“Business models by their very nature are designed not to change”
Business model innovation, with its potential to disrupt entire industries, is currently being actively pursued by companies large and small. But how easy is it really to achieve? A recent study suggests that in fact, business models become more fixed as they evolve, with only certain types of innovation being possible at each stage. Furthermore, the authors of the study suggest that radical innovation often needs to take place outside the confines of the organisation to be successful. The authors, Christensen, Bartman and van Bever, carried out a two-year intensive research project to uncover where current managers and leadership teams stumble in executing business model innovation.
They evaluated 26 business model innovations that had run a course from idea to development to success, or failure, and also observed a cohort of nine market-leading companies, from a variety of industries, that were attempting to execute some degree of business model innovation.
Essentially, the researchers observed that business models rely on a number of interdependencies to be successful – between their value proposition, their resources, their processes and their profit formula – and that as businesses evolve, those interdependencies become more fixed and resistant to change. This limits the types of innovation that can happen at any particular stage.
Based on this, they suggest a number of questions to ask about potential innovations at every stage, to determine whether in fact they are feasible at the stage the business is at, or might need to be developed outside the current business model in order to succeed. They also recommend generally focusing on creating new business models, rather than innovating around existing business models, where the opportunities are more limited.