What is business model innovation?

Business models come in a variety of forms. Direct sales, franchise, freemium, and subscription models are among the common kinds.

In a regular business model innovation, the new firms use the same/existing capabilities i.e. value chain activities and underpinning resources . The business model is such that the existing firms in the market still remain competitive. Products of the old firm still take up enough market share to be competitive enough.

Other experts define a business model by specifying the main characteristics of a good one . For example, Harvard Business School’s Clay Christensen suggests that a business model should consist of four elements: a customer value proposition, a profit formula, key resources, and key processes.

What Is a Business Model? The term business model refers to a company’s plan for making a profit . It identifies the products or services the business plans to sell, its identified target market, and any anticipated expenses. Business models are important for both new and established businesses.

What Is Business Model Innovation? Business model innovation 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 .

Business Model Innovation Example: The Video Game Industry When video games were first created, the consoles that housed them were expensive and bulky, which put them out of reach of most consumers. This gave rise to arcades, which would charge customers to essentially purchase credits needed to play the games.

Four Traditional Types of Ecommerce Business Models