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Four Approaches to Business Model Innovation

Companies hoping to drive growth through business model innovation face a number of critical questions: How broad should the scope of the effort be? What’s the appropriate level of risk to take? Is it a one-time exercise, or does it call for an ongoing capability?

To answer those questions, it’s important to realize that not all business model innovation efforts are alike. Understanding four distinct approaches can help executives make effective choices in designing the path to growth.

  1. The reinventor approach is deployed in response to a fundamental industry challenge, such as commoditization or new regulation, in which a business model is deteriorating slowly and growth prospects are uncertain. In this situation, the company must reinvent its customer-value proposition and realign its operations to profitably deliver on this new proposition.
  2. The adapter approach is used when the current core business, even if reinvented, is unlikely to combat fundamental disruption. Adapters explore adjacent businesses or markets, in some cases exiting their core business entirely. Adapters must build an innovation engine to persistently drive experimentation to find a successful “new core” space with the right business model.
  3. The maverick approach deploys business model innovation to scale up a potentially more successful core business. Mavericks—which can be either start-ups or insurgent established companies—employ their core advantage to revolutionize their industry and set new standards. This requires the ability to continually evolve the competitive edge or advantage of the business to drive growth.
  4. The adventurer approach aggressively expands the footprint of a business by exploring or venturing into new or adjacent territories. This approach requires understanding the company’s competitive advantage and placing careful bets on novel applications of that advantage in order to succeed in new markets.
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