Business Model Innovation Quiz

Business Model Innovation

• Developing novel business models is crucial for long-term competitiveness in today's dynamic markets.
• Business model innovation is essential for creating unique customer value and adapting to fast-changing environments.
• It challenges the status quo of how a company creates and captures value.
• It is an essential element to driving innovation success in the digital economy.

Why Business Model Innovation?

• Incremental product and process improvements are often insufficient for future competitiveness.
• Business model innovation allows firms to escape shrinking markets and surpass competition.
• Product innovation involves developing new products or improving existing ones like Apple's iPhone updates.
• Process innovation involves implementing new production methods to increase efficiency and reduce costs exemplified by Ford's assembly line.
• Business model innovation involves fundamentally changing how a company delivers value, such as the shift from CDs to music streaming services like Spotify.

Technology and Business Model Innovation

• Technology enables innovative business models.
• Finding new ways to bring a product or service to the customer is key.
• Even the most sophisticated technology may fail without a business model that appeals to customers.
• A good business model can be more valuable than great technology.

Nespresso Example

• Nespresso's coffee capsule system is a prime example of technology breakthrough when coupled with a new business model.
• It targeted affluent individuals who enjoy restaurant-quality espresso at home.
• Pairing machine sales with an exclusive club membership, Nespresso became one of Nestlé’s most successful segments.

Rationale for Business Model Innovation

• Business model innovation is a key source of sustainable competitive advantage.
• It can disrupt existing industries by tweaking or inverting traditional models, like Airbnb, Uber, and Spotify.
• It can create new industries or markets, like Nespresso's creation of the coffee capsule market.
• It is closely linked to the strategic renewal of corporations, which improves long-term competitiveness.

Longevity of Companies

• The average life expectancy of a firm in the Fortune 500 has decreased from 75 years to less than 15 years.
• Digital technologies and sustainable development are key drivers for an innovative and green economy.
• New digital business models can help solve issues like urbanization and climate change.
• Smart cities utilize smart devices for urban governance.

Perils and Pitfalls

• It is a challenging form of organizational innovation.
• Optimized capabilities and processes may become targets for transformation.
• Companies like Kodak, Nokia, and AOL failed to reinvent their business models in time, despite past success.
• Kodak invented the digital camera but focused on film and missed the digital revolution.
• Nokia was a leader in mobile phones but failed to adapt to the data-driven future.
• AOL's instant messenger lacked a good strategy to retain customers, leading to a failed merger with Time Warner.

Success Stories

• Large corporations can leverage their customer base and resources to disrupt themselves such as Philip Morris and Netflix.
• Philip Morris explores alternatives to tobacco products.
• Netflix shifted from DVD rentals to online streaming, surpassing Blockbuster.
• Building business model innovation capabilities is crucial for success.

Digital Transformation and Technologies

• Digital transformation and innovative business models are closely intertwined.
• The discussion of the "business model" term arose in the 1990s due to the dot-com era.
• Digital technologies include cloud computing, IT, fiber optic networks, sensors, virtual reality, and open data analytics.
• It is important to consider that digital technologies are constantly developing

Digitization, Digitalization, Digital Transformation

• Digitization: Changing from analog to digital form.
• Digitalization: Restructuring social life around digital communication and media. Using digital technologies to change a business model.
• Digital Transformation: Customer-driven strategic business transformation requiring organizational change.
• Agility facilitates ongoing digitalization initiatives.

Value-Creation Layers of Digital Technologies

• Physical Thing: The physical element providing a direct benefit.
• Sensor and Actor: Microcomputer sensor technology measuring local data.
• Connectivity: Internet connection enabling global accessibility.
• Analytics: Storing, classifying, and integrating sensor data for insights.
• Digital Service: Structuring options into packaged digital services.

Application Areas for Digital Technologies

• Internet of Things
• Smart Solutions
• Big Data

Internet of Things

• Connecting devices with an "on" and "off" switch to the Internet.
• Integrating Devices via intelligent Information Communication Technologies (ICT).
• Enabling objects and locations from the physical world to become part of the digital world.
• Objects are equipped with minicomputers to collect and store information.

Smart Solutions

• Intelligent sensing technology integrated with internet technologies.
• Smart sensors optimize electricity use by detecting and managing unnecessary usage.
• Smart solutions enable:
  • Optimizing spare capacity using underutilized resources.
  • Reducing demand peaks through technology-enabled demand management.
  • Leveraging people-centered innovation with citizen platforms

Big Data

• Extremely large data sets analyzed computationally.
• Reveals patterns, trends, and associations related to human behavior.
• The process to convert random amounts of large sets of data into business insight includes:
  • Internet of Everything: Collects, stores, and connects people processes and data.
  • Data Scientist: Qualifies data and builds cognitive models.
  • Business Insight: Descriptive, predictive, and prescriptive types.

Types of Business Model Change

• Companies must rethink their current way of conducting business with digital technologies.
• Business models are being reshaped by the implementation of digital initiatives and solutions.
• Business model extension: Digital enrichment of established models, like car manufacturers ensuring mobile device compatibility.
• Business model revision: Digitalization of established models, like car manufacturers offering car-sharing services.
• Business model creation: Creating new digital models, like data services for traffic planning.
• Business model termination: Eliminating physical parts of business models, virtualizing vehicle production.

Test your knowledge of business model innovation, its difference from product and process innovation, and its role in digital transformation. Understand how it contrasts with continuous improvements. Explore real-world examples such as Ford and Apple.