We’ve been talking about Innovation. Quite a lot, actually. But not in the sense that you’ve become used to seeing. Yes, the latest and greatest gadgets and tech are pretty awesome, but we’re talking about innovation of a completely different kind. Deloitte recently published an article talking about innovation and we summarised the top 10 types of innovation that organisations look at today.
So, over the next few weeks we will be splitting that up and going into a little bit more detail about what each type of innovation really means for UK business. Sometimes innovation starts with the smallest of steps, and it doesn’t always need a big bang approach. That certainly the case with our first example: The Profit Model Innovation practise.
Often called business model innovation, countless studies have been done to explore avenues of opportunity in the way we run our businesses. In fact, the Harvard Business Review puts it succinctly: “At its simplest, it demands neither new technologies nor the creation of brand-new markets: It’s about delivering existing products that are produced by existing technologies to existing markets. And because it often involves changes invisible to the outside world, it can bring advantages that are hard to copy.”
They go on to say that the challenge about the business model innovation is trying to understand exactly what did entails. They also add that is hard to be systematic about a process when you don’t have a framework that identifies opportunity and it’s because of this that it’s not generally something businesses plan for, but rather do on an ad hoc basis. And because companies never plan for it, they may be missing out on cheaper ways to improve their profitability and productivity – and discovering new avenues of revenue.
“Volatile and rising resource costs, regulatory pressures and supply chain risks are the new normal”
A few examples
“Many past business model innovations have come as a result of taking advantage of new technologies to make fundamental changes to one or more of the key strategic decisions under which the company operates,” says Decision Innovation. “This has been particularly true for manufacturing based businesses where choices for core resources have evolved significantly as a result of improvements in transportation and communication technology.”
They also provide a few great examples of large company business model transformations, which many may have already forgotten about:
- IBM that has managed changes in customer offers from mainframes to personal computers to technology services
- Apple that has evolved its customer offers of personal computers to music delivery devices and service that ultimately included cellular phones
- Dell’s innovation of a new distribution model by allowing online customisation that capitalised on improving internet technology
- Walmart’s fundamental changes to a networked enterprise structure and value chain
Identifying time for change
The business world can be unforgiving for the most part, which is why knowing when to make the right business model change is critical.
Decision Innovation also identifies 6 telltale signs that scream profit model innovation opportunities to business leaders. These include:
- Evidence of commoditisation or declining industry margins
- Indications of over served customers
- Inability to keep pace with changes in your industry
- Base industry technology being used in outside industry products
- Opportunities coming from the current product/service portfolio to serve customers in outside industries
- Degradation in innovation metrics such as sales attributed to new products
Ready for change, and need access to skills that will get you there? We’re your team.
Sustainable living a huge driving factor
We are starting to hear about business trends which are moving from customer ownership to customer access. You know no longer have to only the latest Car model, You simply pay a monthly sum and you’re always guaranteed to. Subscription models mean that you have what you need at your fingertips, when you need it. The pressure on our environment is such that businesses are now feeling it in their commercial strategies – and not because it’s just another way to generate revenue, but rather because they’re being compelled to.
“The reality is that we cannot maintain current resource-intensive business models and consumption patterns. The world’s population is expected to grow by a further billion over the next two decades, reaching 8.3 billion by 2030. This in itself presents challenges for global food supplies and energy resources,” writes The Carbon Trust. “One way of doing this is to substitute owning a product for using it on a subscription or on-demand basis. For example in the consumer space, propositions are emerging to extract value from under-utilised assets, as illustrated by car clubs or peer-to-peer leasing (one aspect of the trend known as ‘collaborative consumption’). An Economist Intelligence Unit report found that 51% of companies have either changed, or are in the process of changing, how they price and deliver goods and services. Similar models are also appearing in the B2B sector, such as cross-leasing under-utilised machinery and other business assets.”
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