Home » Business

The Future Value of Business Model Innovation

Apr 24, 2008
From my field work, I learned that frequent repetition of business model innovation in the same company was an unintended discovery made simultaneously by dozens of companies in the 1990s. Each company was pleasantly surprised by the effectiveness of their first business model innovation. That success led them to want to repeat. From those repetitions came an increased, continuing focus on business model innovation.

These experiences are the pioneering wave of what I believe will be the most important leadership and management activity in the next several decades.

Globalization will speed this process. By 2013, more than half of all companies in developed countries will face foreign competitors as their most significant challenge.

For example, there have been many business model innovations in car dealerships. We can expect new forms of adding value. For instance, all of a consumer's diverse car and truck needs may be provided by one annual fee (including trucks for moving, a sports car for vacation, as well as an SUV or crossover for everyday use).

Such an offering may come from car rental companies, such as Enterprise. This business model, in turn, may face competition from similar offerings priced through online auctions. Such new competitors could supply surplus vehicles in a less costly way through accessing the vehicle rental and leasing companies with the most excess inventory (much as Priceline is doing now for rental car companies at major airports).

As a result, the local vehicle dealer in Dallas may be overwhelmed by online competitors from elsewhere. The local dealer may find tough competition from people offering such advanced vehicle service options hosted by companies located anywhere in the world. Bangladesh can potentially beat Dallas in such a competition for a Dallas customer, if the Bangladesh company's business model has enough profitable advantages for that customer.

The Bangladesh company can seek out those locales where the competition is weak and static and grow very rapidly in such a situation. The impact on existing companies will be enormous.

One winner employing continual business model innovation can wipe out thousands of local competitors. That's the future potential of continuing business model innovation to fulfill Schumpeter's vision of creative destruction by entrepreneurs.

Those who lead their industries in continuing business model innovation will initially find limited competition in this critical arena. Most companies will respond by dropping prices and costs . . . or simply by copying what the innovator has done.

Few existing competitors will innovate to seize an advantaged position versus the new business model. Industry leaders in business model innovation will also be the best places to work, form partnerships, lend money, make investments in, sell to, and cooperate with.
About the Author
Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantage. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at

http://www.2000percentsolution.com .
Rating:
Please Rate:
(Average: Not rated)
Views: 139
Print Email Report Share
Article Categories