Systematically exploring alternative approaches to value creation can allow companies to find new opportunities for growth.
Companies traditionally pursue growth by investing heavily in product development so they can produce new and better offerings; by developing consumer insights so they can satisfy customers’ needs; or by making acquisitions and expanding into new markets. The authors identify a fourth method, which they call “business model experimentation,” or using thought experiments to quickly and inexpensively examine new business model possibilities.
Building an organizational competency in business model innovation allows companies to treat the business model as a variable and not a constant. The authors put forth a series of six questions that are core to any organization’s business model – such as who is the target customer, what customer need is to be filled – and offer a template that helps create alternative answers to those questions. Using the template helps a company discover combinations that may, for example, be used in other industries but that can be applied by analogy to their own, or to uncover opportunities to more comprehensively fulfill a customer service need. Thus the model can serve as a critical enabler of growth.
The choices available are not infinite; some combinations of variables are inherently related, and there are only a few ways that any combination can be practically addressed while remaining consistent with the organization’s mission. The authors give in-depth examples of the process of using the template at two organizations: Kennametal, a tool manufacturer in Pennsylvania, and Infineum, a global company that develops, manufactures and markets petroleum additives for the fuel and lubricant industry. They maintain that the experimentation process helps organizations understand their model and make better-informed decisions about the way they compete.
6 Comments On: How to Identify New Business Models
Thank you for this helpful article. As a designer/ethnographer-turned-innovation-consultant, I quite appreciate the practical nature of your text, as well as the customer focus. Your summary of the three traditional paths for exploring growth as a springboard into business model innovation is a great way to explain the “why” of it.
It’s curious, however, that you don’t mention Alexander Osterwalder’s business model canvas (BMC) as a potential tool (See: http://www.businessmodelgeneration.com/canvas). It really brings a business model to the point–a reduction sauce of sorts–which in turn focuses attention in the right direction. I’ve used the canvas in successfully in many workshops and highly recommend it. (Note: I’m not associated with Mr Osterwalder or the canvas in any way).
I’d like to hear what you think of the BMC.
It is quite amazing how narrow minded the authors are of the development of the concept of the business model concept outside and inside their narrow academic world.
Think about the business model generation book by Alex Osterwalder. A tip to the authors: Just google the term business model canvas or business model innovation.
There are several ways to approach to a business models, the most recognized and useful in my point of view is Alex Osterwalder Canvas approach, recognized and adopted for thousands all over the world.
I´m sure is a must to include Osterwalder´s Canvas when you are a Business Model Innovation Pro.
Nice to see passionate followers of Osterwalder’s business model conceptualization defending their mantra. Nevertheless, it is sad to say that despite how much we might like the beautiful and useful design approach of business model generation this is just a management fad, meaning that we do not have yet a method for new business model generation that provides superior results (performance), we just have a nice tool that helps some of us.
Therefore, the authors are free to cite articles that have been peer reviewed, and in which what is said is usually tested and contrasted. Osterwalder’s contribution to the advance of management is still in construction, some of us look forward providing more evidence-based support to otherwise subjective opinions.
As a user and consultant, Osterwalder’s business model canvas provides a very simplistic and clear understanding of what a business model should focus on at a holistic view with some granular thought. Yes indeed as times passes more contribution in the advance management of this area is a work in progress. However we can hit the ground running with this concept/tool(BMC) and utilize it well as a management tool for thinking and visualization of business models. As well Mark Johnson’s concept on “Jobs to be Done” from the book Seizing the White Space”on Value Proposition for Customer Segments works well.
I am sure over time recognition will follow.
Just a thought.
K
Yup. Agreed with Patrick and Jim, where’s the heck is the Business Model canvas? I find the business model identification outlined in the article far too academic and far less practical. I think business learning needs to be thrusted into the real world, don’t you think?
And pretty pictures can help accomplish that.
Best,
Kenneth Yu
http://www.spurpress.com