I n the IBM 2006 Global CEO Study [1], which was based on interviews conducted with 765 corporate and public sector leaders worldwide, 65 percent of leaders anticipated fundamental change in their industries in the next two years [2]. As a strategic response, many CEOs are innovating in operations and/or products and services. But firms that were financial outperformers put twice as much emphasis on business model innovation as underperformers (see Exhibit 1). As one CEO told us, ''Products and services can be copied; the business model is the differentiator'' [3].But what exactly does the term business model innovation encompass? And what type yields the best results? To find answers, we first identified three main types of business model innovation, which can be used alone or in combination: innovations in industry models, in revenue models and in enterprise models. We then compared these three types of business model innovation across 35 best practice cases. A key finding was that each type of business model innovation, with the right strategy and strong execution, can generate success.Another important finding was that innovations in enterprise models that focus on network plays (i.e. external collaboration and partnerships) seem to be the most common, with 15 of the 35 cases we studied, or almost half, using this type of business model innovation. Moreover, we found that companies using network plays realized similar financial results as companies that used other strategies. We also found that while network plays are being used by diverse companies in different industries and regions and of varying age, size and other characteristics; this tactic has been a particularly useful strategy for older companies.
PurposeBusiness‐model innovation is critical to success in today's increasingly complex and fast‐changing environment. So corporate leaders need to understand when to adapt the business model and how to execute the change. This paper aims to address this issue.Design/methodology/approachData from IBM's Global CEO Study 2008 and an analysis of 28 successful business‐model innovators, produced insights into both the best timing and process for business model innovation.FindingsThe IBM researchers identified a set of characteristics that strong business‐model innovators demonstrate consistently.Practical implicationsA set of characteristics, which the IBM researchers call the “Three A's,” are critical to the successful design and execution of business‐model innovation: Aligned – Leverage core capabilities and design consistency across all dimensions of the business model, both internally and externally, that build customer value; Analytical – Use information strategically to create foresight, and prioritize actions while measuring and tracking for rapid course correction; and Adaptable – Link innovative leadership with the ability to effect change and institutionalize operational flexibility.Originality/valueThe paper answers two questions that can help companies develop their innovation strategy and transformation approach for the new economic environment: Under what conditions should companies adapt their business model?; and What capabilities and characteristics support the design and execution of successful business‐model innovation?
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