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Innnovation Advice

Business Model Innovation

Updated: Sep 29, 2023

As a Cube insider, you'll get access to interesting new trends, what we think about them and how you can benefit.


New Trend: The Basics of Business Model Innovation

Has your company become stagnant with little to no profit from your products and services? Perhaps, it’s time to experiment with business model innovation, a process of creating new ways to deliver value to customers. It requires making fundamental changes to the way a business operates. It helps a company remain relevant and competitive in a modern business industry through new revenue streams, improving customer experience, and lowering costs. It’s the perfect solution needed to keep a company thriving with new ideas and avenues to meet new customer needs.

Generally, innovation comes to life in three different ways. There’s routine innovation that adds established strategies to a company while catering to its existing customers. It also updates an existing product to have some staying power. Next, there’s disruptive innovation where creating a new product or service that addresses unmet needs could lead to a new market. Finally, there’s open innovation where collaboration with external partners can lead to the development of new products or services.

Many businesses can use business model innovation to help expand their business to reach the fullest potential. Not only will the company experience growth, it allows enhancement to its value proposition to customers, increase its efficiency while reducing costs, and provide a company with a competitive advantage over its rivals. For example, Dell started out as a computer company in 1984 that generated $25 billion in 15 years selling through resellers and retail locations. The company changed its business model to offer personal computers directly to customers without any retail intermediaries. It currently uses a direct business model where the company provides customized personal computers at low prices.

Despite the benefits, there are some risks that make business model innovations hard to test out or achieve. Depending on the type of a business innovation, it requires a significant shift in the way a company operates that might lead to some resistance from employees and stakeholders who are comfortable with the status quo. Many of them might feel uncertain since testing new ideas could lead to poor results. It could also be very costly to management and resources, such as investing in new technology, modifying their supply chain, retraining employees, etc. There is also competition for new business models. There might also be some legal and regulatory issues to overcome depending on the industry and new business model.

If a company has already taken the leap to launch a new business model, their biggest challenge would be overcoming the customer’s desire for familiarity to become accustomed to the rebranding of an old product. New brands and old stalwarts alike are working to evaluate refill-and-return models to reduce packaging. If a company only delivers the same product with nothing new to offer, it’ll cause them to fall out of favor. This means that companies have to redesign products and embrace new relationships with customers.


New Insight: The Paths to Business Model Innovation

It’s concerning to face uncertain demand for any business. It’s a big risk that can only be reduced through making changes to your company’s mix of products and services. For example, a finance company might have to choose between two portfolios that offer a 20% return. It’s best for them to choose one less risky method to create value overtime and select an assortment of products to reduce the overall risk factor of the business model. Even with this uncertainty, there are plenty of steps to take to make a new business model successful.

When it comes to innovation, there are four paths that any company could take. Each one provides great benefits to making a business profitable and successful. Here are some of the most notable, historic, companies that made the change.

1. Routine Innovation

If a company is looking to expand on their resources, this strategy can help in building on a company’s current capabilities. It serves the existing customer base through listening to any feedback given. It identifies any additional versions of a product that’s already on the market. By adapting said product on customer feedback, it grants profitability and customer satisfaction. For example, Steve Jobs was able to introduce Apple products such as the iPod, iPhone, and iPad based on existing technology. He linked together unique designs with sophisticated marketing.

2. Disruptive Innovation

By creating a new business model, it challenges or forces competitors to change their business models based on their level of success. For example, Netflix started out as a DVD rental store. After DVD rentals died down in popularity, they decided to switch over to online streaming. Now, it has grown to be a streaming giant with its own comprehensive recommendation algorithm with original content. It has gained almost 167 million subscribers with so much digital content to stream.

3. Radical Innovation

If a company wants to use new technology to their advantage, it would require that innovation fit within an existing new business model. For example, Xerox was one of the most profitable print companies in the world. It started out with creating the Model 914 copy machine that leveraged new and enhanced technology. They faced issues, however, when the machine was too expensive to utilize. Rather than selling the equipment, Xerox charged a monthly fee of $95 for lease of the machine with an extra charge for each copy. It reduced the risk and burden of association with its customers and capitalized on technology that was both efficient and convenient.

4. Architectural Innovation

Other than using technology to adjust to a current business model, this innovation combines it with a change in the business model. For example, digital photocopiers are used to fulfill several tasks with a multifunctional purpose. Small businesses do not require extra space for photocopying. It might destroy the usefulness of a company’s architectural knowledge, but preserve the purpose and knowledge of a company’s product(s).


New Action: The Steps to Launch Business Model Innovation

Aside from the types of innovations that any company could explore, it’s best to know what a new business model might have in store for your company. When implementing changes, certain factors will play a role in how a new business model is executed.

  1. Identify a problem that needs to be resolved with a deep understanding of the model and the market.

  2. Conduct brainstorming and collaborations to work with various departments, teams, and stakeholders to develop and implement new ideas.

  3. Experiment on a small scale to see what works and what doesn’t. The two most important elements in tackling a new business model are being agile and measuring success.

  4. Adapt to new market conditions and customer needs to stay ahead. It’s through adaptability that will lead to success.

  5. Establish clear metrics to measure the costs and profitability of new ideas and solutions.

Are you ready to take your business to the next level? We can help you evaluate the market and determine the best next steps. If you are interested N³ Innovation can help you! Contact us today!

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N³ Innovation does not endorse the organizations or products mentioned in this newsletter. If you are interested to learn more, contact us today for a full landscape and targeted solutions.


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