Re-inventing business: how companies innovate their business model

2013- Nowadays business models gain more attention but why, when and how do companies need to innovate their business model? The answer lies in replication and renewal of the business model. From the mid- 90s, there is a growing attention to the phenomenon of ‘business model’. INSCOPE – Research for Innovation of the Rotterdam School of Management, ErasmusUniversityhas conducted a study of business model innovation among Dutch companies. The results of the research are explained in the book “Reinventing business: how companies innovate their business model." Hereby the main results are:

• One in three Dutch companies holds desperately onto the existing business model;

• Companies that improve the existing business model and develop a new business model at the same time have the best business performance;

• In a highly competitive environment replication of the business model results in a declining business performance and hereby an accurate renovation of the business model is necessary;

• Entrepreneurial management and new technology absorption boost business model innovation;

• A focus on shareholder value and the excessive listening to existing customers leads to postponement of business model innovation;

• Companies only focused on financial performance are often late with business model innovation;

• Companies that pick up warning signals in the corners of their market, critically monitor their core competencies and invest in employees talents can quickly and in time innovate their business model.

Leadership and thorough knowledge of organization are crucial to business model innovation.
The study distinguish four levers of business model innovation: changing technology, entrepreneurial management, organization, and co-creation where entrepreneurial management provides the strongest contribution to both business model replication as to business model innovation. This allows the management to free up budget to innovate business models and to select, train and promote employees based on the skills needed for business model innovation. Also instruments such as the balanced scorecard or self-managing teams are subject of the leverage entrepreneurial management. Prof. Henk Volberda indicates that: “A business model has traditionally been seen as a way to commercialize a new technology. Research confirms that technology is important for business model innovation, but also shows that non-technological elements such as new ways of managing and new forms of organization are crucial to innovate." Also factors such as internal cooperation, size of the organization and an innovative culture promote business model replication. Henk Volberda: “The list of accelerators and retarders of business model innovation and the levers provides CEO’s and management handles to move from the present to the desired degree of business model innovation and to circumvent business model pitfalls as to maintain and improve the competitiveness and business performance. In order to strengthen the practical implications of the book, the research team prepared in close consultation with senior managers do’s and don’ts of business model innovation. This discussion, among others, shows that leadership and thorough knowledge of the organization are crucial for business model innovation."

Reference:  Bosch, F.A.J.Van den, Heij, K.,Volberda, H. (2013) Re-inventing business: How companies innovate their business model.  Rotterdam: INSCOPE – Research for Innovation, Rotterdam School of Management, Erasmus University.

Source Type: Books.

Sector Classification: Not specific

Theme: Dynamic management; External cooperation; Flexible organization;