The Opportunities and Barriers of Business Model Innovation


The popularity of business model innovation is growing profoundly in recent times, with a specific emphasis on its significance for modern businesses. Innovation in products, operations, and processes are definitely some of the credible alternatives for empowering the capabilities of a business. However, the importance of business model innovation surpasses product or process level innovations by a huge margin.

Business model innovation presents the promising potential for delivering valuable customer benefits alongside ensuring credible and unique selling propositions. The following discussion helps you discover some of the notable opportunities and challenges associated with business model innovation. Readers could discover the prospects for the feasibility of business model innovation and the factors which hamper innovation of business models. 

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Importance of Business Models and Business Model Innovation

Before diving into an outline of business model innovation opportunities and barriers, it is important to understand the basics of business model and business model innovation. The business model actually serves as the logic on which the organization operates. The four critical elements in the business model include,

  • The target customers
  • Benefits and value offered to customers
  • Approaches for creating value
  • Cost and revenue model of the organization

Furthermore, the business model also specifies the unique selling points and success factors associated with the organization. 

Business model innovation basically refers to any type of positive modification, renewal or enhancement of an existing business model. Innovation in an organization could take on different forms such as process innovation, product innovation, and marketing innovation. However, the importance of business model innovation has a broader and stronger influence on the company as it focuses on different dimensions. For example, product innovation can only lead an organization to an improved product albeit without any definitive impact on profits or sales.

Many organizations such as Apple, Ikea, Dell, Roll-Royce, Xerox, and Netflix have successfully capitalized on opportunities of business model innovation. Such examples of successful business model innovation encourage enterprise leaders and managers to look for opportunities to innovate their business model. At the same time, they are also eager to identify the barriers of business model innovation.

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Opportunities for Business Model Innovation

The existing business model you have might be good for various reasons. This is one of the reasons for which enterprises harbor apprehensions regarding business model innovation. Why? Business model innovation could have a wide-ranging and in-depth effect on the organization. It basically focuses on introducing fundamental changes in the approaches an organization follows for thinking and functioning. 

Therefore, the transformation process itself is often considered as one of the foremost barriers of business model innovation. However, enterprises need to look beyond the basic obstacle to discover the opportunities for encouraging business model innovation.

Here are some of the promising opportunities of business model innovation that can help you pursue the true potential of your business to achieve sustainable improvements in competitive advantage and commercial success.

  • New Technologies and Solutions

One of the most important and prominently evident opportunities for business model innovation has been identified in the introduction of new technologies or products. Digital transformation has encouraged enterprises to discover the actual value of business model innovation for their competitive advantage. Digitalization has been responsible for the creation of new products, new data for novel business models, and the new array of valuable benefits for customers. Therefore, it is quite impossible and unreasonable to ignore the importance of business model innovation with the introduction of new technologies. 

For example, car manufacturers could now receive precise weather data from vehicles such as rain sensors and navigation systems. It is clearly evident that data is a profoundly powerful entity and can help car manufacturers create new business models. Companies could develop creative processes around product and process development. As a result, they can introduce considerably extensive and groundbreaking innovations in the concerned markets. 

While many enterprises perceive competition as a vice, it could actually serve as one of the prolific opportunities for organizations. In the case of most markets, you can find a similar approach to business model design across all companies. The only difference you can find in such cases is evident in the differences in positioning, products, and services. However, such differences do not make any difference as the way of operating is the same in all cases. 

So, you should capitalize on opportunities of business model innovation to establish a definitive difference from the rest of the competition. Most important of all, the prospects in business model innovation could encourage the establishment of completely new markets. Cirque du Soleil and Apple have shown successful examples of differentiating from the competition with their innovative business models. With the help of new business models, organizations could find favorable opportunities for revolutionizing existing industries alongside ensuring the creation of completely new markets. 

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  • Radical and Disruptive Innovation

More often than not, businesses need a jolt to set their mechanics in place according to the tenets of the modern business environment. This is where organizations could capitalize on the importance of business model innovation in drawing new, disruptive, and radical innovations. The examples of Airbnb and Uber showcase the effectiveness of business model innovation in transforming the face of whole industries. In a limited span of time, both companies have turned into billion-dollar enterprises. How? 

Business model innovation can enable promising innovative capabilities for businesses alongside offering unique selling points and chances for unique differentiation. It is also important to note that you can come across various industries with extremely exhausted products. You could barely find any scope for innovation in such industries. Therefore, a new and modified business model could definitely expand the reach of a business with more prospects for innovation. For example, enterprises could find new value-added chains or alternative sales opportunities with business model innovation.            

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Challenges for Business Model Innovation

Enterprises need a comprehensive impression of business model innovation opportunities and barriers. Why? If you are looking at the positive side of business model innovation, then you are looking at half the picture. On the other hand, you should also know about the challenges in business model innovation to understand what could hold you back from implementing new business models. Organizations face a wide array of challenges leading them to innovate their business models.

The prominent challenges encountered by organizations include the transition in competitive landscapes, introduction of disruptive technologies, and changing customer preferences. As a result, business executives are eager to look at the positive side of business model innovation to deal with these challenges immediately. However, business model innovation is not a simple one-time process that assures enhanced levels of competitive advantage for an organization. 

Detailed understanding of the barriers of business model innovation could help businesses overcome difficulties in the implementation of new business models. In addition, learning from the obstacles faced by top enterprises in business model innovation could enhance the possibilities of success. Here are some of the notable challenges innovators face in transforming business models. 

The foremost entry among the barriers of business model innovation would directly point to the choice of organizational form. Will you choose autonomy or integration in the new business model? The most crucial trade-off with respect to the organizational form reflects on the extent of autonomy and independence allotted for responsible business units. Even if you have a distinct business unit in the new business model, it is important to have it on the same page as the rest of the organization. Therefore, it is important to evaluate the extent of disruptiveness and uncertainty in the planned innovation. In the case of highly disruptive business model innovation, it is important to have a flexible mindset for innovation. Independence could offer considerable freedom to the innovators for exploring and developing the new business model without concerns of cannibalization. 

The next important concern that you would face while looking for business model innovation opportunities and barriers is identity rebellion. The choice between clinging to the status quo and defining a completely new rebellious position is also a critical challenge. Uber and Airbnb have shown promising examples of setting a new rebellious position. Hotels.nl have followed an aggressive approach for enhancing their market share and differentiating from the competition by using sheep which donned a pink jackets with the company name. However, the company encountered a setback with prosecution for animal abuse. Interestingly, Hotels.nl paid the fine of 20,000 Euros and also increased the number of sheep. It was a good and productive marketing strategy and the company was not going to give it up. 

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It is clear that companies in new industries could make the most of a rebellious stance. With a rebellious stance, organizations in new industries could create buzz and gain attention easily. However, mature industries require innovators to tone down their rebellious stance for developing the reputation of a credible and legitimate company suitable for attracting mainstream customers. 

  • Roadmap Planning or Trial-and-Error

Another prominent challenge that can hold you back from realizing the true importance of business model innovation is road mapping. It is important to note the extent to which an innovator would follow roadmap planning in advance. On the other hand, you also have the possibility of beginning testing for the new business model as quickly as possible. The challenge of choosing between developing a roadmap and following a trial-and-error approach could also affect business model innovation considerably. You can find the relationship of such challenges with renowned management concepts such as agile and lean innovation. 

The most plausible solution to such barriers of business model innovation refers to a trial-and-error approach. It can help in coping with the difficulties in the prediction of patterns in new business models. On the other hand, you can find roadmap planning helpful in the case of markets with better stability and predictability. Organizations could work on planning and assessment of the potential of specific markets through market research. Subsequently, they could achieve prolific advantages in terms of market lead time. However, the trial-and-error approach could offer better flexibility for quickly adapting your organization’s value propositions with experimentation in online environments. 

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  • Consistency of Value Proposition 

The whole concept of business model innovation focuses on enhancing the value proposition for customers to ensure elevated competitive advantages. However, the issues pertaining to consistency in value proposition lead to one of the prominent barriers of business model innovation. Initially, business model innovation focused on adhering consistently to the core logic of an organization’s business model. At the same time, organizations had to maintain consistency in their storylines while pursuing business model innovation.

Furthermore, modifications to the core logic of the business model were possible only in certain situations. So, decision-makers and executives had to encounter a formidable challenge in business model innovation. The solution to such challenges is evident in the perception of business models as dynamic entities. Business models could change and do not have to remain in the original form they were created. 

It is also important to note that modifications in business models could become more complicated and difficult over the course of time. However, managers are open to pragmatic modifications in the model according to fluctuating market conditions, with routines and inertia reinforcing the building blocks of the building model. For example, an organization that has been successful for years and faces increased competition now could change its pricing strategy. As a result, they can maintain the value proposition they offered previously with promising improvements. 

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Final Words

The understanding of business model innovation opportunities and barriers shows how they are essential for organizational growth. Enterprises cannot approach business model innovation by shooting arrows in the dark, hoping to hit the target. Furthermore, a clear set of objectives for business model innovation and proper planning could not be sufficient enough for success. 

So, businesses need to take a look at the opportunities and challenges associated with business model innovation to find the perfect balance in navigating their way through the modern competitive landscapes. The successful examples of business model innovation show how they were able to capitalize on the opportunities and deal with the challenges. Learn more about business model innovation and set new benchmarks of productivity for your business.

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