All about Business Models
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Barriers to Business Model Innovation
Anneke Zwart, Student (University), Netherlands, Moderator
Due to fast technological developments and innovations, firms need to be able to quickly adapt to changes in the competitive environment. This is the reason why Business Model Innovation (BMI) has gained importance. BMI refers to the discovery of new business logics of the company and new methods to both create and capture value.
Although BMI is needed to stay competitive, many attempts to implement a whole new business model have actually failed. Von den Eichen and Matzler (2015) describe the most important obstacles that impair successful Business Model Innovation:
- AWARENESS-RELATED OBSTACLES: Our mind-set is often too narrowly focused and we are caught by our own thinking patterns which are guided by dominant logic. This leads us to associate BMI with products (innovation), which is logical because products make innovation more tangible. However, this way of thinking presents a major barrier to BMI, as it prevents us from thinking beyond innovations of products.
In order to overcome this barrier, it is fundamental to break up the separation between product innovation and BMI. One way to overcome this barrier is to continuously reflect on the different types of innovations.
- SEARCH-RELATED OBSTACLES: Companies attempt to define their internal and external environment too narrowly when it comes to searching for solutions to specific problems or new innovations.
Although it is important to consider customer perspectives, solely paying attention to this might lead to the risk of missing important disruptive innovation opportunities. Next to the need for customer integration, it is also important to see new innovations from other perspectives as well. Openness and the expansion of networks are key to overcoming search-related barriers.
- SYSTEM-RELATED OBSTACLES: The creation of innovations are often prevented by so-called dysfunctions of innovations, such as bureaucratic processes, a lack of transparency and complex procedures. Companies with such dysfunctions in their innovation processes actually eliminate BMI systematically rather than embrace the concept and successfully generate disruptive innovations.
Overcoming system-related barriers will need high levels of conscious affirmation and the ability to master complex issues.
- LOGIC-RELATED BARRIERS: Besides the invention itself, an innovation can be successful only if there also is a so-called business logic, which explains the logical of how and why new ideas will create value to their customers AND captures value so as to stay profitable. However, this represents some barriers. In some cases, companies are able to create value to their customers, however fail to capture the value and obtain profits from their idea. In other cases, companies focus on minimizing costs so as to be better able to capture value from their products/services, however this often comes at the expense of creating value for customers.
It is a challenge to both capture AND create value for customers. Companies need to think in a holistic way, and balance their positioning, the different types of business logics, the revenue model and the product/service itself.
- CULTURE-RELATED BARRIERS: What is regarded as enrichment in one culture, might not be regarded as such in another culture. How can businesses overcome culture-related barriers?
Companies need to embrace heterogeneity and cultural diversity. Developing expectations and to finally meet those expectations is critical as well. Furthermore, it is important to set boundaries of the innovation and to communicate them comprehensively. Another solution is granting cultural autonomy to BMI, which refers to the creation of separate organizational units with their own departmental cultures.
Source: Von den Eichen, S. F. and Matzler, J.F.K. (2015),"Why Business Model Innovations Fail", Journal of Business Strategy, Vol. 36 Iss 6 pp. 29 - 38
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Obstacles to Business Model Innovation
Derek Lark, CEO, Australia, SIG Leader
This is a good summation of impediments to innovation. Connected adjacencies such as Nespresso used, creating, delivering, and capturing value in new ways, is one technique successfully used to get innovation implemented.
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