It can be deployed to both defend and disrupt: a powerful response to declining competitiveness and a decisive means to seize new opportunities.
But executing business model innovation—the process of changing both the value that is promised to customers and how it is delivered to tap into new profit sources—is certainly more complex than traditional product or service innovation. It’s hardly surprising then that although 94 percent of the 1,500 senior executives surveyed in the 2014 installment of The Boston Consulting Group’s annual research on the most innovative companies reported that their companies had engaged in business model innovation to some degree, only 27 percent said their organizations were actively pursuing it. This is despite the fact that the complexity of the large-scale change effort involved makes it difficult for rivals to imitate, which affords successful innovators with both a longer head start and a more durable competitive advantage.
Companies hoping to drive growth through business model innovation face a number of critical questions: How broad should the scope of the effort be? What is the appropriate level of risk to take? Is it a onetime exercise, or does it call for an ongoing capability? How can a company discern which new business model is the most attractive? And what differentiates those companies able to transform their business models from those that might run a pilot but fail to fundamentally change the company’s trajectory?
