Using Business Model Innovation to Reinvent the Core

Using Business Model Innovation to Reinvent the Core

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Using Business Model Innovation to Reinvent the Core

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    The BMI Opportunity: Same Goal, Different Results

    The key advantage of BMI over traditional growth levers is that it affords businesses greater degrees of freedom. It can create more value because an orchestrated set of changes across the value proposition and business model can create a new basis of advantage that is harder for rivals to match.

    The traditional tools, including product innovation and pricing strategy, typically involve changes to one, or perhaps two, dimensions of a business. With a new product, the manufacturing process may change; with a price discount, there may be a new way to communicate with the customer. By contrast, BMI involves changes to a much broader set of dimensions. We have broken these down into six key business-model elements. Three define the value proposition: product or service offering, target segment, and revenue model. Three define the operating model: value chain, organization, and cost model.

    The ability to change multiple elements simultaneously—and in a coordinated manner—is what allows BMI to do the work of traditional growth levers but avoid the pitfalls.

    Consider the chasing-volume pitfall. Rather than just reducing the price, companies could also redefine their offering (such as a simplified product with cheaper materials), build a new cost model (such as greater automation and outsourcing), or fundamentally change the revenue model (such as a shift from one-time purchases to smaller, ongoing fees). Or they could do some combination of all three. By using this essence of BMI, we have developed nine particularly high-impact BMI solutions for avoiding typical growth-strategy pitfalls. (See Exhibit 2.) These solutions, and the examples we provide to illustrate them, can lead to a fundamentally new business model.