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Capturing Value with Business Model Innovation

Adventures in Business Model Innovation

Just what is business model innovation? With business model lifespans shrinking in this day and age, according to BCG’s exploration of business model innovation, it is the “art of enhancing advantage and value creation by making simultaneous—and mutually supportive—changes both to an organization’s value proposition to customers and to its underlying operating model.”

BCG further points out that at the value proposition level, these changes can address the choice of target segment, product or service offering, and revenue model. At the operating model level, BCG says the focus should be on how to drive profitability, competitive advantage, and value creation. This includes where to be competitive in the value chain; what is the best cost model of products and services to ensure profitability; and what is the best organizational structure and capabilities.

To be sure, not all business model innovation efforts are alike. BCG identifies four distinct approaches to business model innovation that can serve as a pathway to growth:

1. The reinventor approach is deployed in light of a fundamental industry challenge, such as commoditization or new regulation, in which a business model is deteriorating slowly and growth prospects are uncertain. In this situation, the company must reinvent its customer value proposition and realign its operations to profitably deliver on the new superior offering.

2. The adapter approach is used when the current core business, even if reinvented, is unlikely to combat fundamental disruption. Adapters explore adjacent businesses or markets, in some cases exiting their core business entirely. Adapters must build an innovation engine to persistently drive experimentation to find a successful “new core” space with the right business model.

3. The maverick approach deploys business model innovation to scale up a potentially more successful core business. Mavericks—which can be either startups or insurgent established companies—employ their core advantage to revolutionize their industry and set new standards. This requires an ability to continually evolve the competitive edge or advantage of the business to drive growth.

4. The adventurer approach aggressively expands the footprint of a business by exploring or venturing into new or adjacent territories. This approach requires an understanding of the company’s competitive advantage and placing careful bets on novel applications of that advantage in order to succeed in new markets.

The Business Transformation Equation

Business model innovation is also often critical to business transformation. In “Finding the Way to Business Transformation,” All Things Innovation explored how the concept of business transformation can be defined with a broad range of meanings depending upon the business and the different stakeholders that play a role in it. Even the forces of the marketplace, in terms of disruption, can define what type of transformation is necessary. One concept that many companies tout is that of digital transformation, but transformation can also be one of culture, talent, communication, strategy and more. In today’s environment, business transformation must also generate new value, whether that’s through new growth or other opportunities.

Looking forward to FEI 2024? The conference, which will be held June 10 to 12, will feature the session, “Innovating Beyond Products: Strategies for Creating Value Through Business Model Innovation,” presented by Gus Valen, Chief Executive Officer and Entrepreneur, The Valen Group. While product innovation is important, true competitive advantage often lies in business model innovation. This session explores how organizations can unlock new sources of value by reimagining their business models. Register for FEI 2024 here.

Undertaking a Corporate Rethink

Creating value through business model innovation involves rethinking how a company delivers, captures, and communicates value to its customers. According to ChatGPT, here are some top strategies for achieving value through business model innovation:

  1. Customer-Centric Focus: Center the business model around understanding and meeting the needs of the customer. Engage in customer research, collect feedback, and tailor the business model to provide unique value propositions that resonate with customers.
  2. Agile Approach: Adopt an agile mindset to allow for rapid experimentation and adaptation. Encourage a culture that embraces change, and iterate on the business model based on continuous feedback and market insights.
  3. Ecosystem Collaboration: Explore partnerships and collaborations with other organizations to create value through complementary services or products. Building an ecosystem can extend the reach and capabilities of the business model.
  4. Digital Transformation: Embrace digital technologies to transform and optimize business processes. Leverage data analytics, cloud computing, and other digital tools to enhance efficiency, improve customer experiences, and create new revenue streams.
  5. Subscription and Membership Models: Transitioning from traditional product sales to subscription or membership models can create a steady and predictable revenue stream. This model often leads to stronger customer relationships and loyalty.
  6. Outcome-Based Pricing: Shift from traditional pricing models to outcome-based pricing where customers pay based on the value they receive. This ties the company’s success directly to the success of its customers.
  7. Servitization: Move from selling products to offering services. This can involve providing additional services, maintenance, or support that adds value to the customer’s experience and creates new revenue streams.
  8. Platform Strategies: Build platforms that connect different stakeholders in the value chain. Platforms can facilitate transactions, collaboration, and innovation, creating value for both the business and its users.
  9. Circular Economy Models: Embrace sustainable business practices by adopting circular economy principles. Design products for reuse, recycling, or remanufacturing, contributing to environmental sustainability and reducing waste.
  10. Personalization and Customization: Tailor products or services to individual customer needs. This strategy involves leveraging data and technology to create personalized experiences, enhancing customer satisfaction and loyalty.

Other key strategies include what is called frugal innovation, which focuses on delivering value with constrained resources. Brand innovation repositions or introduces new elements that resonate with evolving customer preferences. Rapid prototyping, data monetization, regulatory and compliance innovation also can be essential in business model innovation tactics.

Sustaining Business Model Success

Further ingredients for success include understanding the components of a robust business model canvas and how to leverage it for strategic decision-making; leveraging customer insights and market trends to identify opportunities for business model innovation; and infusing flexibility in strategy execution through agile methodologies to iterate quickly, test assumptions, and pivot as needed.

Successful business model innovation often involves a combination of these strategies, tailored to the specific industry, market conditions, and organizational context. Regularly reassessing and adapting the business model to evolving trends and customer needs is crucial for sustained value creation.

Whether you are an adapter, a reinventor, a maverick or an adventurer, as BCG puts it, business model innovation faces several critical questions and challenges. But reimagining the business model may just be what’s needed to position the business for sustainable future growth.

Video courtesy of Growth Manifesto Podcast


  • Matt Kramer

    Matthew Kramer is the Digital Editor for All Things Insights & All Things Innovation. He has over 20 years of experience working in publishing and media companies, on a variety of business-to-business publications, websites and trade shows.


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