Business Model Innovation
Lecture 1, Introduction to Business Model Innovation
Business Model Innovation = how organizations can change the way they create, capture, and
deliver value
- Focus of this course: launches, new products
- Main assumption: Organizations often struggle to stay entrepreneurial (new things, seeing
opportunities, seize them, risk-taking) or fail to defend a competitive advantage (needs
strategy, efficiency – repeat things). Difficult to do both at the same time.
- They have to create value now, and search for new opportunities to create value in the
future.
Analyze Anticipate Advise
- Analyze = Current business model (BMC)
- Anticipate = Future business model (BMF)
- Advise = New business model (BMN)
What is a Business Model?
= A business model is a system of three key interdependent activities: who to target as customers,
what to offer these customers and how to serve these customers, that is, what value-chain activities
to put in place to allow the firm to deliver value to these customers in an efficient manner. (Markides
1997; 1999; 2008)
Why are they important? (Saebi, Lien & Foss, 2016)
- BM is used as a basis for enterprise classification.
- BM is seen as an antecedent of heterogeneity in firm performance. Different BM’s can explain
differences in firm performance. BM can explain why an organization does/does not do well.
- The BM is seen as a potential unit of innovation. Change in all three elements (what, how,
why)
Typical Business Models
- Product Sales Model (Retail Model): Your organization produces or purchases physical goods
and sells them to customers. One of the most common BM’s.
- Consultancy Model (Service Model): Your organization offers its expertise to other
companies or individuals in exchange for compensation.
- Subscription model: Your customers pay a recurring fee to access a product or service.
- Marketplace Model (Platform Model): Your organization acts as an intermediary between
buyers and sellers, earning money through commissions or transaction fees.
- Franchise Model: Your organization grants a franchisee the right to use your organization's
name, products, and processes in exchange for compensation.
- Licensing Model: Your organization licenses intellectual property, such as patents or
copyrights, to other organizations.
Organizations can have multiple BM’s!
,Business Model Innovation = Business model innovation is the discovery of a new
business model that is either new to the world or new to the industry in which it is being introduced.
(Markides, 2023)
The Business Model Canvas
- Developed in 2005 by Alexander Osterwalder
- Identifies the building blocks of a business model related to WHO, WHAT, HOW
The Business Model Navigator
- A business model provides a holistic picture of how a company creates and captures value by
defining the WHO, the WHAT, the HOW and the VALUE of a business.
,Examples of the BMI Navigator (focus on the grey parts)
BMI Navigator for Amazon
What’s missing in these Business Model typologies?
- Interaction between elements
- Dynamic perspective (how does the business model perform over time?
- Choices and their consequences
The Business Model as Choices & Consequences
- Choices made by executives about how the organization should operate
- Consequences that influence the company’s logic of value created and value capture
Example Ryanair
Enables you to look at the future when you change
some of the variables modeling
The Business Model as a System
In this course we conceptualize the business model as a system of causally interrelated
variables that collectively determine the success or failure of business model innovations
, Conclusion
- Value now + value in the future = long-term competitiveness.
- A business model is a blueprint outlining how organizations create value.
- The BM Canvas and BM navigator describe the blueprint, but do not show the interaction
between elements, dynamics, and choices and consequences.
- A business model innovation is a change to the blueprint.
- There is not 1 definition of the BM, there is not 1 way to visualize it, no ultimate view
Lecture 2, A systems perspective on business model innovation
Detailed Summary of Business Model Innovation: Strategic and Organizational Issues for
Established Firms by Constantinos Markides (2023)
The article explores business model innovation (BMI) as a key strategic challenge and opportunity,
particularly for established firms facing disruption. It highlights the unique difficulties large firms
encounter when adopting new business models, how they can respond, and the competitive
implications of BMI.
1. Understanding Business Model Innovation (BMI)
Definition and Distinction from Strategy:
Markides defines BMI as the discovery of a new way to conduct business, either new to the world
or the industry, that reshapes competition. It is distinct from technological, product, or process
innovation, which typically focus on incremental improvements.
A business model consists of three interdependent elements:
1. Who the company serves (customer segments)
2. What it offers (value proposition)
3. How it delivers value (distribution, operations, cost structure)
BMI occurs when these three elements are reconfigured to create a fundamentally new
way of operating.
The concept is often confused with corporate strategy, but Markides argues they are distinct:
Strategy is about positioning and making high-level choices (e.g., low-cost vs. differentiation).
Business models translate strategy into concrete operational activities (e.g., how a company
structures its costs, pricing, and distribution channels).
Types of Business Model Innovation
Markides differentiates three levels of BMI:
1. New to the firm (e.g., Microsoft’s shift to a subscription model for Office software)
2. New to the industry (e.g., Rent the Runway adapting Netflix's subscription model to fashion)
3. New to the world (e.g., Uber, Airbnb introducing fundamentally novel business models)
For a change to be considered true business model innovation, it must expand the economic pie—
either by:
Attracting new customers who were previously underserved.
Encouraging existing customers to consume more.
Lecture 1, Introduction to Business Model Innovation
Business Model Innovation = how organizations can change the way they create, capture, and
deliver value
- Focus of this course: launches, new products
- Main assumption: Organizations often struggle to stay entrepreneurial (new things, seeing
opportunities, seize them, risk-taking) or fail to defend a competitive advantage (needs
strategy, efficiency – repeat things). Difficult to do both at the same time.
- They have to create value now, and search for new opportunities to create value in the
future.
Analyze Anticipate Advise
- Analyze = Current business model (BMC)
- Anticipate = Future business model (BMF)
- Advise = New business model (BMN)
What is a Business Model?
= A business model is a system of three key interdependent activities: who to target as customers,
what to offer these customers and how to serve these customers, that is, what value-chain activities
to put in place to allow the firm to deliver value to these customers in an efficient manner. (Markides
1997; 1999; 2008)
Why are they important? (Saebi, Lien & Foss, 2016)
- BM is used as a basis for enterprise classification.
- BM is seen as an antecedent of heterogeneity in firm performance. Different BM’s can explain
differences in firm performance. BM can explain why an organization does/does not do well.
- The BM is seen as a potential unit of innovation. Change in all three elements (what, how,
why)
Typical Business Models
- Product Sales Model (Retail Model): Your organization produces or purchases physical goods
and sells them to customers. One of the most common BM’s.
- Consultancy Model (Service Model): Your organization offers its expertise to other
companies or individuals in exchange for compensation.
- Subscription model: Your customers pay a recurring fee to access a product or service.
- Marketplace Model (Platform Model): Your organization acts as an intermediary between
buyers and sellers, earning money through commissions or transaction fees.
- Franchise Model: Your organization grants a franchisee the right to use your organization's
name, products, and processes in exchange for compensation.
- Licensing Model: Your organization licenses intellectual property, such as patents or
copyrights, to other organizations.
Organizations can have multiple BM’s!
,Business Model Innovation = Business model innovation is the discovery of a new
business model that is either new to the world or new to the industry in which it is being introduced.
(Markides, 2023)
The Business Model Canvas
- Developed in 2005 by Alexander Osterwalder
- Identifies the building blocks of a business model related to WHO, WHAT, HOW
The Business Model Navigator
- A business model provides a holistic picture of how a company creates and captures value by
defining the WHO, the WHAT, the HOW and the VALUE of a business.
,Examples of the BMI Navigator (focus on the grey parts)
BMI Navigator for Amazon
What’s missing in these Business Model typologies?
- Interaction between elements
- Dynamic perspective (how does the business model perform over time?
- Choices and their consequences
The Business Model as Choices & Consequences
- Choices made by executives about how the organization should operate
- Consequences that influence the company’s logic of value created and value capture
Example Ryanair
Enables you to look at the future when you change
some of the variables modeling
The Business Model as a System
In this course we conceptualize the business model as a system of causally interrelated
variables that collectively determine the success or failure of business model innovations
, Conclusion
- Value now + value in the future = long-term competitiveness.
- A business model is a blueprint outlining how organizations create value.
- The BM Canvas and BM navigator describe the blueprint, but do not show the interaction
between elements, dynamics, and choices and consequences.
- A business model innovation is a change to the blueprint.
- There is not 1 definition of the BM, there is not 1 way to visualize it, no ultimate view
Lecture 2, A systems perspective on business model innovation
Detailed Summary of Business Model Innovation: Strategic and Organizational Issues for
Established Firms by Constantinos Markides (2023)
The article explores business model innovation (BMI) as a key strategic challenge and opportunity,
particularly for established firms facing disruption. It highlights the unique difficulties large firms
encounter when adopting new business models, how they can respond, and the competitive
implications of BMI.
1. Understanding Business Model Innovation (BMI)
Definition and Distinction from Strategy:
Markides defines BMI as the discovery of a new way to conduct business, either new to the world
or the industry, that reshapes competition. It is distinct from technological, product, or process
innovation, which typically focus on incremental improvements.
A business model consists of three interdependent elements:
1. Who the company serves (customer segments)
2. What it offers (value proposition)
3. How it delivers value (distribution, operations, cost structure)
BMI occurs when these three elements are reconfigured to create a fundamentally new
way of operating.
The concept is often confused with corporate strategy, but Markides argues they are distinct:
Strategy is about positioning and making high-level choices (e.g., low-cost vs. differentiation).
Business models translate strategy into concrete operational activities (e.g., how a company
structures its costs, pricing, and distribution channels).
Types of Business Model Innovation
Markides differentiates three levels of BMI:
1. New to the firm (e.g., Microsoft’s shift to a subscription model for Office software)
2. New to the industry (e.g., Rent the Runway adapting Netflix's subscription model to fashion)
3. New to the world (e.g., Uber, Airbnb introducing fundamentally novel business models)
For a change to be considered true business model innovation, it must expand the economic pie—
either by:
Attracting new customers who were previously underserved.
Encouraging existing customers to consume more.
