Adapt or Die. What is Business Model Innovation

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Business models have evolved a great deal over the past few years. Technology has enabled businesses to have a wider reach and compete globally. Making your business adaptable is one of the key ways for businesses to ensure survival and have a competitive advantage. Adapting your company’s business model and making room for innovation is something entrepreneurs should consider.

What is business model innovation and how can adopting a business model stimulate growth and generate a profit within an enterprise? As a point of departure, we will need to thoroughly unpack the concept of a business model and see what tools and insights are available to enable entrepreneurs and managers to innovate with new business model designs.

We can start off by briefly examining some concepts captured in the recently released book, Business Model Generation by Alex Osterwalder and Yves Pigneur.

What is a business model?

An organization’s business model basically refers to how that organization creates, delivers and captures value to its market. A business model describes how a company creates an offering, gets it to customers and subsequently generates profit from this transaction. Research done by Alex Osterwalder and Yves Pigneur suggests that a complete description of a company’s business model can be broken down into nine elements:

1. Value proposition:  A clear description of the company’s offering and how it solves problems or creates value for customers.

2. Customer segments: The specific group of people that the organization aims to serve.

3. Channels: The means that a company uses to reach its customer segments to communicate with them and to deliver * products and services to them.

4. Customer relationships: The methods used to maintain relationships with customer segments.

5. Revenue streams:  The income generation and collection mechanisms in the business.

6. Key resources: The most important assets that the company needs to make the other elements of the business model work.

7. Key activities: The most important things that a company must do to make its business model work.

8. Key partnerships: The network of suppliers and partners that make the business model work.

9. Cost structure: The major costs that need to be incurred to sustain the business model.

 

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