Knowledge Center


How is business model innovation different from other types of innovation?

Unlike other types of innovation, changes to the business model require changes to the foundational decisions upon which the business operates. Therefore, business model innovation will likely be radical, and in many cases, transformational. Most innovation is incremental, such as product innovation, where technology enhancements are routinely included in product updates as a way of increasing performance or reducing costs.

Changing the business model brings much higher risk due to the potential for disruption to the current business. For large businesses, recognizing and managing this kind of transition can be critical to long-term survival. Start-up businesses have an advantage over established ones because they can adapt their business models more easily. For that reason, disruptive innovations often come from start-up businesses or small teams in established companies.

Examples

Many business model innovations have resulted from taking advantage of new technologies to make fundamental changes to one or more of the key strategic decisions under which the company operates. This phenomenon has been particularly true for manufacturers that have made choices due to changes in resource availability and technology. Notable business model transformations among large companies include:

  • IBM, from mainframes to personal computers to technology services
  • Apple, from personal computers to music delivery devices to service and cell phones
  • Dell,  by allowing online customization that capitalized on improved internet technology
  • Walmart, to a networked enterprise structure and value chain

 

Describe your experiences developing or working under an innovative business model.

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