INNOVATION
Are You Innovating
Your Business Model?
By Senorine Wasike
B
usiness
models
define
how
companies create and deliver value
to their customers. A well-defined
business model gives innovation the
ability to create value for the customer and
capture value for the firm. Business Model
Innovation (BMI) enables a business
to differentiate itself and makes it hard
for other firms to imitate its product or
service offering.
BMI can range from incremental
changes in individual components of
business models, the extension of the
existing business model, introduction of
parallel business models, right through
to disruption of the business model,
which may potentially entail replacing
the existing model with a fundamentally
different one.
Unlike product, service or process
innovation, business model innovation
offers companies the best chance of
delivering disruptive innovation.
Disruptive innovations create new markets
or transform existing ones by offering
simplicity, accessibility, and affordability.
Companies that compete with disruptive
innovation increase their innovation
success rate by up to six times compared
to sustaining innovation strategies.
This article discusses various case studies
of businesses that have innovated their
business models enabling them to deliver
disruptive innovations that have shaken
up the industries within which they play.
Some have succeeded in outcompeting
large and strong incumbents.
Unlike product, service or process inno-
vation, business model innovation offers
companies the best chance of delivering
disruptive innovation. Disruptive inno-
vations create new markets or transform
existing ones by offering simplicity, ac-
cessibility, and affordability. Companies
that compete with disruptive innovation
increase their innovation success rate by
up to six times compared to sustaining
innovation strategies.
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Airbnb
According to the World Trade
Organization (WTO), 1.3 billion
people traveled across the globe by 2017
generating trillions of dollars in revenue.
A bulk of this revenue was in the form of
accommodation fees from travelers. By
2018, Airbnb had rented out 4 million
rooms compared to the sum total of the
top four largest hotel chains in the world.
Marriott, Intercontinental Group, Hilton
and Wyndham all combined accounted
for 3.3 million rooms in the same year.
Through its innovative business model,
Airbnb created a platform for travelers
and homeowners in a way that benefitted
both. Airbnb saw the need to make use
of underutilized resources, in this case,
rooms in people's homes or houses. By
investing in technology, Airbnb created
a platform for owners of the resources to
make money.
In just over a decade, Airbnb is now
available in 190 countries and 81,000
cities reserving over 300 million rooms
annually. The key benefits as a result of
Airbnb's success include the creation of
entrepreneurs in the tourism sector, making
travel affordable and offering consumers
a wider choice of accommodation types
while traveling.
Netflix
Blockbuster was the go-to at-home
entertainment before Netflix. At the
inception of Netflix, the firm looked to
deliver services to the consumers using