The concept of business model innovation

The concept of business model innovation

Ahead of my book release next week on December 6th, I will present three brief articles on the concept of business models, the history and development of business model innovation and a brief insight into the conditions for the framework that my book Business Model Innovation How It Really Works explores.

Brief history

The concept of business models has been developed gradually and as interest has increased, so has the importance of staying competitive, creating innovative questions and developing the concept of business model innovation. Partly because of its relative novelty as a field, much of the work is also conceptual or descriptive accounts of successful outcomes. There is a need for more clarity regarding the roles of organizational structure and design, as well as under what conditions the concept is successful.

Raising interest for value

Changes in the world around us are helping to create other conditions for business models as a result of globalization, increased use of technology and interest in sustainability issues and the climate. It also means more interest in what creates value, the underlying factors, what is beyond the usual way of creating profits, new fundamental paths of value or finding the mechanism that creates value.? It has reinforced my own ideas of how a business model innovation process could be used for entire industries, companies, organizations, departments and product development.

The first framework for changing an existing business model

The scope has been given quite a lot of focus as to what it takes for it to be perceived as a business model innovation case, especially as it pertains to how many components need to be changed. However, I see it as identifying potential updates on the value proposition and where potential bottlenecks may occur and how they can be dealt with before they’re a problem in an existing business model. It's about changing, improving, or giving a different meaning to the business model's activities. An activity here refers to the engagement or use of human, organizational or physical resources by either the company or an actor in its value network that relates to the business model.

The profit development

The definition of business model innovation gives a direction to owners, boards and management for what triggers work with business model innovation internally or externally. A central idea is that change should be able to be led and developed by management. They should focus on opportunities, margins, clarify costs, reduce risks and see where there may be bottlenecks. It clarifies a creative innovation of something new or within the framework of an existing business model with a focus on developing value.? The outcomes are determined by how well new interdependencies and complementarities between activities work, the extent to which it creates lock-in effects for customers and its ability to increase efficiency and cut transaction costs.?

Going for deeper arguments

A change process allows the company to evolve in response to internal managerial decision making and emergent factors like learning and synergies between activities and resources. The concept of business model innovation can also be driven by a need to more effectively understand and focus on key areas or market segments or it can be for better use, and generation of data to realign internal resources to create more efficient cost structures.? In such cases, business model innovation has the potential to identify and clarify new revenue streams and profits or outline a potentially different value chain and position.

The uses overall

It is important to understand and take into account all factors in order to be able to utilize an innovation process.? The external and internal factors driving the process of change are not part of a business model but effects its components.? What stands out is that a business model is also a cognitive structure for creating value.? It has the function to translate technology or an innovation into economic value and different business models can realize different value from the same technology.? Technology only has a latent value, though this value can be unlocked through an effective set up in an alternative business model.? The real challenge for technical managers is to link the physical into economic domains.

Manging business effects

Managing business model innovation effectively can be seen as a way to more effectively utilize and draw on resources, a company’s abilities, and finding ways to better meet the needs of users.? It is an important part of a company's survival into the future and customer orientation should grow, meaning there should be a constant focus on developing unique customer value that is also close internally and externally. Above all, business model innovation is an important issue for companies, since most medium and large companies put a lot of resources and investments into the development of processes and products.

If you want to read more articles to build on this content

Amit, R. & Zott, C. (2001). Value creation in e-business. Strategic Management Journal, 22(6-7), 493-520.

Foss, N. J. & Saebi, T. (2016). Fifteen Years of Research on Business Model Innovation: How Far Have We Come, and Where Should We Go? Journal of Management, 43(1), 200-227.

Osterwalder, A., Pigneur, Y., & Tucci, C. L. (2005). Clarifying business models: Origins, present, and future of the concept. Communications of the Association for Information Systems, 15(1), 1–25.

Teece, D. J. (2010). Business models, business strategy and innovation. Long Range Planning, 43(2–3), 172–194. Retrieved from?

Zott, C., & Amit, R. (2010). Business model design: An activity system perspective. Long Range Planning, 43(2–3), 216–226.??

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