Business Model Innovation: Change The Model, Not The Business
Business Model Innovation
Entrepreneurs frequently believe that big ideas must be revolutionary—that in order to achieve disruptive success, they must develop a cutting-edge concept. Also, when businesses fail, business owners frequently quit to pursue an entirely new venture, believing the problem is with the 'business.' As a result, the majority of businesses focus their innovation efforts on new products or market segments.
Revolutionary or cutting-edge ideas are quite costly and take a long time to develop, and you probably lack both time and money. So, if your goal is to come up with a viable business that promises both immediate and long term results, try improving on existing products, services or strategies—they could be originally yours or those of others.
You're probably familiar with the adage that in order to improve or be innovative, one must "think outside the box." Not a bad suggestion, but sometimes the solutions are perfectly acceptable "within the box"—it's all in the perspective. Taking a fresh look at things can be quite enlightening. The majority of failing businesses have a problem with their approach, strategy, or model, as the case may be.
According to an article highlighting Andrew Campbell's approach to business model innovation, a recent Economist Intelligence Unit global survey of 4,000 managers revealed that 54% believe business model innovation is more important than product or service innovation for success.
To bolster this view, IBM discovered that companies whose operating margins outperformed those of their competitors over the previous five years were twice as likely to prioritize business model innovation over product innovation or cost reduction.
Change The Model, Not The Business
Numerous examples exist of simple ideas and business model innovations that have achieved enormous success. For instance, Google had no business model to speak of for much of its early life. As detailed in the book The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture, Google was once a pitifully unprofitable business. In 2003, Google introduced the AdWords program, which enabled businesses to advertise to people searching for items on google.com. This was the pivotal moment in Google's evolution from a popular search engine to an advertising juggernaut. Five years later, in 2008, Google reported to the Securities and Exchange Commission that it had generated $21 billion in revenue solely from advertising.
Another remarkable example is that Amazon did not have to begin with a revolutionary concept. By operating on a more sustainable business model than the typical book store, it is able to offer a wider selection of books and, rather than requiring you to return to the store to collect your orders, they deliver them directly to your door at a significantly lower price.
In its early stages, Facebook was designed exclusively for college students—in fact, it required users to sign up using.edu e-mail addresses. By 2006, anyone 13 years or older with a valid e-mail address could join Facebook. The business remained the same; only the strategy shifted. The company sold a 1.6 percent stake to Microsoft for $240 million at one point.
Evidently, business success is more closely related to the improvement of business ideas than to the creation of new businesses or products. This implies that, rather than focusing on how to break even, it is far more fruitful to inquire, "How can I do things differently?"
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