‘Business model innovation can empower organizations to transform existing markets, create new ones or recast whole industries’ (Johnson, 2010: 20). As Casedusus-Masanel and Ricart (2010: 195) put it, companies believe in the need to innovate business models ‘in order to compete differently’.
Sparrow et al (2010: 6) argued that ‘Organizations are using business models to articulate what they consider must be the dominant performance logic inherent in their strategy’.
An analysis of an IBM survey of 765 corporate leaders by Pohle and Chapman (2006) came to the following conclusions.
Source review Views of CEOs on business model innovation – Pohle and Chapman (2006: 35)
Because businesses are so often defined in terms of the products and services they take to market, their leaders have traditionally focused innovative energy there. But with technological advances and globalization presenting so many new opportunities – and threats – CEOs are looking to business model innovation to create sustainable competitive advantage and differentiation for them in their marketplaces. In fact, according to CEOs, business model innovation is now on par with innovation in operations and nearly as important as innovation around products and services.
They also found that:
Cost reduction and strategic flexibility were considered top benefits from business model innovation – reported by over half of all business model innovators. Business model innovation allows companies to specialize and move more quickly to seize growth opportunities as they emerge. Overall, CEOs’ rankings suggest that business model innovation is helping their organizations become more nimble and responsive, while, at the same time, lowering costs (ibid: 38).
Chesbrough (2010: 356) confirmed that: ‘A company has at least as much value to gain from developing an innovative new business model as from developing an innovative new technology’. The Economist (2007: 7) also noted that: ‘Business model innovation is far more radical than conventional product or process innovation. Globalisation and the spread of IT allow the creation of unexpected and disruptive business models.’