Business model innovations have reshaped entire industries and redistributed billions of dollars of value. Yet cases from well-established companies, like Apple, are rare. An analysis of major innovations within existing corporations over a decade shows that precious few have been business-model related. And a recent American Management Association study determined that no more than 10% of innovation investment at global companies is focused on developing new business models.
Business model innovation is about fundamentally rethinking your business around a clear—though not always obvious—customer need, then realigning your resources, processes and profit formula with this new value proposition. It’s not easy and can take decision makers out of their comfort zones. But the results can be dramatic.
“Reinventing Your Business Model” by Mark W. Johnson
To explore business model dynamics, read our McKinsey-Award winning Harvard Business Review article.
At Innosight, we understand the power of business model innovation to transform businesses, create new markets and unlock significant growth. Using our proprietary framework, Innosight helps companies:
- Identify “white space” growth opportunities—tapping into an entirely new customer opportunity with a completely new business model that changes the competitive landscape.
- Generate valuable, new ideas for engaging with customers, designing new or transformed business models that fulfill the jobs customers need to get done more effectively, efficiently and profitably.
- Successfully enter emerging markets, re-conceiving business models that recognize the unique unmet needs of consumers in these markets, profitably and efficiently.
- Create new systems, rules, and metrics that enable companies to organize for and implement new businesses successfully.
SEIZING THE WHITE SPACE
Kodak invents digital photography in 1975 but doesn’t capitalize on it. Xerox famously devises the mouse, the laser printer, and the graphical user interface but fails to commercialize any of them. The $2 billion Digital Equipment Corp. spends developing a personal computer turns out to be too little, too late.
Innosight co-founder Mark Johnson’s book was named one of the Top 50 Business Books over the Past 5 Years
What makes opportunities like these so difficult to grasp is that so often they require companies to move far beyond their core into uncharted territory—into their white space. That’s a scary place, one where many companies’ experience is (as one CEO put it) “unblemished by success.” But if the danger is all too obvious, its causes are not. The white space is hard to navigate not because it’s uncharted but because so many companies try to go there with the wrong map, the one they’re currently using—their existing business model.
And who can blame them? Every successful company is already fulfilling a real customer job with an effective business model. The problem is that few organizations can explicitly articulate what that model is. Day to day, they go along guided by implicit rules of thumb, metrics, incentives, and the odd success story. But without an explicit understanding of their business model—the premise behind its development, the way its parts work together, its strengths and weaknesses—they don’t know whether they can use it to deliver on a new customer opportunity or a new model is needed.
Seizing the White Space offers the path to that explicit understanding, starting a practical business model framework: the four fundamental building blocks that make your business model work. 1) the customer value proposition that fulfills an important job; 2) the profit formula that lays out how your company makes money delivering the value proposition; 3) the key resources that value proposition requires; and 4) the key processes needed to deliver it.