For companies seeking to innovate, developing new products requires significant investment in time and resources. Business model innovation offers a low-cost approach to market leadership profitability. It is an umbrella term that groups together a range of innovations that improve the delivery or positioning of products and services.
Two other approaches are adjacent to and often undertaken simultaneously with business model innovation. Firstly, revenue model innovations seek to increase revenue by reducing costs or novel pricing strategies. Secondly, companies seek to create new industries by developing completely novel markets. At extreme ends of the innovation spectrum, these approaches are significantly different from business model innovation where the focus is on generating new business models.
How to enable Business Model Innovation
Proactive Approach to Innovation
Many companies take a reactive approach to innovation. They react to changing consumer trends or new developments from their competitors. Today, when market leaders can rapidly lose their competitive advantage, it is a dangerous approach to take. This is why more companies are now taking a proactive approach to developing new business models.
Innovation managers need to constantly survey the industry and market landscape to counter competitive threats before they emerge. For instance, data-driven technology landscaping allows organizations to identify disruptive technologies early and forecast trends. This provides a direction for new product development (NPD) and improves competitiveness.
Create Thick Value
Traditionally, companies prefer quarterly earnings over long-term growth. This is known as thin value. However, increasing economical and societal pressures, such as the climate crisis, make this an unsustainable approach. Market leaders of tomorrow will be companies that create thick value with business models that are resilient to emerging threats.
Innovation intelligence allows organizations to identify startups and technologies that will create thick value for them. Many companies are looking to integrate circular solutions within their business processes to improve sustainability. Data-driven startup scouting allows them to identify emerging startups that repurpose waste materials or produce upcycled materials and whose technologies can be integrated into their existing infrastructure.
Modular Business Models
Earlier, when companies developed a product, they’d sell it in all markets they could without any further modifications. However, emerging markets in developing countries, as well as high customer expectations, demand a rethink in this approach. Companies need to adapt their products and services to different customer demographics. In short, their business models need to be modular.
Innovation intelligence enables companies to identify opportunities for adopting modularity. It allows companies to tap into external innovation that allows them to achieve a range of objectives in this direction. Some of these include improving marketing and sales intelligence, optimizing supply challenges, and creating new pricing models.
When companies sell in global markets, they face stiff competition from local players. This necessitates a need to act locally while staying global. Having modular business models is the first step towards this, but isn’t sufficient enough by itself. Customers in new markets often have needs and aspirations that are significantly different from customers in the original markets.
Customer intelligence allows companies to stay on top of customer preferences and modify their products and services accordingly. Further, companies need to work with local companies through data-driven startup programs or startup scouting initiatives. Going beyond new business models, information gained from new markets can also unlock new product innovations.
Benefits of Business Model Innovation
Business model innovation provides a range of benefits for companies across industries. Here are 4 major benefits of this innovation management approach.
1. Business Performance Optimization
The success of business models relies as much on products as on the productivity of business units within a company. Business model innovation identifies opportunities to improve performance across the company. For example, incorporating what works for other companies or integrating innovations from startups enables rapid optimization of business performance.
2. Improved Success of New Technologies
It is often said that customers don’t buy goods, they buy solutions to their problems. New technologies by themselves do not translate into profits. They need the backing of innovative business models that position them strategically while offering customers a strong value proposition. Since this is at the heart of business model innovations, they improve the odds of success of new technologies.
3. Higher Profits
In a hyper-competitive market, profits rely heavily on business models. If you do not innovate, you’re likely to be outpriced by your competitors and find yourself in a commodity trap. By identifying new revenue sources for your products and services, business model innovation increases profits.
4. Greater Competitive Advantage
Another outcome of a hyper-competitive market is that the competitive advantage doesn’t last as long as it used to be. With companies and startups alike launching new products throughout the year, market leaders do not enjoy exclusivity for long. Business model innovation delivers a longer competitive advantage by helping you expand to new customers. Further, it improves the resilience of your company across market cycles.
Use Innovation Intelligence to Optimize Your Business Model
Leveraging innovation intelligence allows you to identify startups and technologies that align with and optimize your business models. At StartUs Insights, we offer a range of services enabled by the StartUs Insights Discovery Platform covering over 2,5 million startups & scaleups globally. Some of our services that help you achieve your open innovation goals include:
- Trend Scouting: Identify emerging and latent trends and developments that will advance business model innovation
- Technology Scouting: Reveal emerging technologies and the business models that are best suited for them
- Startup Scouting: Discover over 2,5 million startups & scaleups globally, scouting the right partners & saving you weeks of desk research
To discover how you can leverage open innovation to optimize your business models and increase competitiveness, get in touch today!