I found reading this short interview on business model innovation with Clayton Christensen, the renowned Harvard professor and author, quite worthwhile. He offers some trenchant advice on business model innovation. Even more important: It shows how hot the topic currently is. I saw Christensen speak at a conference a few years ago and he certainly isn’t a person who jumps on a topic just because of the buzz.
The most interesting part is Christensen’s answer to the question if the creation of new business models are substantially different from the innovation of new products or services. His answer:
Yes. Most new products and technologies can be sold through the existing business models. In fact, the corporation will reject process or resource allocations that don’t fit its business model.A powerful reason why companies aren’t good at business-model innovation is because the kind of products that are required to be the seed of a new model can’t get through the resource allocation process.
This is food for thought, particularly for successfull companies…
Alex,
I am a great fan of Christensen. However, i think this particular assertion of Christensen is incorrect. I think implementing new business models is a change management challenge and organizations must rise up to the challenge and execute. Companies that have taken up Christensen’s advice and started spinoffs to overcome the RVP problem have failed or have had to pull the spin-off back in -Barnes & Nobles.com, eGM, Walmart.com, Infosys’s Progeon, and many others. Yes, change management is a big problem but without it, you cannot leverage the company’s existing strengths and you are putting the new business model at severe risk of failure.
Thanks
Sukumar
http://sastwingees.blogharbor.com/blog
Sukumar,
I think you, as well as Christensen are right. It really depends on the situation. In some cases it’s about change management and transforming from a company’s old out-dated business model to a new competitive one. In other cases it’s about seeding new innovative business models outside one’s current operations to be prepared for the future…
It’s all about context. Cheers, A
i think in this respect, Vijay Govindarajan’s and Chris Trimble’s Borrow-Forget-Learn adagium could be very useful: the most important decision in strategic innovation is: What strengths do i need to borrow from the existing body? Assets/Strengths that don’t give the innovative unit a lasting competitive advantage over a fully independent start-up should not be borrowed. As you say, Alex, this decision really depends on the situation.
http://mba.tuck.dartmouth.edu/pages/faculty/vg.govindarajan/
http://mba.tuck.dartmouth.edu/pages/faculty/chris.trimble/