Is business model innovation part of your innovation strategy?

Today’s leaders feel under pressure to continuously innovate. Decisions must be made often and quickly to contend with continuous change and disruption, and supporting data is often unclear – making it hard to discern cause and effect. More than ever, leaders must operate in an environment that is characterised by the following four features:

• Volatility – economic and industry shocks occur more often meaning there is less opportunity for steady state conditions to prevail.
• Uncertainty – it is increasingly difficult to predict the direction of shocks and how they will impact the strategy, business performance and day-to-day operations.
• Complexity – due to technological advancements everything is more interlinked and inter-related, making it more difficult to understand the cause and effect relationships between events.
• Ambiguity – information and data is plentiful, yet it is increasingly difficult to determine a source of truth that completely validates any one particular direction.

To overcome these factors and thrive, you need to develop and sustain ‘strategic agility’ [1]. This has three essential capabilities which must be present and must mutually reinforce one another:

Innovative business models sustain strategic agility

It is critical to constantly renew and reinvent to sustain success in this complex and fast-moving world. As business models are being disrupted in increasingly frequent cycles, leaders face the challenge of delivering upon two separate (and at times conflicting) priorities at the same time – with each priority demanding different leadership, culture and capabilities. Leaders need to:

• improve the efficiency of delivery of core products and services to customers; and
• experiment with new products and services in new markets that will deliver future growth.

Business model innovation can address both of these needs. Changes to how products and services are delivered to customers can drive efficiency and create sustainable advantage now, as well as deliver growth into the future. Business model changes can also be invisible to competitors and therefore hard to copy. Meanwhile, new business models are essential to the successful delivery of new products and services and entry into new markets.

Nous recently worked with a large national service provider that was undergoing significant digital and customer focussed transformation. The organisation was attempting to bring long term material change to its service mix and implement digital improvements to current services, in response to increased competition. We set up a cross-functional ‘sprint’ team to develop, test and validate new, ‘big bet’ opportunities that could transform existing services in the future. This approach minimised friction for staff while balancing current operations and future growth. The result was the development of a new Customer Relationship approach that will increase acquisition through the referral pathway and retention during customer on boarding.

Innovative and agile business models are a doorway to success in a complex, dynamic and often uncertain environment. They allow organisations to achieve a balance between efficiency and experimentation, and enable success in the short and long term. Paying attention to how well business models are working and exploring new potential can also help leaders navigate the volatility, uncertainty, complexity and ambiguity of the modern business environment.

Get in touch to discuss how business model innovation fits into your strategy, or read this article to learn more about practical initiatives that can help you innovate your business model now.

[1] Yves Doz, Mikko Kosonen "Fast Strategy: How strategic agility will help you stay ahead of the game" 2008