Business model innovation has only grown in popularity in the last couple of decades and rightfully so. The digital age has resulted in new technologies drastically changing how companies operate and deliver their services to customers.
While technology has made it easier to adopt new business models, the accelerated pace of innovation coupled with growing global competition has made differentiation more crucial than ever. In addition, the average business lifespan has fallen from about 15 years to less than five in the last 50 years.
All these factors have thus made business model innovation an essential part of any organisation that is seeking to only survive but thrive in an ever-increasingly competitive marketplace. But what exactly is business model innovation anyway? Let’s start by understanding the basics - what is a business model?
What is a business model?
People often make the mistake of defining a business model as simply the pricing model of their products or services. While pricing is a key part of any business model, its true definition is the way an organisation creates, delivers and captures value.
A business model thus represents how your company transforms its resources in the form of technology and converts them through customers and markets to create economic value (revenue/profits). Successful business models are those that take a holistic approach to integrate these different aspects of their business into an organised and operational system.
Business model innovation can thus be defined as a novel way of putting these pieces together with the hope of creating a system that is continually creating value for both your organisation and your customers.
What is business model innovation?
In a nutshell - business model innovation is the process of enhancing your business’s advantage and value creation by making changes to both your company’s value proposition to its customers and its underlying operational business model.
The changes addressed at the value proposition level could include; target segment, product or service offering and the revenue model. At the operating model level, you could choose to focus on how to drive profitability, value creation and competitive advantage.
What should you consider before you innovate your business model?
If you’re hoping to foster growth through business model innovation, you’ll be faced with several critical questions; How broad will the scope of the process be? What’s the appropriate level of risk to take? Is it a one-time effort or does it require an ongoing process capability?
To answer these questions you’ll need to take into consideration these four things that are essential to the success of your business model:
1. Your customers
A business starts by understanding what the consumer needs. It doesn’t matter how good your product or service is, the simple truth is that if no one wants it or believes they need it, they won’t buy it.
Therefore, researching, learning, understanding and satisfying the ever-changing needs of your customers should be at the core of your business model innovation. Once you have this knowledge, you can find new ways to persuade potential and existing customers into buying from you.
Aim to satisfy your customers so much that they become your brand ambassadors and help you in attracting new customers through recommendations.
2. Your employees
As your business grows, you may choose to employ others to help you with an increasing number of tasks. Or it just may be that you hired employees since the inception of your organisation. Either way, your employees are just as important as any other resource in your business model.
They are the ones at the frontline dealing with your customers or at the very least representatives of your business. Not only will they act as resources when it comes to your business model innovation, but they will also be the drivers of it. As a business leader, it’s vital that you prioritise keeping your employees engaged and satisfied just as you would with your customers.
"Take care of your employees and they will take care of your business. It's as simple as that. Healthy, engaged employees are your top competitive advantage." - Richard Branson
3. Your environment
It’s also important that as your business grows you consider the environment from two fronts - resources and waste.
To be able to perform your business activities, you’ll need resources like labour, equipment, finance, tools, technology, raw materials etc. Tapping into your business environment can provide you with these inputs essential to keeping your business model operational.
On the other hand, you’ll also have to consider the impact of your business processes in the environment you operate in. What waste are you producing and what checks do you have in place to keep your business environment healthy and functional for its stakeholders.
4. Your business’s profitability
Once you have created value for your customers, engaged your employees and taken care of your environment is when you can start talking about profitability.
Remember the goal of any business model is to eventually create economic value. Thus when looking to innovate your business, you’ll have to consider how your new process will create profitability for your organisation.
Here at IMS Africa, we can be instrumental in helping you better understand these four dimensions of your business model innovation. We can:
Help you and your teams be focused on your customers and help you understand the various regulations and standards that deal with serving customers. For example ISO 9001, FSSC 2200, IFS/BRC and Enterprise Risk Management.
Help you learn more ways you can be taking care of your employees and the rationale of standards under this umbrella such as IS0 45001 along with government regulations and your HR standards and welfare.
Help you understand how to be more environment-friendly in your processes along with other local and international standards such as IS0 14001 that deal with environmental impact.
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