Business Model Innovation
Identify your innovation.
Companies are innovating their business models all the time; these can be categorized into:
Deepening - Within box innovations – e.g. new charging systems, new ways of delivering value
Adding - Without changing the fundamentals of dyadic or triadic – e.g. adding a work-for-hire service to a product business model, that makes a portfolio of business models for the company
Hybridizations - combining dyadic and triadic business models – e.g. taking a product based video- game and creating a version that is free to user but supported fully by advertising and offering both simultaneously – typically a challenging move because for the free-to-use version the rm needs a new version of the game and needs to nd advertising companies to pay for the free-to-use version. Note the classic “freemium business model” where the free product is not sustained by advertising and so not economically sustainable is NOT a hybridization, but a simple product business model with two offers (free offers to entice payment).
It requires care to identify exactly which kind of innovation you undertake, because they create different kinds of value and have different economic consequences
Test the value of your innovation
Innovations can be categorized in terms of impact:
Mimetic - New to the company, but copying others in the same sector or location, so unlikely to be more than “catch up moves”
Innovative - New to the sector or locality – but typically borrowed from another sector – that can sometimes transform an industry (EasyJet copied Southwest Airlines, Amazon copied Sears Roebuck)
New to the world - Rare, hard to achieve, even harder to make work, but totally game changing when it works. One of the best examples is Google’s internet search supported by SME advertising which remains one of the most pro table business models ever invented.
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