Getting Started on Business Model Innovation (part 2)

So what is business model innovation?

Conduct Business Process Reengineering

Business Process Reengineering (Photo credit: Wikipedia)

Business model innovation requires the management to look at two or all three of the components of a business model (refer to previous article). You may not be ready for radical changes to your business, in which case then, you may want to tackle each component at a time. But this is not to say that you can change one component without affecting the other components. However, if you have decided on innovating one aspect of the business model, say innovating a new customer value proposition, it becomes easier and logical to you and your team to also innovate the revenue and business processes and system.

Pizza Hut, for example, offers a new value proposition in terms of ‘customized pizza’ and this is made possible by harnessing the internet and third party services such as online payment gateways to make ordering and purchase of customized pizzas seamless. The decision to offer new value proposition to customers can often be the trigger to innovating new revenue and business processes. Similarly, a company can also choose to innovate a new revenue model without radically changing the value proposition. So if you are a business owner or a manager, here are two simple things you should do to get started.

Step 1: Map out your product’s business model with your team

Gather your staff and facilitate a discussion on the three components of your business model. You will be surprised to discover that your managers and executives may have different perception of the value proposition of your products. The most important group of people to involve in this discussion is your sales and marketing team because they know your customers best. Do not worry about disagreements. Your product may have a combination of value propositions or more than one business or revenue system. Work towards a convergence of ideas. This is a good time to review, reposition and redesign your strategy and involve everyone in the process. You can do this using any variety methods: face-to-face discussions, online platforms or outsource this to a management consultancy.

Alternatively, you can use the following matrix (input your own values) to help you see where your product or service is on the Value Proposition-Revenue Model Canvas. This may be useful if your company offers different products with slightly different business models.

Value Proposition-Revenue Model Canvas (Original illustration by the author)

Value Proposition-Revenue Model Canvas

 

 

 

 

 

 

Step 2: Gather proposals

The next phase of your business model innovation process should help your staff visualize the alternatives to existing models. You may delegate different managers and their teams to submit alternative and innovative ideas for the different components of your business model.

Your supply chain manager will be more than happy to rethink the business process and system. Your may delegate your R&D and marketing teams to innovate new customer value proposition since they are involved in product innovations. You could also start exploring new ways of monetizing your business.

Some of the questions that your brainstorming team should ask may resemble the following:

  • How can I deliver the same value proposition without changing the revenue model?
  • Is there a new way of charging that will make the business more sustainable?
  • Would digitizing some components of the business process save more money?
  • How can our new value proposition, revenue model and business processes reinforce each other?

These are the first two steps to start the conversation of business model innovation in a company. It is by no means the whole process, but, it helps to discuss this big topic using a meaningful structure and to break down the whole concept of business model innovation into digestible bite sizes.

Business model innovation means innovating one, two or all of the components of the business model. Some people believe that business model innovation should entail radical 360 degree change but it really depends on the company’s size, management style, culture and products or services offered. The big step to take is to initiate a strategic discussion about it in a way that everybody who is not a management consultant can understand.

From: Taryn Augustina Mook. Taryn is a Business Strategy and Development Analyst. Prior to her post, she was a graduate researcher in business model innovation

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3 thoughts on “Getting Started on Business Model Innovation (part 2)

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