Innovation is a key determinant of economic growth.
Innovate UK is a central to the UK innovation ecosystem, and performs a key role by working with businesses to de-risk, enable and support innovation.
In a recent Innovate UK blog about outcomes and connections, Kevin Baughan rightly noted that ‘everyone has a different definition for innovation’ but for many businesses, innovation is still regarded as all about things and widgets.
Whether a product, process or service, the offering is often the focus of businesses looking to innovate.
However, delivering innovation-led economic growth is about more than new and improved widgets and things. It is about doing something new to create value.
The right business model at the right time
For many businesses, the question of transformative growth is not just about having a business model, but the right business model at the right time.
In the case of innovative firms developing new products, processes and services, this can mean thinking about the business model earlier in the process as opposed to an afterthought.
Since business models are concerned with how businesses make money, they are often seen as a given. As such, for many businesses the concept of business model innovation can appear an alien concept, potentially disrupting established revenue streams.
However, the survival of firms is likely to become increasingly reliant on their ability to identify and sustain a competitive advantage in terms of the business model. In the majority of cases this will demand some degree of business model innovation.
Essentially this means establishing and identifying new ways of working to unlock value through the business model, as opposed to focusing on the development of new products, processes or services.
Business model innovation
Like other forms of innovation, business model innovation involves a degree of experimentation and is therefore not without risks.
New businesses entering a market are typically well placed to engage in business model innovation with a view to disrupt establish markets.
Recent high profile examples include Halo, Air BnB, and Deliveroo - while older, established firms can often struggle to identify opportunities to innovate the business model.
That said, the success of large businesses such as ARM and Apple is as much to do with their innovative business models as it is their innovative products!
In order to achieve this, the first challenge is raising awareness about the benefits of business model innovation and what benefits it brings, highlighting that it is not just what you do, it is increasingly about how you do it!
Innovation Caucus – a tool to help with business model innovation
In conjunction with Innovate UK, the Innovation Caucus has been working to develop a tool to get businesses thinking about their business model and business model innovation.
The tool considers innovation in terms of how to improve the performance of products, processes and services. It also encourages businesses to think about other dimensions of the business model.
The tool, developed by Prof Irene Ng, Prof Tim Vorley and Dr Chay Brooks of the Innovation Caucus, will be available online late autumn, and aims to encourage owners and manager to think about the building blocks of their business, for example:
- profit model
- channels to market
- interactions with customers
Do you define innovation broadly enough?
These aspects of the business are crucial to business model innovation. Challenging the accepted way of doing business is difficult, especially for business owners and managers. Although, it is increasingly important in order to remain competitive and grow in fast-changing business environment.
So while everyone will have a different definition of innovation, the question to think about is whether you define innovation broadly enough.
Don’t just think in terms of things and widgets. After all, if innovation is often in the eye of the beholder, more than ever businesses need to make sure they are looking at the right things.
So business model innovation provides an opportunity to create more value and stay ahead of the game.
Follow Dan Hodges on Twitter: @EconDanH
Follow Tim Vorley on Twitter: @timvorley
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