Oct 01, 2021

Business Model Innovation Methods to Remain Competitive

Business Model Innovation
by Maximilian Böger

Innovation is an essential aspect of generating a profitable product or service in today's economy. The most successful companies provide new solutions that set them apart from competitors in their industry. While groundbreaking ideas are critical components of new business models, companies can also develop operational systems that add value proposition to consumers. In this article, we will include:

  • Business model innovation methods to develop a new product or service

  • Methods that help optimize operational systems

  • Provide business model innovation examples from successful companies

What is Business Model Innovation?

Business model innovation is the process of creating value for consumers while remaining profitable.

Companies offering a new solution or technology to an existing problem aren't guaranteed monetary success simply because they are innovating a market through their product. Other challenges include:

  • Choosing a target market

  • Structuring a cost model

  • Organizational configurations that need to be included in the business model

Constructing a new business model requires an added value proposition to consumers in the form of a product or service, how it is delivered, or both.

Business model innovation isn't always defined as rolling out a revolutionary product; McDonald's created an entirely new industry by innovating how American food is cooked, purchased, and consumed. The business processes rather than the actual product are how the fast-food corporation became one of the most successful restaurants ever.

Improving the Value Proposition with New Products

The value proposition to the consumer should be the central focus point of the business model. If the company is offering a new product or service to the market, the solution's benefits should be communicated in the marketing campaign and through effective branding strategies.

A new business model offering a value proposition to a target market in a product or service uses intellectual capital to generate sales. When the value is evident and clearly communicated to the consumer, returns will follow. However, creating an ground-breaking product is less common than perfecting production, distribution, or cost structure.

Below are methods successful entrepreneurs use to bring forward new ideas for a product or service.

The Challenges of Product Innovation

An innovative product can be a completely new idea in the market or an improvement on existing solutions. Unfortunately, there isn't a magic formula that will lead to new, profitable ideas with apparent demand in a market; however, business leaders can put themselves and their team in an ecosystem that breeds innovation.

  1. Keeping an open mind to new ideas – Continuing to learn, grow, and accept new ideas is key to deploying transformative products with the potential to innovate industries.

  2. Being persuadable – Accepting disruptive ideas is difficult but necessary to develop a breakout product.

  3. Hiring a diverse team – An ideologically diverse group is essential in creating new or revolutionizing products. Adverse opinions and mindsets can lead to new ideas and encourage an innovative environment.

The Blue Ocean Strategy

SaaS (Software as a Service) and technology solutions thrive off innovation. While many companies generate profits from creating a better UI or customer experience, we are amid a global digitalization period with disruptive ideas shaping the future.

The Blue Ocean Method helps identify profitability opportunities in a market through analysis of current offers. Finding a "blue ocean" and staying away from a competitive "red ocean" is the goal of the methodology. Blockchain is an excellent example of an industry with incredible potential with highly competitive sectors. The Blue Ocean method suggests staying away from oversaturated spaces, like crypto and NFTs, and looking for underserved areas where innovation is possible.

Constructing a new business model with the Blue Ocean Method involves finding a new market rather than fighting over existing ones. The business model will rely heavily on the novel product or service rather than optimizing the execution of an existing idea.

Delivering the Value Proposition Operationally

Industries with high failure rates like restaurants lean on operational value propositions to generate growth. Even before the COVID-19 pandemic, the National Restaurant Association estimated that 1 in 3 restaurants wouldn't survive their first year.

During the lockdowns, restaurants that survived could adapt operationally and accommodate the increased demand for food delivery and takeout. They had to adjust their menus to dishes that would travel well and retain quality for extended periods. Restaurants that excelled also optimized their food delivery pick-up areas to increase output and streamline the new dependence on 3rd party delivery workers from apps like Uber Eats and Doordash.

In hindsight, these changes are apparent, but many restaurants failed to adapt in the first months of the pandemic. Utilizing business model innovation methods can help operators identify areas of improvement when facing adversity.

Process Innovation Using Six Sigma

A popular method that helps identify inefficiencies in a market is known as Six Sigma or Sigma DMAIC.

The five data-driven steps are outlined below:

  1. Define – Identify all relevant information about the business processes.

  2. Measure – Indicate the current process and use data to measure their capability baseline.

  3. Analyze – With the data collected in the measure phase, identify root causes of the deficiencies.

  4. Improve – A strategy is formulated to target the root problem and pass the value on to the consumer.

  5. Control – Successfully implementing the plan.

Countless companies utilize the Six Sigma methodology to create new ideas that increase efficiency. Amazon uses the method to streamline operations and reduce waste. Restaurant owners took the time to define, measure, and analyze challenges created when government agencies limited or banned dining.

Solutions to Drive Profitability

Companies introducing a new product or service to market must create or adjust existing operations to accommodate innovation. Communication and marketing are critical aspects of the new business model. In some cases, the market must be educated before realizing the value proposition.

For example, the CBD industry is faced with messaging issues because most of their consumer base that can benefit from CBD are unfamiliar with cannabis products. Education is needed to reach older consumers dealing with pain which could take advantage of a non-intoxicating solution.

Reeducation can be a nightmare for startups; many investors avoid new business models that require informing the market of a problem rather than solely providing a solution. However, companies that can successfully tap into new solutions and overcome the challenges of educating consumers can experience incredible growth. Forbes reports that the CBD industry is expected to exceed $19.5 billion in the US alone, with a compounded annual growth rate of 37%.

Why business model innovation is the new competitive advantage?

Improving operational practices is necessary to stay competitive in an ever-changing economy. Companies can add value to their products is by changing the materials they use. Offering more premium or environmentally friendly components to their existing products can add to their value proposition.

Before 2013, Adidas was quickly losing market share to Nike. The company's implementation of its Boost technology in the soles of its trainers created excitement with consumers. Adidas' adjustment attracted new sponsorships from professional athletes and entertainers. Today, each footwear giant's stock price is sitting at about $160.

A sudden, significant adjustment in materials also can create challenges. Adidas struggled to keep up with demand because they couldn't source enough thermoplastic urethane to produce their proprietary polymer. Implementing major changes requires long-range planning and adjustments to operations. Adidas may not have been fully prepared for the increase in demand, but the decision to incorporate new materials provided new growth that kept the company competitive long term.

Examples of Business Models

Learning from existing business model design is an excellent strategy to help develop new ideas and make operational adjustments to drive profits. We've provided three examples below from influential companies that have experienced success through inventive ideas.

Nintendo Wii

The video game console market is dominated by three companies, Sony, Microsoft, and Nintendo. While Xbox and PlayStation consoles are virtually the same product, running most of the same games and priced over $500, the Wii brings a separate value proposition.

Instead of providing another high-priced console alternative, Nintendo used an Aikido business model pattern to carve out their own market section. Aikido is a Japanese martial arts technique that utilizes the attacker's power against them. The Wii is a far less expensive product and features classic Nintendo games offering an opposed image and mindset from the competition.

Nintendo Wii Business Model


Twitch is a social platform initially developed for video game live streamers. Today, Twitch is the go-to digital destination for Generation Z and has expanded beyond gaming into topics like politics, movies, and music. The innovations created by the developers have introduced added value to an audience that requires a more stimulating experience than traditional social networks like Facebook and Snapchat.

The live chat feature in Twitch allows the audience to become part of the product. Streamers regularly interact with their audience or 'Chat,' creating a relationship between the view and content creator.

Twitch Business Model Analyzes


The NYC skateboard clothing store has gained global recognition in fashion by creating a new business model that helped birth hype culture. Supreme chooses to release a limited amount of clothes every time they introduce a new line, creating demand for supply that doesn't exist. While Supreme clothes aren't overly expensive initially, the inventory is bought up by resellers and sold for up to 100x on resell websites like StockX and GOAT.

Today, brands like Nike, New Balance, and even GAP release a limited supply of hyped products to generate buzz, brand awareness, and FOMO (fear of missing out). There is an entire industry based on buying and selling products that have limited supply runs.

Developing A Unique Business Model Innovation Strategy

Incorporating new ideas into a business model is challenging. Whether you are introducing an original product to market, improving an existing service, or improving your operational systems, success is dependent on research and adequate planning.

Is Innovation Efficient? No! Do I have to be innovative to be successful? No!

The famous Simon Sinek correctly said in the interview below: '...you don't have to be innovative! There is nothing wrong with it to take somebody's innovation or idea and implement it in to your firm!'

That's why we have created Business Model Ideas. To inspire you, your team members and your organisation with the best business model examples and business model patterns of this planet! Did you know that 95% of the business models worldwide are a recombination of existing 108 business model patterns? No? Sign in for free and check it out!

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Our Database of Business Model Innovation Examples

For more business model examples and information on business innovation, check out our database of examples. We feature over 150 business models from the most successful companies around the world. Learning from successful models is one of the best strategies to implement new ideas and improve existing business systems. We analyze successful companies and deliver them in one convenient place perfect for entrepreneurs, intrapreneurs, bootstrappers, strategies, and investors.

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