How to discover and assess opportunities for business model innovation

Abstract

Purpose – The author explains that changing both the company’s offerings and its organization exponentially increases the complexity and uncertainty of any new undertaking, which is why business model innovation is both so difficult and, when successful, so hard for competitors to respond to. Design/methodology/approach – The example of how SolarCity introduced a new business model in 2008 designed around third-party ownership illustrates many of the steps Solar-City took to redesign their offering as well as the capabilities to deliver it. Findings – Design teams often build prototypes of new products and test their performance or test their appeal to users. It is much more difficult to design and test a novel financial model and more difficult still to sell that design to a company’s leadership and its investors or lenders. Practical implications – Rather than dive into details of the product development, organizational design or financials, the innovation team should rank order the largest sources of the project’s uncertainties and focus on identifying any fatal flaws before much time and money are spent. Originality/value – A new business model should not be the initial goal but the by-product of a process that focuses on maximizing the long-term value you provide to your customers.