Digital Transformation and
Strategic Innovation
Reinventing business models: how firms cope with disruption.
Volberda, H.W., Van Den Bosch, F.A.J., & Heij, K.
,Table of Contents
1. Introduction 3
2. Know Your Business Model 5
3. How Firms Modify Their Business Model: Replication or Renewal 8
4. Levers for Business Model Innovation 11
5. Enablers and Inhibitors of Business Model Innovation 13
6. Business Model Transformation: Driven by Strategy or Customer? 16
7. Managing Business Model Transformation 17
8. Re-examining Business Model Innovation: Dos and Don’ts for Managers 21
, 1. Introduction
In the current turbulent environment, it Is no longer relevant to ask whether firms should innovate their
business model, but how, when, and the extent to which firms should change their business models. Every firm
has a business model and business model has become more important and is a crucial factor in explaining
differences in firm performance.
Research on business model innovation falls into two main streams:
- Replication: Leveraging an existing business model.
- Renewal: Introducing a new business model that is very different from the previous one.
The need for business model innovation
The speed with which technologies and strategies change forces firms to innovate their business model
continually. Existing players will have to deal with new forms of competition, where incumbents find
themselves superseded by new firms whose business models are based on the digital world. In today’s
dynamic business environments, there has been increasing focus on how to create distinctive business models
and how to change them in order to sustain competitive advantage.
Signs a business model is under pressure:
- New generations of products and services are not significantly better.
Traditional strategies, based on top-sown control, formal planning, and detailed industrial analysis, guaranteed
that their business models would remain both distinctive and sustainable for some time, with only a slow and
gradual erosion of the business model. However, competition is now characterized by short periods of
competitive advantage, alternating with frequent disturbances and disruptions of the busines model.
Disruptions can be either demand-driven, supply-driven, or a combination of the two.
The examples of Kodak and Polaroid profited from the razor blade business model: one item is offered cheaply
(camera), and a considerable margin is then achieved on another related item (film rolls). Their downfall came
when they did not dare to let go.
A changing competitive landscape
Firms can now only achieve a temporary competitive advantage, because those advantages are being imitated
or improved upon at an ever more rapid rate through business model innovation by other players in the
market. Players seem to be standing still because others are doing the same: the Red Queen race.
As an organization adapts fully to the existing environment, it becomes highly vulnerable should the
environment change unexpectedly falling into (a) business model trap(s):
Strategic Innovation
Reinventing business models: how firms cope with disruption.
Volberda, H.W., Van Den Bosch, F.A.J., & Heij, K.
,Table of Contents
1. Introduction 3
2. Know Your Business Model 5
3. How Firms Modify Their Business Model: Replication or Renewal 8
4. Levers for Business Model Innovation 11
5. Enablers and Inhibitors of Business Model Innovation 13
6. Business Model Transformation: Driven by Strategy or Customer? 16
7. Managing Business Model Transformation 17
8. Re-examining Business Model Innovation: Dos and Don’ts for Managers 21
, 1. Introduction
In the current turbulent environment, it Is no longer relevant to ask whether firms should innovate their
business model, but how, when, and the extent to which firms should change their business models. Every firm
has a business model and business model has become more important and is a crucial factor in explaining
differences in firm performance.
Research on business model innovation falls into two main streams:
- Replication: Leveraging an existing business model.
- Renewal: Introducing a new business model that is very different from the previous one.
The need for business model innovation
The speed with which technologies and strategies change forces firms to innovate their business model
continually. Existing players will have to deal with new forms of competition, where incumbents find
themselves superseded by new firms whose business models are based on the digital world. In today’s
dynamic business environments, there has been increasing focus on how to create distinctive business models
and how to change them in order to sustain competitive advantage.
Signs a business model is under pressure:
- New generations of products and services are not significantly better.
Traditional strategies, based on top-sown control, formal planning, and detailed industrial analysis, guaranteed
that their business models would remain both distinctive and sustainable for some time, with only a slow and
gradual erosion of the business model. However, competition is now characterized by short periods of
competitive advantage, alternating with frequent disturbances and disruptions of the busines model.
Disruptions can be either demand-driven, supply-driven, or a combination of the two.
The examples of Kodak and Polaroid profited from the razor blade business model: one item is offered cheaply
(camera), and a considerable margin is then achieved on another related item (film rolls). Their downfall came
when they did not dare to let go.
A changing competitive landscape
Firms can now only achieve a temporary competitive advantage, because those advantages are being imitated
or improved upon at an ever more rapid rate through business model innovation by other players in the
market. Players seem to be standing still because others are doing the same: the Red Queen race.
As an organization adapts fully to the existing environment, it becomes highly vulnerable should the
environment change unexpectedly falling into (a) business model trap(s):
