Seizing the advantage

When and how to innovate your business model

When to make a change: Keys to innovating your business model

In today's increasingly complex environment, business model innovation can be critical to organizational success.

In a follow-up to the "IBM Global CEO Study 2008, The Enterprise of the Future," we analyzed 28 successful business model innovators to understand how and when business model innovation is most valuable. The business model consists of four components: the value delivered to customers, how revenue is generated, how a company positions itself in the industry and how value is delivered.

In the new economic environment, companies can start developing a strategy and transformation approach by answering two questions: (1) Under what conditions should companies innovate their business model? and (2) What characteristics support the design and execution of successful business model innovation?

Successful timing of business model innovation depends on the economic environment, the specific market and industry conditions, and a set of internal factors impacting the organization.

We found that successful companies are innovating their business model in three ways: (1) Revisiting the enterprise model to reduce cost through new partnership models and by reconfiguring the asset mix, (2) Using strong financial resources to introduce alternative industry models and disrupt competitors and (3) Rethinking revenue model and value propositions to respond to a different set of customer behaviors and market requirements.

Not every organization needs to innovate its business model immediately, but the capabilities need to be established in order to act when the time is right.

Three capabilities – we call them the Three A's – can improve the execution of business model innovation: organizations need to be aligned with customer value, analytical to gain insight from differentiated intelligence, and enabled by an adaptable operating model.

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Meet the authors

  • Ragna Bell

    Ragna Bell

    Strategy & Change Leader Institute for Business Value IBM Global Business Services

  • Eric Riddleberger

    Eric Riddleberger

    Comms Sector Strategy & Transformation Practice Leader IBM Global Business Services

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