What is Business Model Innovation

Business Model Innovation is simply the process of defining or modifying a firm's business model, which involves making specific choices in each one of the nine core elements. Business Model Innovation does not focus on the definition of the product or service offered;  it focuses on how the value the product offers is delivered to the customer, and/or how the firm appropriates value from the customer offering.  This include what internal resources and processes are used, what external partnerships are required, how the customer is reached, what type of customer relationships are established, and how that overall process is monetized.  

 

Business Model Innovation has emerged as a new category of innovation, distinct and separate from other established and well know innovation types.

 

Product Innovation: This involves the development of a new product or service or improvement in the performance or features of an existing product.  Apple’s continued iteration of its iPhone is an example of this. Market Innovation:This involves finding a new application or market segment for an existing offering.  It may also include changes in the channel used to reach the target customer. Process Innovation: Process innovation is the implementation of new or improved production and delivery methods in an effort to increase a company’s production levels and reduce costs. One of the most notable examples of this is when Ford Motor Company introduced the first moving assembly line reducing the assembly time for a single vehicle down from 12 hours to roughly 90 minutes. Business Model Innovation:  Is the introduction of a new way of creating value for customers, the way the value is delivered, and/or the way the firm appropriates value from the customer offering through changes in any of the .

Business model design or modification can be applied to a firm's business model on multiple levels: it can be applied to the entire business, or just to an individual product or service offering.  Design changes can involve a single element such as the value proposition, value creation and delivery,  and value capture elements, or it can involve the alignment between these elements.