during ideation, and being willing to cannibalize existing products, services and processes in order to provide better customer solutions. Companies may form cross-functional teams focused specifically on incubating and prototypes business model experiments before integrating successful concepts at an organizational level.

Leaders play a critical role in spearheading business model innovation by communicating a vision focused on continual learning, being receptive to non-traditional ideas from all levels of the organization, and framing key performance indicators around customer-oriented metrics versus purely short-term financial targets. They invest heavily in collecting and analyzing market data to uncover unmet needs. By obsessing over the problems that customers face, they are better positioned to conceive innovative business models tailored to solving those frustrations.

Ultimately the goal of business model innovation is to provide better products, services and experiences in a way that adds greater value to both customers as well as the business itself. Companies that continually refine and even transform their business models will sustain competitive differentiation. They reinvent themselves before external forces require difficult reactive changes on someone else’s terms. And they unlock their full potential for not just incremental improvements but more substantial leaps in how they operate.