Innovation in Business – Identify Business Model Innovation Strategies

In today’s global business environment, the idea of achieving a “win-win” results-oriented working relationship with all concerned is becoming more common. To sum up, a successful business operation relies on the ability to reach out and communicate a clear message to the target audience in a way that creates a positive response. This process is achieved through the consistent application of best business practices by the business organization. One of the most important aspects of this communication process is called the “effectiveness” of the communication which, in simple terms, refers to the level of satisfaction with which the target audience responds to the message. The effectiveness of communication in reaching the target audience and creating a positive response can be measured either directly or indirectly.


One such dimension measured

in terms of effectiveness is called the Business Impact Factor (BIF). The BIF is measured as the average difference between the perceived value of a good or service offered by another business model and that offered by the competitor. The higher the BIF, the more successful the competitor’s business plan is likely to be. One can also measure the BIF by using a range of standard performance indicators including profitability, customer satisfaction, return on investment, and the number of new customers. These indicators are a powerful tool for measuring the efficiency of a business plan, thus a business plan should be customized to meet the specific needs of a particular company.


A second dimension measured

in terms of effectiveness is called the gross profit margin. This is closely related to the BIF, the higher the gross profit margin, the more successful the competitor’s business plan is likely to be. The key to achieving the maximum level of profitability in any business model is the ability to continually differentiate one business model from another based primarily on market definitions, product features, and/or service offerings. Many businesses will choose to focus their attention on market segments and sub-segments in which they have experience, knowledge, and competitive advantage. By identifying the profit margin associated with one model (e.g., the high-end coffee house) the company can then focus its marketing efforts on this market segment to attract and expand its customer base.


Identifying and analyzing

the sourcing opportunities provided by various business models will further contribute to identifying the success or failure of the business strategy. In addition, developing sourcing networks based on core competence areas will help businesses to effectively source capabilities required to build, test, and deliver products or services that enhance competitive positioning. Another aspect of sourcing that has been identified as being vital to business model innovation is outsourcing. Outsourcing allows companies to contract with service providers who have expertise in specific business models.


There are many types of business models

used in modern organizations. However, the five million dollar figure cited earlier is a conservative estimate of the value of business plans and the value of business models today. Business plans and business models become more valuable as their applications and scope increase. As an example, the gross profit margin obtained when selling widgets would not be the same as the gross profit margin obtained when selling complex automotive software.


The correct way to approach

the design theme in a business plan is to identify what type of services or products will make money. A business model will typically identify multiple business models that will support its growth. These models can include revenue streams, cost models, or business design themes.

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