Creating a business model innovation for your organization? Check out some of the notable examples of inspiring business model innovation before you start!
Many startups in the past developed solely on the foundation of the introduction of new technology. Such types of new ventures focused profoundly on offering solutions to problems that were beyond any solution previously. For example, the problem of creating and editing documents led to the introduction of word processing triggered by the easier availability of low-cost personal computers. However, startups in the present times focus more on business model innovation rather than relying on technology innovation.
Various successful business model innovation examples provide the ideal foundation for new startups and existing enterprises to follow suit. The examples of business model innovation also offer insights on the best practices to follow for ensuring successful adaptability. You can discover some of the notable examples of inspiring business model innovation in the following discussion.
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How Should You Approach Business Model Innovation?
Business model innovation points out the reconfiguration of a business as it continues delivering similar products to similar markets. However, business model innovation involves a different and unique approach for enhancing the value creation and competitive advantage of organizations. At the same time, business model innovation also brings promisingly supportive modifications in its operating model and the value it offers to customers.
Furthermore, it is also essential to note that the modifications in business model innovation examples are generally invisible to competitors. Therefore, it is quite impossible to copy the approaches followed by organizations for innovation in their business models. So, you should look for some of the famous business model innovation case studies to identify how the organizations adapted their business models to changing circumstances.
Also Read: 4 Steps to Business Model Innovation
Examples of Top Business Model Innovation
While business model innovation is considered a critical entity for business transformation, organizations are eager to find out how they can innovate their business models. In such cases, it is important to look for different questions regarding the concerns you want to address. What type of risk appetite will the new business model have?
What should be the breadth of the scope of innovation? Will the business model innovation be a one-time exercise or a continuous journey? Let us try to find the answers in some of the examples of top business model innovation approaches which can inspire you to do the same with your business.
The name Xerox is probably known all over the world. The multinational Fortune 500 company selling print and digital document solutions is one of the pioneers of business model innovation. With a pay-per-copy business model introduced in 1959, Xerox showed the effectiveness of simplicity in ideas and considerably trivial redundancies in the revenue model for rendering a wide array of financial implications. Xerox is one of the best business model innovation instances, especially considering the journey of the company. It started off as Haloid before being named Xerox.
The company created the Model 914 copy machine that leveraged new and enhanced technology. However, the machine was almost six to seven times expensive than alternative methods. As a result, Xerox experienced difficulties in penetrating the market, with many of its competitive marketing partners backing off.
At this point in time, Xerox displayed exceptional and inspiring business model innovation by choosing the lease the copy machine. Rather than selling the equipment, Xerox charged a monthly charge of $95 for lease of the machine. In addition, the company also charged $0.04 for each copy, following the first 2000 copies every month. Furthermore, Xerox also catered to the service and support requirements, thereby reducing the risk and burden associated with its customers.
Customers loved the new pricing model, with the technology providing considerable efficiency and convenience for them. In the course of the next 12 years, Xerox was able to grow its revenue to $2.5 billion in 1972 from $30 million in 1960.
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2. ALD Vacuum Technologies
The second notable addition among best business model innovation instances refers to ALD Vacuum Technologies. The company is presently the leading supplier of vacuum process technology solutions in the world. Apart from its classic plant sales, ALD Vacuum Technologies pursued business model innovation with its “Own & Operate” model. The new business model focused on addressing the modified customer needs in the domain of modular process, process technologies, and construction.
In the new model, the company addressed the needs of customers directly. For example, ALD served as a service provider for resolving the customer requirements of heat treatment in further processing of components, with the customers lacking the technology and know-how for adequate processes. Now, ALD was capable of supporting customers in the domain of product development alongside taking over a share of added value.
As one of the examples of top business model innovation, ALD offers its own know-how at the customer’s premises. In addition, the company could also ensure optimal operation of sensitive systems. The business model innovation helped the company ensure better plant utilization in comparison to their competitors. At the same time, the company also offered enhanced quality with reduced overall costs.
You could easily discover your favorite movies and TV shows on your smartphone or television without having to pay a visit to a DVD rental store. Didn’t all the DVD rentals shut down decades ago? What was the reason? Netflix! Interestingly, the online streaming giant started off as an online DVD rental store in 1997, which delivered DVDs to users through email. As one of the notable business model innovation examples, Netflix has introduced some prolific changes in its business model over the years.
The striking milestone in the innovation journey of Netflix was in 2005 when the company considered offering an online streaming service. The ideas of the online on-demand streaming service were considered after rejecting the proposal for a hardware device or a ‘Netflix Box’ that would allow users to download movies overnight.
Netflix introduced its online streaming service in 2007 and subsequently separated the streaming service and DVD rental business. The company showed inspiring business model innovation by presenting a comprehensive recommendation algorithm alongside integrating backward into content production. Today, Netflix is one of the most popular online streaming services with a massive array of content and almost 167 million subscribers.
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Another promising example of famous business model innovation refers to Dell. The company started off in 1984 with a staggering $6 million worth of sales in the next year. Interestingly, Dell was able to garner annual sales of almost $25 billion around 15 years later. So, how did Dell achieve such an exclusive feat? The company initially provided hard-drive upgrades, and within a short time after its foundation, the company modified its business model.
Now, the company focuses on offering personal computers directly to end customers without any retail intermediaries. With a new ‘made-to-order’ design, Dell attempted to reduce the reseller markup and inventory holding costs. Thus, Dell was able to establish a direct business model, which helped the company sell customized personal computers at low prices.
The direct business model shows one of the best business model innovation instances, which focused on configuration of its supply chain and distribution. As a result, the company was able to address market expectations without dealing with retailers. Furthermore, Dell was also able to develop close relationships with customers alongside ensuring direct data collection for anticipation of demand and development of better products.
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5. Dow Corning
The final addition in famous business model innovation case studies would take you to Dow Corning. The US-based chemical company supplies silicone products for various industries. Initially, the business model of Dow Corning focused on product sales with comprehensive consulting services and better margins.
However, the company encountered issues of stagnation in sale of certain products owing to commoditization of markets. This is where Dow Corning realized the need for modifying its business model to ensure future growth. The company started investigating the reasons for the dip in sales. The results of the investigation indicated that customers wanted a larger quantity of products at cost-effective pricing rather than support.
Therefore, Dow Corning established one of the reliable business model innovation examples with its cost-based ‘no frills’ business model. Most important of all, the new business model was tailored in parallel to the current value-based business model. The new model focused on delivery of products to the mass market at low prices, even with the quality trade-off. Dow Corning implemented the new business model by establishing a new and independent brand by the name of Xiameter. The new brand featured specialization in sales of standardized offers at the most reasonable prices by leveraging the internet.
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On a final note, you can find that business model innovation examples presented here have one thing in common. All of the instances of business model innovation showcase the emphasis on safeguarding value for customers. The innovation in business models focused on addressing customer requirements and in the most efficient way possible.
Apart from the examples cited here, you could also find many other types of business model innovation projects with considerable potential. However, it is important to have a clear impression of what you need and a clear roadmap for implementing changes. Business model innovation is difficult, although not impossible to achieve!
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