Handbook of Business Model Innovation E-Book

Christian Müller-Roterberg

• Herausgeber: Books on Demand
• Kategorie: Fachliteratur
• Sprache: Englisch
• Veröffentlichungsjahr: 2021

Seitenzahl: 433

Beschreibung

New business models are supposed to provide answers to never-asked questions about problems that everyone is waiting for solutions to. This book is for founders and managers who may deal with innovations of business models directly or indirectly. You will find countless tips, recommendations, checklists and methods in this book on how to identify, analyze, develop, change and manage new business models.

Leseprobe

Preface

For whom is this book?

This book is for founders and managers who may deal with innovations directly or indirectly.

How can you benefit from this book?

You will find countless tips, recommendations, checklists and methods in this book on how to identify, analyze, develop, change and manage new business models. If you can implement just a few of these tips, your time and financial investment in this book will have paid off. And you will need more than just a few tips, guaranteed!

The symbol indicates further literature tips following some chapters. Recommendations for interesting internet pages are marked with the following symbol:

This book encourages you to understand business model innovation as a process that is constantly changing. Innovation efforts are like an endless loop. Therefore you follow the " Infinite Loop of Innovation":

Innovations are never perfect in the sense of this "Infinite Loop of Innovation", but grow through constant feedback from customers. This book is not perfect either, but lives, dear readers, from your feedback. With this in mind, I look forward to your feedback so that this book can continually improve: [email protected]

Acknowledgement: My special thanks go to Ms. Anna-Maria Stock, research assistant at the Ruhr West University of Applied Sciences, who edited a first draft with great commitment and expertise.

For Gertrud and Bernhard

For Kerstin, Leonard and Maximilian.

Thank you for the way full of happiness,

whom you go and will go with me.

Thank you for the loving hands,

who are always so helpful to me.

Thank you for your love and support.

Content

Preface

What is Business Model Innovation?

How to Initiate Business Model Innovations

2.1 Strategic Planning Approach

2.2 Exploratory Approach

2.3 Initiating Innovation Projects

How to Analyze the Business Situation

3.1 Environment Analysis

3.2 Company Analysis

3.3 Holistic Analysis Methods

How to Generate Business Ideas

4.1 Identifying Business Opportunities

4.2 Creativity Techniques

4.3 Customer-oriented Methods

4.4 Business Model Canvas

4.5 Lean Canvas Approach

4.6 Development of Sustainable Business Models

4.7 Pattern-based Development of Business Models

4.8 Blue Ocean Strategy

How to Test Business Models

5.1 Principles of the Lean Startup Method

5.2 Benefits of Testing

5.3 How to Test

5.4 Test Methods

5.5 Objections to the Lean Startup Method

5.6 Implementation Tips

How to Create a Business Plan

6.1 Business Planning

6.2 Goals and Requirements for a Business Plan

6.3 Components of the Business Plan

6.4 Evaluating Business Plans

6.5 Financing Innovations

How to Select a Business Model

7.1 Preliminary Selection

7.2 Multidimensional Evaluation

7.3 Net Present Value Method

How to Implement and Control Business Models

8.1 Anchoring the Business Model in the Organization

8.2 Implementing a New Business Model

8.3 Managing the Business Model

Ten Success Factors for Business Model Innovations

Glossary

Bibliography

1

What is Business Model Innovation?

1What is Business Model Innovation?

"If you always do what you’ve always done, you’ll always get what you’ve always got.“

- Henry Ford

In recent years, the importance of business model innovations has become increasingly apparent in research and practice (see, among others, Amit/Zott (2012), Chesbrough 2006, Johnson/Christensen (2008), Massa/Tucci (2014)). Before the subsequent chapters with tips & tools explain in detail the development of successful business model innovations, the following section will briefly discuss what is meant by business model innovations, what relevance they actually have for business practice, and how an innovation process can look like in the overall picture. The latter is described step by step in the following chapters.

A business model is the description of the way in which a company creates value for certain customers, creates and delivers this value and generates sustainable revenue growth from it (see Osterwalder/Pigneur (2010), p. 14). The business model is thus the implementation and concretization of a strategy and represents the link between strategy and the individual business processes (see Osterwalder/Pigneur (2010)).

In addition, the terms business idea, business model innovations and business plan are also to be understood as follows in the sense of a practice-oriented definition.

The business idea concerns only a part of the business model (such as an idea for a product or service innovation) and can at the same time be an impetus for a business model innovation (see below).

Unlike product, service, process and social innovations (see gray box below), a business model innovation should always involve changes to several building blocks of a business model at the same time (see Lindgardt et al. (2009), p. 2), and always contain a certain degree of novelty - either in its individual elements or seen as a whole (see Björkdahl/Holmén (2013)).

Finally, the business plan (at company level) or business case (at project level) is the written documented concept of a business model and provides additional information about steps of implementation and financing.

What is meant by business model innovation?

Innovations can be differentiated according to their subject area. The following types of innovations are available here:

Product innovations are innovations of a physically tangible product,Service innovations are intangible and represent changes in the service industry,Process innovations are planned changes in the process of manufacturing goods and creation of services, They serve to increase e,g, labor productivity (efficiency) and have a direct effect on the supply side,Social/organizational innovations include changes in the organization of work and in social issues, This type of innovation can also be found under the term "administrative innovation", Examples of this type of innovation are new remuneration or participation systems, expansion of tasks, bonus systems, social benefits and/or further training activities,Business model innovations are targeted changes to existing business models or the creation of new ones, They are about gaining a competitive advantage by differentiating oneself from competitors, A business model describes how the company can generate added value and benefits for the customer and where the success potential of a business idea lies in terms of sales, costs and earnings, Business model innovations are far-reaching, strategic innovations because they change the fundamental structure of a business,

Since, by definition, a business model always comprises a company in its entirety or at least an entire business unit, implementing several completely different business models would be a complicated and complex task, Only one business model per business unit or company is therefore recommended (see Johnson (2010), p, 167),

Nonetheless, depending on the specific object of the innovation and the customer segment, it may make sense to use different design options. For example, completely different types of customer relationships or sales and communication channels may be required for the same product with different target groups. In addition, radical and disruptive innovations often require a different business model, i.e. in the end, these (often but not always!) are also business model innovations at the same time.

The importance of business model innovations for entrepreneurial practice is widely recognized in research (see Amit/Zott (2001), Chesbrough (2006)). Initial studies indicate that there is a positive correlation between business model innovations and the growth or success of a company (see Amit/Zott (2012); Massa/Tucci (2014)).

The Boston Consulting Group postulates in a study that innovations in business models are five times more successful than product/service innovations (Lindgardt et al. (2009)). A study by IBM reports similarly on business model innovations, and illustrates here an annual profit margin growth of more than 5% - also five times the product/service innovations (IBM 2006). Johnson/Christensen (2008) identified that 40% of the companies that have been included in the list of the world's 500 top-selling companies (Fortune Global 500 companies) over the last 25 years would have achieved this through business model innovation.

In this context, Clayton Christensen of Harvard Business School developed the Theory of Disruptive Innovation, which explains that start-up companies in particular introduce business models with a disruptive character into an established industry (for background information on the Theory of Disruptive Innovation, see the grey box below).

Theory of Disruptive Innovation

From his findings on patterns of industrial evolution, the US-American researcher Christensen (1997) recognized that so-called disruptive innovations often do not come from the incumbent companies themselves, but are introduced by new "players" such as start-up companies. However, the incumbent companies adopt the new technology much later or even too late to survive themselves. Christensen speaks here of a dilemma of disruptive innovation for established companies. For there are also rational reasons for not making a rapid change to technology that is not yet efficient (Christensen (1997)). Disruptive innovations often achieve increasing competitive advantages through simplicity, convenience, user-friendliness, accessibility and a favorable price for the customer. Christensen describes this disruptive technological change in eight phases as follows (source: Christensen (1997))

Technologies develop faster than market needs.Incumbent companies tend to "overengineer".The emergence of a market vacuum for simple, cheap products that redefine customer value is occurring.Disruptive innovations are easier, cheaper and/or more convenient.Disruptive innovations initially do not meet the quality requirements of the mass market.Disruptive innovations are initially only attractive for a small market segment.Further development of disruptive innovations leads to the point that they will soon meet the basic requirements of the mass market.Incumbent companies ignore disruptive innovations until it is too late.

There are many explanations for the challenges faced by established companies and market leaders when it comes to disruptive innovations. On the one hand, this may be due to (rather irrational) cultural/psychological reasons such as the arrogance and habituation of the current entrepreneurial success as well as the security and short-term thinking of managers.

But there can also be economic reasons: Leaving competence that has secured market leadership in the past is very risky and can mean the loss of the investment in terms of people, machines, know-how, etc. In addition, the cost structure of established companies (especially due to high fixed costs) often forces them to open up large markets, whereas markets from disruptive technologies are often very small at the beginning. It is therefore only rational to pursue consistent marketing and customer proximity, oriented towards the "average customer" (mass). This is accompanied by a focus on cost reductions, efficiency increases, optimization of existing processes and an emphasis on incremental innovations. This orientation is reflected in a corresponding "efficiency culture", which in turn explains the cultural and psychological reasons mentioned above.

The following (general) recommendations can be derived from these findings by Christensen (1997):

Avoiding a purely strategic-systematic search for new markets and new technologies, but also the use of explorative approaches see chapter 2.2, as well as the Lean-Startup method see chapter 5.1). Avoiding too quantitative and present oriented evaluation of new technologies or innovations. Avoiding too strong orientation towards the existing, current "average customers". Not only think in purely product-oriented terms, but also consider innovating the entire business model (see chapter 4.4). Do not conduct a classic customer segmentation, e.g. according to demographic factors (age, gender, etc.), but rather be aware of the so-called "jobs-to-be-done" concept (see chapter 4.3.2). First a look into the niche (new markets) and only then into the development of a mass market. Do not develop new markets, technologies, products and services with existing processes and values, but rather adapt processes and structures to disruptive innovations.

Due to the important significance of new (disruptive) business models, many companies are setting themselves the goal of increasing their innovation efforts in the development of business models (see Johnson (2010), IBM Corporation (2006)). Today, however, focusing solely on product and process innovation is not enough. From an industry perspective it can be assumed that according to the model of Abemathy/Utterback (see Abernathy/Utterback (1978), Utterback (1994)), the innovation rate must be increased over time by the development of new business models. In the following figure, the industry development model according to Abernathy/Utterback has been supplemented with a curve for business model innovations, following Massa/Tucci (2014).

Figure 1: Industry Development Model according to Abemathy/Utterback (1978) supplemented by business model innovations

Product innovations and subsequently process innovations can only temporarily increase the innovation rate and thus the competitiveness. Here, the innovation rate is understood as the ratio of the sales of innovations introduced in recent years to total sales in a given year. Over time, it is imperative from the industry's point of view to increase the efforts for innovations in the business model.

However, only a small percentage of the innovation budget is actually spent on developing business model innovations (see also Johnson (2010)). In addition, business practice shows a lack of effective methods and instruments for developing such new business models.

Due to the importance of the business model for a company, the process for business model innovations should always be systematic, structured and method-based. This ensures, among other things, that in such a complex and company-wide process, responsibilities are clarified, tasks are not forgotten and the basic process can be carried out effectively and efficiently. This is an essential success factor for business model innovations - as well as for product innovations.

In contrast to product innovations, business model innovations in research and practice have not yet established generally accepted process flows. Nevertheless, there are already some approaches of process models (Bucherer (2010)), which however - compared to the highly developed process models for product innovations - diverge considerably from each other. These process models differ not only in their level of detail and the terminology used, but can also be differentiated in the individual tasks, supporting methodologies and the sequence of phases. Particularly in the early innovation phase, the so-called "fuzzy front end", major differences in the concepts are discernible to the extent that the impetus or source of business model innovation is seen differently depending on the author. In addition, there is hardly any practical advice in the literature as to which methodological procedures are recommended along the individual phases.

Since - as mentioned above - the existing process models for business model innovations neglect the early innovation phase or provide few practice-relevant hints for the methodical approach, a process model is presented below to close this gap. Based on the established stage-gate process by Cooper (2011), different phases are specified. These phases have decision points at certain points of the process. These so-called "gates" are there to continue, modify and/or possibly drop the project.

In order to avoid the justified criticism of the too strongly sequential character of the stage-gate process model, it is suggested at this point that the process should be executed in a prototyping phase with a so-called hypothesis-design-test-learn cycle according to the lean startup concept (Ries (2011)). Design thinking processes are structured in a similar way (see Müller-Roterberg (2018 and 2020)). This means that the concrete design of the business model innovation must be based on assumptions that are tested and learned from. For example, assumptions ("hypotheses") about customers' wishes, needs and problems can be tested early on in the form of experiments in order to learn from them for further development. Furthermore, the tasks in the individual process steps can be processed in the form of projects, which in turn can be carried out according to the principles of agile project management. Thus the process is implemented iteratively and agile.

Below is a brief summary of the steps for this iterative and agile process model for the development of business model innovations. A detailed description of this process model with tips & tools can be found in the next chapters.

Figure 2: Innovation Process for a Business Model

Chapter 2Initiating

The trigger for the development of a business model innovation can be manifold and can be divided into internal and external triggers. These triggers can be the result of a systematic, strategic-planning approach (chapter 2.1), in which the goals to be pursued for new business models are derived by means of predictions and their analysis, and the necessary resources for realization are derived from these predictions, In other words, the necessary resources result from the goal pursued for a business model innovation, Furthermore, it is also possible that the trigger is the (limited) available resources themselves, from which the business model innovation results, This so-called effectuation approach is explained in chapter 2,2,

After the trigger for the review or new development of the existing business model has been given, an internal project for this purpose should be initiated by top management in the sense of a systematic approach, The measures required for this are outlined in chapter 2,3,

At the end of the initiation phase, the following question should be considered as a gate:

Are all prerequisites and requirements for the project clarified, which aims to develop a business model innovation?

Chapter 3Company-/Environment-Analysis

In the next step, a more in-depth analysis of the current situation and future developments and trends both within the company and in the environment of the company can be carried out, For this purpose, the methods explained in chapter 3, such as trend analysis, PESTEL analysis, industry structure analysis, value chain analysis, core competence analysis or SWOT analysis, must be used,

Chapter 4Business Idea Generation

As a source of new business model ideas, other methods in addition to company and environment analyses can systematically support the generation of business model innovations. The so-called Business Model Canvas by Osterwalder/Pigneuer (2010), for example, is suitable for developing ideas for new business models (see chapter 4.4).

Here, the business model is broken down into the different elements of a business model and for each element the design possibilities or options are considered. This allows new design options to be developed or recombined as a whole. It is recommended to include creativity techniques (chapter 4.2) and methods of customer orientation such as the customer journey (chapter 4.3).

Another way to generate business model innovations is the pattern-based approach (see chapter 4.7), which draws inspiration from other areas through the confrontation or adaptation of successful business models or parts.

It is becoming increasingly important that sustainability is taken into account in business models. Chapter 4.6 presents an approach to this end that, in addition to the economic dimension, explicitly considers ecological and social effects.

For a competition-oriented approach also the Blue Ocean strategy presented in chapter 4.8 can be used supplementing during the idea generation. Thus it is possible to recognize the dominant industry logic and to break through purposefully conventions. Here one should however always anticipate that the competitor will react to it. Business models, which create new market entrance barriers, are here particularly advantageous.

In an initial qualitative assessment, the best ideas can then be selected, e.g. using checklists or by applying a scoring model (more on the topic of assessing business models in chapter 7). Suitable evaluation criteria for this can be, for example, desirability from the customer's point of view, feasibility, viability, sustainability, scalability and adaptability to a dynamically changing environment.

At the decision point Gate 2 the following question must therefore be answered:

Is the new business model desirable from the customer's perspective, feasible, economical, sustainable, scalable and adaptable?

Chapter 5Protoytyping

During the development of a business model, any change to an element or the choice of a new design option should be tested. It is recommended to formulate an assumption (hypotheses) about the desired effect of this change or design option in the sense of the lean startup approach (see chapter 5.1), to select a suitable test design, to conduct a test with the relevant target group and to learn from these results in order to be able to change course afterwards if necessary. Since the hypotheses to be tested should be available in a visualized, and in the broadest sense tangible, functional way, this is also called prototyping (for more information on what can be understood by the term prototype, see chapter 5.1).

Detailed recommendations for implementing the lean startup approach, which, contrary to its name, is very well suited to existing companies, can be found in chapter 5. This iterative execution of tests with the targeted further development of the company's own business model based on early customer feedback is a very target-oriented concept here.

At the decision point Gate 3 the following question must therefore be answered:

Which design options of the business model can be used, and which must be changed or even discarded?

Chapter 6Creating a Business Plan

If the assumptions of the business model have been confirmed by customer feedback, a business plan can be developed on this basis. If it is the business model of the entire company, it is called a business plan, on the project level it is called a business case. Detailed instructions on how to develop a business plan/business case can be found in chapter 6. The business plan should also include a first draft of the implementation plan. This allows the implementation speeds/risks and expenses to be estimated.

Finally, the business model should be checked again for consistency of the individual elements and optimized if necessary. The positioning in terms of a unique selling proposition (USP) vis-à-vis competing offers should also be clearly identified.

Chapter 7Selection and Decision-Making

The selection of a business model and the decision on its implementation is a far-reaching strategic decision that is the responsibility of top management. It is advisable to clarify already during the above-mentioned initiation who will act as the decision maker, which decision criteria will be applied with which evaluation methods and which information with which level of detail must be available for this. Only if this is defined in advance and communicated to all parties involved (especially the project team for the development of a business model), the selection and decision process can be carried out effectively and efficiently.

In addition to the above mentioned qualitative criteria desirability, feasibility, viability, sustainability, scalability and adaptability for checklist-like evaluation and especially for the analysis of profitability and risk, other methods can also be applied. A variety of suitable evaluation methods are listed in chapter 7. The scoring model (chapter 7.2.3) for comparing different business model alternatives and, above all, net present value calculations (chapter 7.3) for the revenue model are valuable decision-making aids in this context.

In addition to the decision on a business model, a formal decision should also be made on the implementation plan. This plan includes the aspects mentioned in the next section.

At the decision point Gate 4 the following question must therefore be answered:

Which business model is implemented how and when?

Chapter 8Implementation and Monitoring

The implementation plan should include the following aspects:

Implementation plans with deadlines and dates and especially the milestones

Budgeting of the implementation (training costs, building a new infrastructure, etc.)

Selection of qualified (technical as well as social/communicative) team members for the implementation

Determine measures for implementation including the accompanying communication measures and

Definition of responsibilities and tasks during implementation.

Furthermore, the company and environment analysis explained above in phase 2 should be understood as a process step to be carried out permanently. On this basis, it is necessary to observe the trends and developments in the company's environment with continuous monitoring over a longer period of time. The underlying assumptions of the business model have to be questioned regularly in the sense of a premise control. The lean startup approach mentioned above (chapter 5.1) should also be used during implementation to identify the need for change through early feedback.

How success, obstacles and risks in the implementation of the business model can be identified at an early stage must also be clarified in advance. The methods from innovation accounting (see chapter 8.3), e.g. by collecting and analyzing suitable key figures, can be helpful here.

At the decision point Gate 5 the following question must therefore be answered:

Does the business model have to be adapted?

Finally, the business model must be regularly adapted to the dynamically changing environment on the basis of information from monitoring and management control.

Although the above steps from initiation to adaptation of the business model have been explained sequentially for clarity, this process also includes feedback in each phase, as indicated in figure 2. Depending on the company situation (large, existing company vs. small, newly founded company), not all steps are taken in such detail. Nevertheless, this process outlines a level of detail that is appropriate to the importance of the right business model for a company. In the following chapters, these individual steps will be explained in detail.

Gassmann, Oliver/ Frankenberger, Karolin/ Csik, Michaela (2014): The Business Model Navigator: 55 Models That Will Revolutionise Your Business, Financial Times Prent., London/UK.

Osterwalder, Alexander / Pigneur, Yves (2010): Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers, New York: John Wiley & Sons.

Further information is available at:www.innovationsratgeber.de

2

How to Initiate Business Model Innovations

2 How to Initiate Business Model Innovations

2.1 Strategic Planning Approach

2.2 Exploratory Approach

2.2.1 Principles of the Effectuation Approach

2.2.2 How to Proceed

2.3 Initiating Innovation Projects

2How to Initiate Business Model Innovations

"The purest form of madness is to leave everything as it was and hope that something will change at the same time." - Albert Einstein

This chapter shows that the impetus for developing a business model innovation can be very diverse. Internal and external triggers can be found for this. The identification of these triggers can be the result of a systematic strategic-planning approach (chapter 2.1), in which the goals to be pursued for new business models are derived through forecasts and their analysis, and the necessary means for realization are derived from these forecasts. In other words, the necessary resources result from the pursued goal for a business model innovation. This strategic planning approach is outlined in chapter 2.1. On the other hand, it is also possible that the trigger is the (limited) available resources themselves, from which the business model innovation results. This so-called effectuation approach is explained in chapter 2.2.

After the trigger for the revision or new development of the existing business model has been given, an internal project should be initiated by the top management in the sense of a systematic approach. The measures required for this are outlined in chapter 2.3.

2.1 Strategic Planning Approach

The comparison of the existing business model with the (corporate) vision or strategy can be an internal trigger for the insight that there is an urgent need for action to revise the business model. A GAP analysis (see chapter 3.2.1.1) can show, for example, that with the existing business model a (turnover) gap will arise in the course of the next few years, which needs to be closed. To become aware of the strategic importance of business model innovations, it is helpful to think through a so-called do-nothing scenario. This means:

What might happen if we as a company did nothing?

What might the competitor do?

How might the customers react in the long term?

What risks might emerge? What opportunities might be missed?

With this in mind, the existing business model should also be regularly questioned. In other words, a systematic analysis of business model approaches that could substitute the company's own value proposition is necessary, even if this leads to the cannibalization of the company's own "cash cows. This can lead to an early re-allocation of resources from the "cash cows" to build a new business model.

Strategically thinking employees are also a fruitful internal source of inspiration, which may initially seem to affect only an insignificant part of the business model, but then show the need for business model innovation. Strategic thinking in this context means looking in all directions, as the diagram by Mintzberg (2005), the so-called strategy bridge, illustrates, in order to build a bridge from the past into the future.

Figure 3: The Strategy Bridge - Strategic thinking from different perspectives Source: Following Mintzberg (2005) (with adaptions and modifications)

The following different perspectives should be adopted in strategic thinking to look at the existing business model from the past, present and future (Mintzberg (2005)):

Seeing back

Look at the developments in the past:

Which development patterns and competitive reactions from the past are identifiable?What was particularly successful/what led to failures?What can you learn from the past for the design of the business model?

Tips for methods:

GAP analysis (see chapter 3.2.1.1)Benchmarking

Seeing from above

Take a bird's eye view and consider the influence of the overall market, politics and/or the social situation on your existing business model or the typical business models of the industry.

What are the prevailing trends and influences?

Tips for methods:

PESTEL analysis (see chapter 3.1.2)Stakeholder analysis (see chapter 3.1.6)

Seeing from below

Analyze your existing business model in detail:

What are its strengths and weaknesses?What are the core competencies on which the business model is based?How does the value chain work for the customer including the individual processes/activities?

Tips for methods:

Strengths/weaknesses analysisCore competence analysis (see chapter 3.2.1.3)

Seeing beside

Compare your business model with those of similar companies. Look at the (technological and market) developments in similar or different areas.

What can you learn from others (companies, institutions, personalities, etc.) working in similar or even completely different fields?

Tips for methods:

BenchmarkingIndustry structure analysis (see chapter 3.1.5)Competitor analysis

Seeing ahead

Analyze which trends there will be in the coming years.

What changes will take place in the political, economic, social, technological, ecological and legal environment?How will these trends effect your own business activities in the future?What needs or problems do our customers currently have or will they have in the future?Are there any developments that could awaken new demands?Which offers provide currently and in the future direct, indirect or potential new competitors, and how could you differentiate yourself from them?What technological developments are relevant for the company?What interesting applications could result from this?Which technological challenges will have to be solved in the future?

Tips for methods:

Scenario technique (see chapter 3.1.4)Trend-impact analysis (see chapter 3.1.3)

Seeing beyond

What would be a radical innovation in the business model?How could an (alternative) vision for the fUture of your own business model look?

Tips for methods:

Creativity techniques (see chapter 4.2)

Seeing through

Consider also the challenges of implementing a business model innovation.

What (internal/external) barriers/resistance could occur? What risks are associated with the implementation?How can these be identified and eliminated at an early stage?How can successful implementation be monitored and managed? How can the sustainability of the implemented business model innovation be ensured?

Tips for methods:

Stage-Gate Process (see Cooper (2010))Project managementAgile project managementInnovation accounting (see chapter 8.3)

Further questions to be answered in this phase are listed in the following table.

Tabelle 1: Checklist for Initiating Business Model Innovations

Checklist for initiation

■ Where does the company see itself in five to ten years? Is it possible for the company with the current strategy still be successful in five years and more? ■ What significance does the business model have for business development?

■

What is the major significant challenge or urgent problem for a larger number of customers the company wants to solve?

■

What should characterize and shape the company or its innovation activities in the future?

■

What are the goals to be achieved with the business model innovation?

■

What opportunities does a new business model offer? What benefits would be gained from a completely new business model? Which risks could exist?

■

Should the new business model be focused on a product, process or

s

ervice innovation?

■

Which elements or design options should not be changed for strategic reasons (restrictions)?

■

What should the strategy result in?

■

Which restrictions from the point of view of the relevant stakeholders are there for business model development?

■

Which elements of the business model in particular require a rework?

■

Where should the business model focus? (New customer benefits, revenue stream, different way of creating value).

■

Is there a common understanding in the company about the goals of the project?

In addition to the ideas at the strategic level, the innovation projects that have just been initiated or are currently underway, which lead to new products, processes, services or the restructuring of administrative aspects, can make a new business model necessary. This is often the case with radical or disruptive innovations. The identification of obvious weaknesses in the company or a more in-depth analysis of the current and future corporate and environmental situation (see chapter 3.1) can also provide reasons to completely revise the business model and not just make incremental improvements.

External triggers for business model innovations can also come from various sources: Customers, suppliers, dealers, research institutes, universities, consultants/service providers can use their ideas, problems, needs, wishes or tasks to initiate a development process for a new business model.

Frequently encountered in practice is the initiation of such an innovation project as a reaction to a change in the competitive structure or in the largest competitor. Likewise, (abrupt) technological, political-legal, social and societal influences or even natural events can be the cause.

A company should not only react to these impacts, but should, in the sense of a strategic-planning approach, critically reflect on them on an ongoing basis using the methods of corporate and environment analysis (see chapter 3) and the methods of customer orientation (see chapter 4.3) and strive for improvements or substantial changes.

2.2 Exploratory Approach

In situations of high uncertainty and complexity, there is often a limited information base for the strategic planning approach. In such situations, forecasts for future developments and the strategic planning based on them are rather vague in terms of their meaningfulness. In complex situations with little information, explorative (adaptive) approaches, such as the concept of effectuation explained below, can therefore be useful. The starting point is the company's own competencies and resources, which can provide ideas for new business models by asking the following questions:

For which products and services could your own competences, skills or resources be useful?

In which market and technology areas are (similar) competencies important?

2.2.1 Principles of the Effectuation Approach

The effectuation approach is the opposite of the strategic planning approach (see chapter 2.1), in which a specific vision or goals are to be achieved and appropriate measures are derived for this. In the case of the effectuation approach, the achievable goals are derived from the available resources.

In principle, this adaptive approach is possible both on a personal level in connection with a business start-up and in (established) organizations. The approach was originally developed by Sarasvathy (2001). Based on their work (Sarasvathy (2008)), the following explanations of the principles and the approach of effectuation are essentially based on their work:

1Principle of Shaping the Future

The principle of shaping the future expresses that one can abandon forecasts and their detailed analyses because of their uncertain significance and should rather focus on shaping the future itself. That means not to adjust itself - as with the strategic-planning approach (chapter 2.1) - to the future in the best possible way, but as far as the own control capabilities allow it, to arrange the future in its sense actively.

2Principle of Resource Orientation

The principle of resource orientation describes how to develop the objectives from the available resources. The question is therefore: What results (goals) can be achieved with the available resources?

In order to analyze the available resources, the answers to the following questions are necessary first:

Who (identity, values, culture) are we? Who should we become?

What do we know? What can we do? What (resources, knowledge) do we have? What do we particularly well?

Who (business relations, formal/informal/loose contacts and networks) do we know? What resources do they have? How can we use existing customer relationships?

What can we do and achieve with these means and contacts?

If the goal is achieved, what new means will result?

The answers to these questions must always take the context into account: What fits the situation? In which current and future situations are these tools of importance or useful?

3Principle of Affordable Loss

In accordance with the principle of affordable loss, every step of the way one asks oneself in advance what one is prepared to lose, With the classical strategic-planning approach, the question is posed as to what return one can (must) achieve with an action, In uncertain situations, however, this is often nothing more than pure speculation, With the question of the affordable loss, the maximum stake is determined and limited ("up to there and not further"), The maximum stake and thus the affordable losses can take very different forms, such as: time (including lost leisure time), capital, material goods, immaterial goods/ideas, image/reputation, relinquishment of control and scope for decision-making, opportunity costs (what could have been done with the profit instead), personal energy, self-confidence, etc,

The decision logic of this principle is that one decides to invest only as much as one is willing to lose. The following questions must be answered with this principle:

What am I willing to lose? Is it acceptable to lose the stake? What would be the worst consequence that could result from losing the stake? Can we live with the consequences of losing?

If not, how could we reduce the stake?

What can I do under the conditions of affordable loss?

What are the first steps with affordable effort?

This principle often leads to a quicker check of what is not working and thus to a quicker change of the goals pursued, Setting a loss limit in turn means that you actually hold out up to this limit and do not break off prematurely, Ultimately, this principle allows sanction-free failure, so that you can learn from it again,

4Principle of Chance and Circumstances as an Opportunity

In the strategic-planning approach, changes in the environment of a company are basically understood as disruptive events in planning and the company tries to counteract these by means of appropriate risk management, In the effectuation approach, unexpected events, random situations or surprising findings are expected and initially interpreted as an opportunity or gain in knowledge, The question is decidedly asked how such coincidences and circumstances are to be used, This means that opportunities are to be sought to use the changed environmental situations to one's own advantage,

This raises further questions that need to be answered in this context:

What happened unexpectedly?

What alternative meaning can this event have?

What effects do the events have on the available means and goals? Have the means become more or less? Can the goals still be realized? Is a change of priorities necessary?

What other means have been created by chance or by circumstance? Which new goals can be pursued now?

How can we deal with them constructively?

For what other applications/ideas can what has happened be used?

Can weaknesses and risks be used as strengths and opportunities?

5Principle of Partnerships

The effectuation approach recommends entering into binding agreements with interested partners (friends, acquaintances, (other) companies, potential suppliers, customers, opinion leaders, experts, research institutions, etc.) at an early stage. In contrast to the strategic-planning approach, no systematic search for the supposedly perfect cooperation partner should be attempted here. Rather, discussions should first be held with potential partners who are willing to contribute their resources to a cooperation. The concrete goal of the agreement will only be worked out in dialogue with the partner. In this way, a network of agreements with cooperation partners is to be created quickly, which can expand the means and possibilities for further action and at the same time give direction to the (common) goal. Through partnerships, the competencies but also the affordable losses can be increased significantly.

The following questions can be asked in preparation for a partnership:

Who (in the company) knows whom (in another company)?

Who might be interested and willing to develop the project/idea with us?

Who wants to participate and contributes their own resources?

What does the potential partner have that we do not have? What resources can both use?

What distinguishes the potential partners from each other? How could differences be overcome?

What would you like to convince your partner of in a dialog? In which direction do their common ideas point?

What benefits does the partner derive from the contact?

What resources could both use together?

Which win-win situation could be realized in a cooperation? Where could the joint activities lead to?

How could the partners jointly create something new and reduce uncertainty?

How can we offer our partner a guarantee for success? How can we reduce risk and effort (affordable loss) for others?

How could we proceed to build trust step by step?

How could the agreements be designed to enable commitment and flexibility and at the same time build trust?

2.2.2 How to Proceed

The above mentioned principles can be embedded in a process that has to be carried out iteratively, as shown in the following figure. The process starts with the resource analysis. Here the available resources (see above) have to be considered and the questions have to be answered in which contexts they could (still) be useful and what results can be achieved. The above mentioned principle of resource orientation is to be applied here. Next, action can be used to gain new information and create facts that will shape the future. In doing so, it should be possible to make things manageable (which small step will take us further?). These manageable steps should leave plenty of room for further decisions.

Further questions are here:

What could you start with immediately? What would be the first step?

Which of our experiences etc. can we use here and now?

Partners with whom something can be set up together should be sought quickly.

Who can we approach and involve in the project? Whom can we join?

Who is willing to get involved in the project?

These partnerships enable new resources and opportunities and result in (new) common goals. In the sense of the above-mentioned principle of chances and circumstances, changes in the environment are ultimately to be perceived as opportunities. These in turn can change the available resources and the goals pursued.

Figure 4: Effectuation approach Source: Based on Sarasvathy/Dew (2008)

The effectuation approach is no replacement for the strategic-planning approach. Rather, this concept can be useful in an early innovation phase when developing business models, As soon as more information about the innovation context (technology potentials, market developments, environmental changes, etc,) is available, methods of the strategic-planning approach can be applied, The two approaches thus complement each other, Likewise, the effectuation approach can be used primarily to implement quick decisions, which are then causally justified in individual cases, It is important to remember that this adaptive approach is only possible if there is an actual freedom of decision,

2.3 Initiating Innovation Projects

Once the initiative for the revision or new development of the existing business model has been given, an internal project is best initiated by top management, This is the official start of the actual innovation process, I deally, the initiation of the project should generate a willingness to change within the company,

The first step is to define the goals of the project. A clear definition of the goals is a necessary condition for the success of an innovation project. A project goal therefore always describes a (desired/planned) state at the end of the project. A clear and realistic definition of the project goal should be part of the project assignment. It should be ensured that the solution path is not predetermined. With business model innovations the strategic innovation goals of a company can be implemented.

To create a new or increased customer value and thus increase customer loyalty or address new customer segments, create or improve competitive advantages, differentiate more clearly from the competition and make imitation more difficult, as well as develop new sources of revenue and/or achieve an improved cost structure. In the sense of a clear goal formation, possible guidelines are also to be defined here. This also includes a precise description of the restrictions to be observed.

This procedure can thus certainly represent the delimitation of the search field or definition of the elements of the business model (see chapter 4.4), which may not be changed or only within a certain framework. Although these specifications can severely restrict creativity, they ensure strategy conformity (see below) and feasibility. Nevertheless, such guidelines should be well justified and critically questioned in advance. Breaking through conventions in particular can have a lot of creative potental.

Once the goals have been roughly defined, an interdisciplinary project team should be put together. Since business model innovations affect all functions, the persons in charge here from research, development, production, marketing, sales, accounting and other service units (e.g. legal/patent department, quality management, etc.) should be involved. The core team should not comprise more than five to nine people. Furthermore, the time and cost budget of the project as well as the reporting and communication channels must be clarified.

Finally, the implementation phase focuses on the concrete implementation of the strategies at project level. This includes clarifying the allocation of resources and responsibilities in order to deploy financial and human resources in accordance with the strategy (strategy conformity). Alternatively, the projects for planning, development and implementation of business model innovations can also be carried out according to the principles of agile project management.

3

How to Analyze the Business Situation

3 How to Analyze the Business Situation

3.1 Environment Analysis

3.1.1 Trend Analysis

3.1.2 PESTEL Analysis

3.1.3 Trend Impact Analysis

3.1.4 Scenario Technique

3.1.5 Industry Structure Analysis

3.1.6 Stakeholder Analysis

3.2 Company Analysis

3.2.1 GAP Analysis

3.2.2 Value Chain Analysis and Process Analysis

3.2.3 Core Competencies

3.3 Holistic Analysis Methods

3.3.1 Portfolio Analysis

3.3.2 SWOT Analysis

3How to Analyze the Business Situation

"Every act of creation is first of all an act of destruction. “

- Pablo Picasso

After initiating the development of a business model innovation and setting up a corresponding project, the next step is to conduct a more in-depth analysis of the current situation and future developments and trends, both within the company and in its environment. Within the framework of the strategic analysis and prognoses, information about the strengths and weaknesses of the company (company analysis) as well as the opportunities and risks from the environment (environment analysis) must be prepared. In this context, some of the questions to be answered are summarized in the following table.

Tabelle 2: Checklist for company/environment analysis

Checklist

■ What will happen if we don't change our business model?

■ What has made the previous business model successful? What customer benefits are generated? Are profits made with it?

■ What are the indications for checking the effectiveness of the business model?

■ Who are the relevant stakeholders of the current business model?

■ Which trends impact our current business model most?

■ Which technologies impact our business model the most?

■ Which legal framework will/could change?

■ What alternatives for business models exist today and in the future?

■ Who are the main competitors? What developments in the business model are the competitors facing? Have competitors revised their business model (or parts thereof)? In which parts is the competitors' business model different? How successful is it? Why was it changed?

■ What are the barriers to market entry? Which market entry barriers can we create?

In the next two sections, these questions are addressed and recommendations for conducting an environment (chapter 3.1) and company analysis (chapter 3.2) are given. The methods listed in the table below can be used for this purpose.

Table 3: Methods for company/environment analysis

Environment Analysis

Company Analysis

Trend Analysis

chapter 3.1.1

Value Chain and Process Analysis

chapter 3.2.2

PESTEL Analysis

chapter 3.1.2

GAP Analysis

chapter 3.2.1

Trend-Impact Analysis

chapter 3.1.3

Core Competencies Analysis

chapter 3.2.3

Scenario Technique

chapter 3.1.4

Industry Structure Analysis

chapter 3.1.5

Integrated Methods

Stakeholder Analysis

chapter 3.1.6

Portfolio Analysis

chapter 3.3.1

SWOT Analysis

chapter 3.3.2

3.1 Environment Analysis

There are two fundamental questions connected with the analysis of the environment:

To what extent can you forecast situations/events of the environment?

To what extent do you know about the situation/events in the environment of the company?

The challenges posed by the answers to these questions can be summarized with the acronym VUCA, which stands for Volatility, Uncertainty, Complexity and Ambiguity.

As explained below, in response to these VUCA challenges of the environment, corresponding VUCA actions can be derived for the company, which should stand for Vision, Understanding, Clarity/Concentration and Agility/Adaptation. The following figure shows that the VUCA challenges are interrelated in many ways and require different actions.

Figure 5: VUCA-challenges vs. VUCA-actions

Volatility

:

This describes the change in variability or the speed and extent to which the environmental conditions alter. Sudden and unexpected changes of uncertain duration require agile and adaptive responses (agility/adaptation). In addition, a reliable vision is required (see chapter 2.1), which reminds you constantly of the core of your own actions during these fluctuations (why do we do this at all in this volatile world?).

Uncertainty

:

Uncertain situations, in which the causal relationships become unclear, lead to a decrease in the predictability of events. In order to increase comprehension in this uncertain world, information about the environmental conditions must be collected, analyzed and evaluated (understanding). A vision can provide orientation beyond and in this uncertain world.

Complexity

:

There are numerous environmental factors that can have a direct or indirect impact on the company (see following chapters). These factors interact with each other in many different ways and change dynamically. It is therefore important to first understand this complexity (understanding) or gain clarity about it and then concentrate on a few factors (concentration).

Ambiguity

:

Information about the environment is increasingly ambiguous or contradictory, making the environment incomprehensible and difficult to interpret. The number of alternative options is therefore increasing enormously. Understanding these contradictions and alternatives by collecting, analyzing and evaluating information is a first step. Then clarity must be achieved about what you actually want or what you want to focus on (concentration). After the "What?" has been clarified, the "How?" must be clarified. An agile, adaptive approach (agility/adaptation), as presented in chapter 5.1 on the