This post is an extract of my forthcoming book on business model innovation. The innovation book looks at why business model innovation is needed and how it works. You can read more about it here. These posts are early drafts of planned content and I’m putting them out to get feedback. Please do comment below, or subscribe to these pages to get each new section as it is published. In today’s post, we will be looking at finding opportunities in this new world.
I have collected a number of business model innovation definitions here to help give a sense of what business model innovation is and the different perspectives that organisations, consultants, and academics have on it. If you need a business model innovation definition, read on, and hopefully, there will be one that fits your needs or provides the spark of enlightenment.
Consulting and Commercial Definitions of Business Model Innovation
Business model innovation is the art of enhancing advantage and value creation by making simultaneous—and mutually supportive—changes both to an organization’s value proposition to customers and to its underlying operating model. At the value proposition level, these changes can address the choice of the target segment, product or service offering, and revenue model. At the operating model level, the focus is on how to drive profitability, competitive advantage, and value creation through these decisions on how to deliver the value proposition.
BCG
Business model innovation, then, describes the process in which an organization adjusts its business model. Often, this innovation reflects a fundamental change in how a company delivers value to its customers, whether that’s through the development of new revenue streams or distribution channels.
North Eastern University
Business model innovation is a wonderful thing. 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.
Karan Girotra and Serguei Netessine – Harvard Business Review
A business model innovation is thus the conscious change of an existing business model or the creation of a new business model that better satisfies the needs of the customer than existing business models.
Lead Innovation Management
Business model innovation is the development of new, unique concepts supporting an organization’s financial viability, including its mission, and the processes for bringing those concepts to fruition. The primary goal of business model innovation is to realize new revenue sources by improving product value and how products are delivered to customers.
Ben Cole at Tech Target
A business model is [sic] the way an organization creates, delivers, and captures value. Successful business models thus take a very holistic approach by integrating [sic] these different aspects of the business into a well-organized and thought-out system. Business model innovation then is simply a novel way to put these pieces together to hopefully create a system that produces more value for both customers and the organization itself.
Jesse Nieminen at Viima
Business Model Innovation is about fundamentally rethinking your business around a clear—though not always obvious – customer need, then realigning your resources, processes, and profit formula with this new value proposition. It’s not easy and can take decision-makers out of their comfort zones. But the results can be dramatic.
Cio Index
When an organisation creates a new business model, the process is called business model innovation. There is a range of reviews on the topic, the latter of which defines business model innovation as the conceptualisation and implementation of new business models.
This can comprise the development of entirely new business models, the diversification into additional business models, the acquisition of new business models, or the transformation from one business model to another (see figure on the right).
The transformation can affect the entire business model or individual or a combination of its value proposition, value creation and deliver, and value capture elements, the alignment between the elements. The concept facilitates the analysis and planning of transformations from one business model to another.
Frequent and successful business model innovation can increase an organisation’s resilience to changes in its environment, and if an organisation has the capability to do this, it can become a competitive advantage.
Wikipedia
Business model innovation is about fundamentally rethinking your business around a clear—though not always obvious—customer need, then realigning your key resources, processes, and profit formula with this new value proposition. It’s not [an] easy approach and can take decision-makers out of their comfort zones. But the results can be dramatic, providing a real competitive advantage.
Innosight
Business model innovation is the process of reinventing how you transform your organisation to more effectively compete. At the centre of business model innovation is the need to create new products, services, or organisational models that improve your value proposition.
Gary Fox
Business model innovation describes the innovative processes and rationale of how an organization creates, delivers, and captures value as opposed to how to create a new product or service.
Dwight Chestnut
Business model innovation describes the innovative processes and rationale of how an organization creates, delivers and captures value as opposed to how to create a new product or service. For example, Google rose to power using business model innovation. Google didn’t invent the internet and computers, it simply used the those tools to engineer new search engine business models. The new search engine business models created a new value proposition for the general and business public and, as a result, Google is one of the most profitable companies in history.
Academic Definitions of Business Model Innovation
By business model innovation, we mean business model replacements that provide product or service offerings to customers and end-users that were not previously available. We also refer to the process of developing these novel replacements as business model innovation.
Mitchell and Coles, 2004
A business model innovation changes one or more dimensions of a business model (which are perceived by the authors as a product-market combination, the architecture of the value creation, and the revenue model) so that a novel configuration of the elements is created and implemented.
Labbé and Mazet, 2005
Specifying a set of business model elements and building blocks, as well as their relationships to one another […] a business model designer […] can experiment with these blocks and create completely new business models, limited only by imagination and the pieces supplied.
Osterwalder and Pigneur, 2005
Business model innovation is to “advance [the] business model […] from very basic (and not very valuable) models to far more advanced (and more valuable) models.
Chesbrough, 2007
Innovation becomes BMI [business model innovation] when two or more elements of a business model are reinvented to deliver value in a new way. […] BMI can provide companies a way to break out of intense competition, under which product or process innovations are easily imitated.
Lindgardt et al., 2009
business models as definers of the value creation priorities in an organisation should be continuously reviewed in response to actual and possible changes in the perceived market conditions and evolve the enterprise strategy as the business environment, and customers’ needs change.
Romero and Molina, 2009
[Business model innovation] [1] Articulates the value proposition (i.e., the value created for users by an offering based on technology); [2] Identifies a market segment and specify the revenue generation mechanism (i.e., users to whom technology is useful and for what purpose); [3] Defines the structure of the value chain required to create and distribute the offering and complementary assets needed to support position in the chain; [4] Details the revenue mechanism(s) by which the firm will be paid for the offering; [5] Estimates the cost structure and profit potential (given value proposition and value chain structure); [7] Describes the position of the firm within the value network linking suppliers and customers (incl. identifying potential complementors and competitors); and [8] Formulates the competitive strategy by which the innovating firm will gain and hold advantage over rivals. (p. 355, citing Chesbrough and Rosenbloom, 2002)
Chesbrough, 2010
[Seizing the white space] calls for the ability to innovate something more core than the core, to innovate the very theory of the business itself. I call that process business model innovation.” (p. 13) “business model innovation is an iterative journey“ (p. 114)
Johnson, 2010
Business model innovation describes either a process of transformation from one business model to another within incumbent companies or after mergers and acquisitions, or the creation of entirely new business models in start-ups.
If You Want to Read More
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