Abstract: Typically, innovation is seen more as an offering in the form of a new product/ service, whereas a Business Model Innovation (BMI) deals with an innovation that provides companies with an advantage to not only compete on the value proposition of its offerings, but also aligns its formula for profits, resources and processes which would be helpful in enhancing the value proposition, capturing of newer market and alienating competitors. The article focuses on BMI as how it can be of help to managers while resolving the trade-off between costs of innovation and benefits by addressing the way they do business.
A company’s business model can be defined as a system of interconnected and interdependent activities that determines the way the company “does business” with its customers, partners and vendors. Alternatively, a business model is an activity system (an array of specific activities) which is based on satisfying the perceived needs of the market, along with the specification about which parties (its partners or a company) will perform what activities, and the linkage between these activities is also defined i.e. how these activities are linked to each other.
“When you innovate, look at the forest and not the trees — and get the overall design of your activity system right before optimizing the details.”
[The article has been written by Vikas Bhojwani. He has completed his MBA in HR from MDI, Gurgaon]