Innovation is critical to continued success for any company. Without continuous innovation of products and services, businesses fall behind the competition and drive away customers looking for fresh new experiences and products.
Generally, companies pursue two types of innovation. These include:
Product Innovation
This type of innovation is most familiar to everyone. It means new products, new services, or new iterations of existing products from a recognized brand.
Process Innovation
Process innovation is more internal. Here, companies find new ways of producing goods with improved OEM equipment, IoT connectivity, factory layout, or task management that improves efficiency and reduces costs.
Business Model Innovation
But there is a third type of innovation that businesses can use, one that highlights the fact that innovation isn’t just about new iterations of existing products and services or improved efficiencies. This type of innovation consists of the introduction of entirely new business models.
This innovation was recently highlighted by the extreme disruption presented by the COVID-19 pandemic, where overnight, many companies had to innovate their business model to survive. Companies that had built substantial or exclusive value streams centered on in-person experience suddenly had to innovate to find ways to survive.
One example of this was Airbnb, which had built its success on allowing apartments and homeowners to rent out space to travelers. When the pandemic hit, Airbnb began offering paid, virtual experiences and guided tours through their website.
This type of innovation found its way into fields like medicine that COVID-19 impacted. It allowed a way to handle the opposite problem of Airbnb, a deluge of patients. The rise of telemedical visits became a vital way to keep in touch with and care for patients with COVID and non-COVID-related issues who could either not travel or were hesitant to travel to an already overcrowded medical office.
There were many examples of how disruption forced business model innovation in the last year. But it is also common to innovate new business models either accidentally or through planning and taking advantage of new technology or ideas.
Types of Business Model Innovation
There are numerous ways to arrive at an innovative business model. These include:
1. Reinvention
Many companies can reinvent themselves with a new product line completely separate from their core product. One great example is Apple, which had built a highly successful brand with fierce loyalty with computer products. By introducing the iPhone, Apple created a new business model. They also entered a new industry segment and carved out an equally loyal following with its closed source app store ecosystem for the new product. This was at a time when the rest of the world was jumping onto the open-source bandwagon. Apple was able to change its value proposition and reinvent itself as an electronics producer beyond computers.
2. Adapting
There are times when companies realize that increased commodification, competition, advancing technology, and other factors will continue to erode their core product base. This allows them to explore related – or unrelated – markets. Examples include Corning, which historically produced cookware. Sensing the coming global economy’s impact on labor cost, Corning moved entirely into specialty glass and internet infrastructure products such as fiber optics, which allowed them to retain their core expertise while applying it to new fields.
3. Channel Innovation
Many companies look to the maverick approach to adapt their core product into a different format to gain more customers, provide greater access to more users, or offer their product at lower costs while maintaining high margins. Examples of this approach abound in the Software-as-a-Service (SaaS) model many software developers use. By producing cloud-hosted software, these companies were able to make their product modular and more flexible to offer “pay-as-you-go” versions. They also changed their value proposition by allowing businesses to save money on wiring and server maintenance infrastructures. And they increased access to their product compared to traditional on-premises software. This meant that small and medium-sized businesses (SMBs) now had access to the same quality of best-in-class software as their larger counterparts, improving their competitiveness and lowering entry costs.
The Henry Bernick Entrepreneurship Centre (HBEC) at Georgian College understands the necessity and value of innovation. They offer expertise at the academic level as well as through partners with deep experience in business. They offer resources such as training, guidance, project iteration, mentorship, and more to those seeking help in developing innovative new ideas for their business or startup. To understand how HBEC can help you build and sharpen how you innovate in your project or business, contact us today.
