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Business Model Innovation and Change

Alexander Osterwalder

I have come up with an additional graphical representation of business model innovation after some more reflection and after my last posting on the business model innovation cycle. This graph illustrates the change (y-axis) and time (x-axis) required to move from a given existing business model at time t0 towards a selected new future business model, chosen from a set of 4 different generated business model prototypes (selected from the "business model innovation cloud"). The new business model is expected to be implemented at time t3...

x-axis: degree of change

If your company functions according to a particular business model and wants to move towards a new business model, you can choose between more or less radical options. For example, the toy company Lego introduced "Lego Factory", a tool that lets users design, upload, and purchase their own unique Lego creations on the company's website.

This represents a nice innovation of their existing business model, but (surprisingly) did not require too much change. According to Michael McNally, Lego's senior brand-relations manager this was just a matter of rejiggering their fulfillment process and their packing process (read about Lego at Wired and at Fast Company).

An example of a big change in terms of business model innovation would be if Sony Music Entertainment moved from their traditional model of music discovery and distribution towards a pure online model à la

y-axis: implementation time

Business Model innovation and change takes time. A certain amount of time is required to change the structures, processes, mindsets, and systems of a company in order to make a new business model work and thrive.

In other words, if your company wants to move towards a new business model it will take time from the moment you chose a new business model design until the whole thing is actually operational.

This time necessary to move from an existing business model towards a new one depends on the degree of change, but also on many other factors such as the availability of financial & human resources, willingness to change, organizational culture, etc. This is why a radical business model change does not imperatively take more time than a modest business model change.

It all depends on the context. In an innovative company, culture change management will be much easier than in a change resistant culture. These are all factors that must be considered during the selection of new business models from a set of possible business model scenarios.

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