Business Model Innovation
Organisation challenges and business realities, organisations recognise that need change or need to address these challenges. To drive B.M.I. you need to enable your business to change the way it operates, in a manner that cuts across functions, departments and silos.
Business Model Innovation – this is rewiring the organisation, the way the process, staff are linked together, and this is a profound change in the organisation. This requires attention and drive by the leaders to get this through successfully.
The ability to get organisations to try something different, willing to discipline or kill off process, parts in their current B.M. If you can get buy in on this, you are on a major struggle with B.M.I.
- Encyclopaedia Britannica
- Blockbuster Video
These organisations could not get past their established business model, or organisational inertia. They retracted into their own familiar business model rather than to try something different.
- Netflix
They reinvented the way movies are seen, via a console or pc at home, there is no need for dvd’s or peripheral players to view the movies. They moved from the original mailing model to digital delivery model.
Why organisation challenges are prelevant in B.M.I.
Organisations hate change, they like the status quo, change is hated, its toxic to the culture of the organisation. Unfortunately, we tend to think of the finance department when we think of challenge to change. For Business Model Innovation, you must be willing to experiment and to fail. It’s not easy, difficult to get right at the first attempt, organisations have to experiment, try new steps and processes, times you are going to fail, but you learn new experiences each time your try something new.
It is important for leaders to sustain the organisation through this journey. Keep pushing when the first or even 2nd attempt doesn’t work, to keep perusing change.
This is not confined to Business Model Innovation.
In reality in, you must get an organisation comfortable with the notion of change; otherwise we may be shooting ourselves in the foot, displacing our current familiar business to that of a new model.
Where does Business Model Innovation come from, start-ups are a classic example. Skype, it competes against established telecommunication carriers, competes in a different way, different asset base, different business model. When start-ups come to the market, they have a unique Business Model, they have to, to challenge the dominant players, and they have no other choice, have to be creative, generate value in a different way. If a large business if want to peruse B.M.I., it’s the challenge to peruse the same amount of change / transformation as the start-ups.
Amazon, look at their history at reinventing their Business Model, they have gone through many incarnations of change to get to their current model. They even allowed 3rd party sellers on their platform. They are competition on the same page as Amazon’s product offering, selling the same products for cheaper price, but this is a competitive strategy, improving competition, customer choice, and they even get additional revenue streams for this. It boils down to ‘profound organisational change’.
How can you reconfigure the things that you already do, process that you have in addition to new ones to create new value in your organisation.
GE Aviation is another good example, that has done Business Model Innovation across many sectors. GEA, got credit for invention power by the hour, but this was coined originally by Rolls Royce. They created the up time model per hour usage, for aircraft engine sale & maintenance. GE was able to integrate this offering with GE capital division, along with analytical capabilities of data, modelling, engine uptime, failure statistics, maintenance, etc.. They developed predictive analytics to help them to identify when an engine was about to fail or break
They became the market leader in aircraft engine sector, taking the crown away from Rolls Royce.
Rolls Royce original business model was adapted and used to compete against them, sounds familiar?
There is no easy answer, single way to measure Business Model Innovation
- You must understand organisation challenges, have clear goals, areas that you want to focus your attention on
- Start with deep knowledge of customer needs, wants and what they value
- Across organisations, how do we make money, flip this on its head, save customers money, dividends will reward themselves
- Explore to reconfigure assets, processes and networks, integrate multiple types of innovation
Why in a supermarket does the person with the smallest basket, get the quickest checkout, surely does the supermarket not value the person with the 300 euro shopping trolley over a basket with a tin of baked beans.
Same with frequent fliers rewards in the airline industry. Those that are frequent fliers, pay through the nose when they book, as they typically can book 4 months ahead, this punishes your best customers.
For Business Model Innovation, you need to step back, and see what way your business works, flip this on its head, and what does your customer value from your business.
The basic concept is to understand your customer, what to do they want and value.
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