Corporate business model innovation refers to the process of enhancing an organization’s business advantage and value creation by making changes to both an organizations value proposition and the underlying business model by which it delivers it. It delivers lasting competitive advantage by re-engineering the way that an organization produces and delivers its products and services as well as modifying them as required to address changing consumer needs.
Such changes often address the choice of target market and the corresponding goods and services they demand as well as reconsidering the revenue model that is applied. At the operations level the goal is to drive increased profitability and competitive advantage and new ways to identify and deliver the value proposition.
Over the last half century it has been estimated that the business model lifespan has fallen from an average of 15 years to less than 5. This means that business model innovation is now essential for any organization seeking to drive growth over the long term and to defend against new, more nimble competitors.
Organizations hoping to drive growth through innovating their Corporate business model innovation must answer the following questions:
• How broad is the scope of the effort and on which parts of the business should it be focused?
• What level of risk is presented by undertaking these changes and is it justified?
• Is this a one-off exercise or will it be entrenched as an ongoing practice?
The answers to these questions will be different for each organization and their goals in undertaking business model changes.
In some cases the core business needs to be reinvented in response to a fundamental change in the industry such as when facing a deteriorating business model. In other cases reinvention is not sufficient to address the challenge and organizations may need to look at adjacent markets that they can enter to remain in existence or to move into new markets entirely. In these cases the organization may need to build an innovation function that is constantly driving experimentation to find new opportunities in a new market. Another method for an organization to reinvent its business model is to aggressively expand into entirely new industries or markets. This requires a thorough analysis of the organization’s strengths and competitive advantage and the ability to identify new applications and business opportunities that will help it succeed in new markets; this can also require the ability to bounce back from a poor choice since not all new approaches will be successful.
