BUSINESS MODEL INNOVATION

When so many companies want the new growth that business model innovation can bring, why can so few pull it off? What makes achieving transformational growth through business model innovation so difficult? 

Our fieldwork suggests that part of the problem resides in a lack of definition. As a result, there is no clear consensus on the definition of a business model, despite the widespread use of the term. With this in mind, distilled to its essence, we define a business model as consisting of four major interlocking, interdependent elements:

• Customer Value Proposition: A solution or offering (product or service) that helps customers do more effectively, conveniently and affordably a “job” (a deep consumer need or problem) they’ve been trying to get done, provided at a given price.
• Profit Model: Based on the offering and its associated price as defined in the CVP, Profit Model is the blueprint that then defines how the company will create value for itself.
• Key Resources: Key resources are the unique people, technology, products, facilities, equipment, and brand required to deliver the value proposition to the targeted customer.
• Key Processes: Key processes – both operational and management – make delivery of the value proposition repeatable and scalable. These include the recurrent, critical tasks that must be delivered in a consistent way, such as training, development, manufacturing, budgeting, planning, sales, and service.

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Additionally, we have found that through the lens of a company’s existing business model, new models often look unattractive to internal and external stakeholders alike. Even when the need for fundamental business model change is recognized, the rigidity inherent in the existing model and deep-seeded general management practices established to preserve the core model impede its progress.

Our clients therefore come to us to aid them in identifying the limitations in their own business model, developing opportunities that could be exploited with a new model, and overcome the internal resistance to implementing a new model.