How to Do Business Model Innovation?

Jeff Bezos didn't know the retail business when he left the vice president post of a bank on Wall Street in 1994 and started Amazon.com. He did not understand the Internet at all, but had seen statistics that the Internet was growing 2,300%. Amazon started out as a huge bookstore. With its different business model, it significantly reduced its overheads and maximized stock turnover and equity profitability. He established a model funded by the buyer by taking payments in advance for the products he sold. Amazon then expanded to many products using its customer base and marketing knowledge. As a next step, he began to lease server capacity, and finally, using his knowledge of books, Amazon designed and sold an e-book reader called Kindle. The story of Amazon, one of the largest e-commerce companies in the world today, is a good example of business model innovation starting from its foundation.

The business model is a conceptual framework that defines a company's processes to create and deliver value. A schematic representation of what and how the company offers to whom and how it makes money. Business model innovation, on the other hand, is the name given to creating brand new ways of doing business that are fundamentally different from existing businesses, or strategic diversification in a way that your business will be valued by customers and earn you more money.

Business model innovation, if done right, brings innovation in multiple dimensions of the business model. This ensures that the value you offer to the customer is not easily discernable by competitors, and even if understood, it cannot be easily imitated. It creates a sustainable competitive advantage opportunity in a world where everything is imitated quickly. When you look at the most innovative companies in the world, you see that they are realizing successful business model innovations. While IBM was a only a hardware manufacturer in the past, it became one of the world's largest business solutions and consulting companies. Dell built computers to order, removing the intermediary and finished inventory. Apple gave birth to an inimitable business model from the combination of iPod and iTunes. Apple also managed to generate a steady income from telecom operators for the first time with the iPhone. Canon created a new business model by selling cheap printers and expensive ink. Gillette razors and Japanese cars were similar examples.

There are basically four dimensions to a company's business model. The first is the concept of Customer Value Proposition, which expresses the value the company creates for the customer. What is put in front of the customer as a new value should be a solution for a so far unmet or half-met need of the customer and should be found to be valuable by the customer. We are talking about a new value package offered to a certain customer group and why the customer should buy it. The second dimension is the company's Money making or profit formula. The third and fourth dimensions are about what activities and what resources the company will use to provide this value to the customer and to make this profit.

Whether an innovation is a business model innovation can be understood by verifying that it is:

* Addressing numerous aspects of the business model and creating a cumulative effect by making a series of changes that create value for the customer and the company simultaneously,

* Hard to understand where the real value lies and hard to imitate.

Business model innovations are more complex and difficult than innovating in one dimension, but the payoff is also greater. According to survey results, this return is four times that of product and process innovations. Again, according to surveys, companies that make business model innovation can stay ahead of their competitors even after ten years. In addition, business model innovations can be an opportunity for companies in sectors where commoditization and price competition is dominant and also during recession periods.