innovative business plan model

The 7 Best Business Plan Examples (2024)

As an aspiring entrepreneur gearing up to start your own business , you likely know the importance of drafting a business plan. However, you might not be entirely sure where to begin or what specific details to include. That’s where examining business plan examples can be beneficial. Sample business plans serve as real-world templates to help you craft your own plan with confidence. They also provide insight into the key sections that make up a business plan, as well as demonstrate how to structure and present your ideas effectively.

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Example business plan

To understand how to write a business plan, let’s study an example structured using a seven-part template. Here’s a quick overview of those parts:

• Executive summary: A quick overview of your business and the contents of your business plan.
• Company description: More info about your company, its goals and mission, and why you started it in the first place.
• Market analysis: Research about the market and industry your business will operate in, including a competitive analysis about the companies you’ll be up against.
• Products and services: A detailed description of what you’ll be selling to your customers.
• Marketing plan: A strategic outline of how you plan to market and promote your business before, during, and after your company launches into the market.
• Logistics and operations plan: An explanation of the systems, processes, and tools that are needed to run your business in the background.
• Financial plan: A map of your short-term (and even long-term) financial goals and the costs to run the business. If you’re looking for funding, this is the place to discuss your request and needs.

7 business plan examples (section by section)

In this section, you’ll find hypothetical and real-world examples of each aspect of a business plan to show you how the whole thing comes together. 

• Executive summary

Your executive summary offers a high-level overview of the rest of your business plan. You’ll want to include a brief description of your company, market research, competitor analysis, and financial information. 

In this free business plan template, the executive summary is three paragraphs and occupies nearly half the page:

• Company description

You might go more in-depth with your company description and include the following sections:

• Nature of the business. Mention the general category of business you fall under. Are you a manufacturer, wholesaler, or retailer of your products?
• Background information. Talk about your past experiences and skills, and how you’ve combined them to fill in the market. 
• Business structure. This section outlines how you registered your company —as a corporation, sole proprietorship, LLC, or other business type.
• Industry. Which business sector do you operate in? The answer might be technology, merchandising, or another industry.
• Team. Whether you’re the sole full-time employee of your business or you have contractors to support your daily workflow, this is your chance to put them under the spotlight.

You can also repurpose your company description elsewhere, like on your About page, Instagram page, or other properties that ask for a boilerplate description of your business. Hair extensions brand Luxy Hair has a blurb on it’s About page that could easily be repurposed as a company description for its business plan. 

• Market analysis

Market analysis comprises research on product supply and demand, your target market, the competitive landscape, and industry trends. You might do a SWOT analysis to learn where you stand and identify market gaps that you could exploit to establish your footing. Here’s an example of a SWOT analysis for a hypothetical ecommerce business: 

You’ll also want to run a competitive analysis as part of the market analysis component of your business plan. This will show you who you’re up against and give you ideas on how to gain an edge over the competition. 

• Products and services

This part of your business plan describes your product or service, how it will be priced, and the ways it will compete against similar offerings in the market. Don’t go into too much detail here—a few lines are enough to introduce your item to the reader.

• Marketing plan

Potential investors will want to know how you’ll get the word out about your business. So it’s essential to build a marketing plan that highlights the promotion and customer acquisition strategies you’re planning to adopt. 

Most marketing plans focus on the four Ps: product, price, place, and promotion. However, it’s easier when you break it down by the different marketing channels . Mention how you intend to promote your business using blogs, email, social media, and word-of-mouth marketing. 

Here’s an example of a hypothetical marketing plan for a real estate website:

Logistics and operations

This section of your business plan provides information about your production, facilities, equipment, shipping and fulfillment, and inventory.

Financial plan

The financial plan (a.k.a. financial statement) offers a breakdown of your sales, revenue, expenses, profit, and other financial metrics. You’ll want to include all the numbers and concrete data to project your current and projected financial state.

In this business plan example, the financial statement for ecommerce brand Nature’s Candy includes forecasted revenue, expenses, and net profit in graphs.

It then goes deeper into the financials, citing:

• Funding needs
• Project cash-flow statement
• Project profit-and-loss statement
• Projected balance sheet

You can use Shopify’s financial plan template to create your own income statement, cash-flow statement, and balance sheet. 

Types of business plans (and what to write for each)

A one-page business plan is a pared down version of a standard business plan that’s easy for potential investors and partners to understand. You’ll want to include all of these sections, but make sure they’re abbreviated and summarized:

• Logistics and operations plan
• Financials 

A startup business plan is meant to secure outside funding for a new business. Typically, there’s a big focus on the financials, as well as other sections that help determine the viability of your business idea—market analysis, for example. Shopify has a great business plan template for startups that include all the below points:

• Market research: in depth
• Financials: in depth

Internal 

Your internal business plan acts as the enforcer of your company’s vision. It reminds your team of the long-term objective and keeps them strategically aligned toward the same goal. Be sure to include:

• Market research

Feasibility 

A feasibility business plan is essentially a feasibility study that helps you evaluate whether your product or idea is worthy of a full business plan. Include the following sections:

A strategic (or growth) business plan lays out your long-term vision and goals. This means your predictions stretch further into the future, and you aim for greater growth and revenue. While crafting this document, you use all the parts of a usual business plan but add more to each one:

• Products and services: for launch and expansion
• Market analysis: detailed analysis
• Marketing plan: detailed strategy
• Logistics and operations plan: detailed plan
• Financials: detailed projections

Free business plan templates

Now that you’re familiar with what’s included and how to format a business plan, let’s go over a few templates you can fill out or draw inspiration from.

Bplans’ free business plan template

Bplans’ free business plan template focuses a lot on the financial side of running a business. It has many pages just for your financial plan and statements. Once you fill it out, you’ll see exactly where your business stands financially and what you need to do to keep it on track or make it better.

PandaDoc’s free business plan template

PandaDoc’s free business plan template is detailed and guides you through every section, so you don’t have to figure everything out on your own. Filling it out, you’ll grasp the ins and outs of your business and how each part fits together. It’s also handy because it connects to PandaDoc’s e-signature for easy signing, ideal for businesses with partners or a board.

Miro’s Business Model Canvas Template

Miro’s Business Model Canvas Template helps you map out the essentials of your business, like partnerships, core activities, and what makes you different. It’s a collaborative tool for you and your team to learn how everything in your business is linked.

Better business planning equals better business outcomes

Building a business plan is key to establishing a clear direction and strategy for your venture. With a solid plan in hand, you’ll know what steps to take for achieving each of your business goals. Kickstart your business planning and set yourself up for success with a defined roadmap—utilizing the sample business plans above to inform your approach.

Business plan FAQ

What are the 3 main points of a business plan.

• Concept. Explain what your business does and the main idea behind it. This is where you tell people what you plan to achieve with your business.
• Contents. Explain what you’re selling or offering. Point out who you’re selling to and who else is selling something similar. This part concerns your products or services, who will buy them, and who you’re up against.
• Cash flow. Explain how money will move in and out of your business. Discuss the money you need to start and keep the business going, the costs of running your business, and how much money you expect to make.

How do I write a simple business plan?

To create a simple business plan, start with an executive summary that details your business vision and objectives. Follow this with a concise description of your company’s structure, your market analysis, and information about your products or services. Conclude your plan with financial projections that outline your expected revenue, expenses, and profitability.

What is the best format to write a business plan?

The optimal format for a business plan arranges your plan in a clear and structured way, helping potential investors get a quick grasp of what your business is about and what you aim to achieve. Always start with a summary of your plan and finish with the financial details or any extra information at the end.

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50+ business model examples

Discover innovative business models, see visualizations of their different revenue streams, and copy ideas for your startup.

• Who is this guide for?

How to choose the right business model

Business model inspiration, companies to learn from, who is this guide for.

When in need of a business model for your next startup or corporate venture, there are more than a couple of options to explore. To make your decision-making a little easier, we’ve analyzed 50 innovative revenue models and partnership ideas. 

Browse these business model examples to spot the ideas that are fit for your company’s needs, and let these use cases inspire you to start building your own business plan.

At Board of Innovation, we specialize in innovation and business design. If you feel you need help moving forward, you can dive deeper into how we do business model innovation or get in touch .

In this deck, you will find a comprehensive guide through business models from different companies and industries.

This guide will help you understand how each business model works, the products or services they offer, and what makes it unique. These key insights will help you in the selection process of a business model that works best for you.

Have you ever wondered how some companies are profitable?

In this deck, we deep dive into business models used by companies in multiple industries. Using our Business Model Kit , we offer a visual overview of how each business profits from the model that drives it. .

Free (or nearly free) for the user:

• Early exit strategy
• Pay-what-you-want (PWYW)
• Tip jar/donation
• Freemium model
• Barter or swapping for services
• Barter or swapping for products

Third party options:

• Advertisement (ad-based) model
• Affiliate/referral fee
• Get-one-give-one model (G1G1)
• Franchise model

Mixed business model:

• Razor and blade model
• Crowdfunding
• Open source model
• No frills model (discount or budget model)

Broker/matchmaking:

• Commission-based model:
• Auction model

Paid (direct sales business model):

• Subscription model
• Premium model
• Pay-per-use model
• Add-ons/In-app purchases
• License fees
• Single purchase model
• Pay-as-you-go model (PAYG)

Grab is an on-demand ride service that has since expanded to everyday services like deliveries, financial services and more – making it a superapp. It charges a service fee of 20% ~ 30% for every transaction that goes through its platform.

Hubs charges clients for each industrial manufacturing job they begin through the platform. Prices are determined by a machine learning algorithm.

Patients Like Me offers a free health community service to its users. They make money by selling the data, generated by the community, to pharmaceutical companies.

WHOOP offers a wearable fitness gadget that gives personalized recommendations and feedback. WHOOP charges a monthly subscription fee to access the data on the platform, while the first device is free.

Digit is a financial service application that monitors financial behavior and automates its users’ savings. Digit receives a fixed monthly fee of $5 from its users. On top of that, it can leverage the funds it has under management for greater returns

Kiva is the first online non-profit lending platform for underserved populations.As a non-profit, Kiva doesn’t profit from loans received — lenders donate to Kiva to cover operating costs. The remainder of costs are covered through grants, supporters, and field partners.

Appear Here is the Airbnb of retail spaces — an online marketplace to list, find, and book short-term retail spaces. After the landlord sets a daily, weekly and monthly price, Appear Here takes commission between 12% - 15% on a completed transaction, while the space owners pay no listing fee.

Kaggle makes money in two ways: With Kaggle competition, they receive a “listening fee” for each competition posted on the platform. Also, they provide a service for matching companies to the top 0.5% of their community, which they call Kaggle Connect.

23andMe makes money with personal genetic tests, providing reports on lineage discovery & +240 health conditions. It’s believed that their DNA research studies & surveys will soon be an additional way of making money, with a mainly B2B focus instead of B2C.

Friendsurance works as a broker between Policy Holders and existing Insurance Partners. They’re letting customers share risks with friends, allowing them to lower prices due to reduced fraud & process costs, better risk pools, etc.

AliveCor makes money by selling ECG devices ($199) that fit on existing smartphones and via their AliveInsights Service – a professional analysis service that makes it easy to get expert insight on your ECG readings.

Glow sells “data insights” regarding conceiving to Research Institutions & gives exposure to trustworthy Infertility Treatment Clinics. The data is generated by users who use the Glow free fertility-tracking app.

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Guide to business model innovation: Strategies and examples

In an ever-changing world, business model innovation is something every product manager and entrepreneur should focus on.

Business models that were solid a few months back might be irrelevant today, especially if we look at ever-increasing technological advances. If I had a penny for every business model that has had to pivot due to the advent of ChatGPT, I could retire today.

In this guide, I’ll show you how you can demystify business model innovation by simply asking the right questions.

What is a business model?

Let’s start with a high-level overview of what a business model actually is. You’ve probably already seen Strategyzer’s famous business model canvas at least once:

This business model canvas is one of the most common approaches to describing a business model. It includes answers to nine key questions:

• Customer segments — For whom are you creating value?
• Value proposition — What value do you deliver to customers?
• Channels — How are you reaching your customers?
• Customer relationship — What type of relationship do you establish with your customers?
• Key partners — Who are your key partners and suppliers?
• Key activities — What do you need to do to deliver the value proposition for your customers?
• Key resources — What key resources do your value proposition and distribution channels require?
• Revenue streams — How much value do you capture from your value delivery activities?
• Cost structure — How much does maintaining the business model cost you?

If you can get a good answer to all these questions, the overall strategy for your business is solid and self-supporting.

However, the business innovation canvas is just a template. Depending on the maturity of your company, you might need something more lightweight or more robust.

Ultimately, what you need is clarity regarding three critical areas of business operation:

• Value creation — What value do you offer to the market?
• Value delivery — How do you ensure the market discovers your value proposition?
• Value capture — How do you benefit from delivering that value?

In this article, I’ll focus on the more lightweight approach to business model innovation. It’ll make it more applicable for product managers, who often work only on a product-oriented part of the business model.

What is business model innovation?

Building a business model is similar to everything we do in a product and agile environment. Any guesses?

Yes! We do it iteratively!

In the past, we often worked thoroughly to establish a very detailed business model, probably got a company loan for that, and then spent years executing that model. In the modern world, this approach doesn’t work. Things just change too fast.

Today, business models are not planned; they are discovered. The best approach is to adjust, inspect, and adapt your business model iteratively:

That’s what business model innovation is. It’s a never-ending, iterative process of discovering the best business model given current micro and macro circumstances.

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Strategies to innovate on your business model

Now let’s try to put the theory into practice. Although there is no “right” approach to iterating on one business model, the lightweight process I prefer involves repeatedly asking three high-level questions:

• Can we improve the value we deliver to the market ?
• Can we improve the way we reach our customers ?
• Can we improve the way we capture the value along the way ?

Innovating on the value proposition

This part is the most well-known to product managers. To some extent, PMs are hired to focus chiefly on this area of the business model.

Start by visualizing your current value creation process. I like to use a double-layered value proposition model for that (my own framework).

A core value proposition includes:

• Customer profile — Who is your target persona? What gains do they want? What pains do they experience?
• Value canvas — How do you deliver value for your customer? Which pains do you relieve, and which gains do you create?

A category value proposition includes:

• Market standards and benchmarks — You should meet these to be relevant
• General performance expectations of the market — No matter how great the value proposition of your app is, people won’t use it if it takes 20 seconds to load
• Category rules — What are the must-haves for a given type of product? For example, good luck building an email app without a labeling option

Once you have visualized your business model, start challenging it. Use quantitative data, qualitative knowledge, and market expertise to determine how to deliver more value to the market.

The most common approaches to delivering more value include:

• Pivoting customer segments — Maybe the persona you target isn’t the right fit after all?
• Expanding customer segments — Even if your target segment is properly defined, at some point, the market gets saturated. Maybe it’s time to expand?
• Focusing on different pain points — Are the pain points you target most relevant for your customers?
• Expanding offering — Can you deliver more valuable services to your customers?
• Shrinking offering — Cutting out the noise and doubling down on your best solutions might also be a sound decision.
• Innovating on current offering — Maybe iterating on the current offering is the most optimal way?

What you should focus on depends heavily on the data you have and the context you operate in. But if I were to give a universal tip, focus on properly balancing small bets (improving the current business model) and big bets (pivoting the business model) for the most optimal outcomes.

Innovating on value distribution

Innovating on value distribution is all about searching for the most optimal channel for acquiring users and maximizing that channel’s potential.

Let’s assume you acquire users through LinkedIn ads (performance marketing). You should revisit this strategy regularly and ask yourself two questions.

• Embracing tactics to minimize CAC.
• Hiring performance marketing professionals / external agencies to help you boost your reach.
• Experimenting with new platforms.
• Trying programmatic advertising.
• Experiment with setting up a blog
• Use the data you have to automatically generate new pages at a sale
• Build virality mechanics into the app

My main tip here is the same as in the previous chapter: in an ideal scenario, you would continuously improve on both your current growth channel (small bets) while also exploring other growth channels (big bets) — especially if you haven’t reached product-channel fit yet.

Innovating on value capture

Capturing value might sound fancy, but let’s be honest — in most cases, it’s all about generating revenue.

You should regularly revisit how your product and business generate money from its operation. While the exact questions you should be asking yourself depend on your particular model, the four questions I believe every PM should ask themselves regularly are:

• Do we have the most optimal revenue model?
• Is the way we charge the best way?
• Do we charge at an optimal price point?
• Can we boost our revenue with better bundling and packaging?

1. Do we have the most optimal revenue model?

It’s a big question. If you are a subscription product , should you be a subscription product? Maybe you should try ad-based revenue, or combine both?

2. Is the way we charge the best way?

The way you charge is more important than how much you actually charge. Ideally, you should charge per value received (i.e., the number of transactions). Or, if this is impossible, per some proxy metrics (e.g., the number of seats), or a flat monthly fee. Is it the best way?

3. Do we charge at an optimal price point?

Different segments have different willingness to pay and price sensitivity . Finding the best price points to charge requires a lot of quantitative research, but it’s worth it.

In the end, increasing the price by 10 percent might be the fastest way to grow revenue or the fastest way to lose all your customers.

4. Can we boost our revenue with better bundling and packaging?

If you have a more mature product with various types of plans, consider bundling/unbundling them and experimenting with different plan settings.

Maybe there’s a gap between your tier 1 and tier 2 offering, leaving a lot of money on the table. Or, perhaps you should add to your most premium offering  a standalone, pay-per-use feature.

Sometimes, moving a feature from one plan to another can knock your revenue through the roof.

Business model innovation examples

Now that we’ve thoroughly explored the concept of business model innovation, let’s dive into some real-world examples. These cases highlight the impact that innovative business models can have on a company’s success or failure.

Netflix: Streaming revolution

One of the most well-known examples of successful business model innovation is Netflix. The company started as a DVD rental service by mail, but it quickly identified the potential of streaming technology.

By shifting its focus to on-demand streaming, Netflix transformed the way we consume entertainment and effectively disrupted the traditional cable TV industry. This strategic shift allowed the company to grow exponentially and become a global entertainment powerhouse.

Uber: Ride-sharing disruption

By leveraging then-nascent mobile app technology, Uber created a platform that connects drivers with passengers looking for a ride. This peer-to-peer model revolutionized the transportation industry, challenging traditional taxi services and expanding to other services like food delivery.

Although Uber faced regulatory hurdles and controversies along the way, it remains a prime example of how business model innovation can create a new market.

Blockbuster: A cautionary tale

On the flip side, Blockbuster’s failure to innovate its business model serves as a cautionary tale. As a movie and video game rental chain, Blockbuster was once the go-to place for home entertainment. However, the company failed to adapt to the digital age and recognize the potential of streaming services, ultimately leading to its decline.

Had Blockbuster been more agile and open to business model innovation, it might have remained a significant player in the entertainment industry.

LEGO: Reinventing the brick

LEGO, the iconic toy company, faced near bankruptcy in the early 2000s due to a lack of focus and an overly complex product portfolio. To turn things around, LEGO embraced business model innovation by refocusing on its core product — the beloved plastic brick — and expanding into new markets.

By capitalizing on brand partnerships, digital gaming, and even theme parks, LEGO successfully transformed its business model and remains a beloved brand worldwide.

Zipcar: Car-sharing pioneer

Zipcar was an early pioneer of the car-sharing model. By allowing members to rent cars by the hour or day, Zipcar offered a convenient and cost-effective alternative to traditional car ownership.

Although the company faced challenges and was eventually acquired by Avis Budget Group, its innovative business model inspired a wave of car-sharing services that continue to reshape urban transportation.

Business model innovation sounds like a big, daunting endeavor. In reality, though, it can be as complex or as straightforward as you want it to be.

I believe in simplicity. The more robust the innovation process is, the more neglected and deprioritized it often gets.

When it comes to business model innovation, I encourage you to think about it simply as an iterative process of asking the right questions. Start with the three main questions:

• Can we improve the value we deliver to the market?
• Can we improve the way we reach our customers?
• Can we improve the way we capture the value along the way?

Then, step by step, go a bit deeper and ask more detailed questions.

On the one hand, you must innovate your business model in a conscious, iterative manner to stay competitive. But on the other hand, you don’t have to do it all at once. In fact, you shouldn’t.

Revisit the main questions and focus on the part of your business model that requires the most attention in your current context. Trying to innovate on a business model as a whole is a fool’s game.

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Blog Feature Updates

Startup Business Plans 101: Your Path to Success

By Jay Nair , Jul 24, 2023

It’s time — you’ve got a promising idea and you’re now prepared to invest the necessary effort to turn it into reality. Startup business plans are vital hack tools that will guide you through your entrepreneurial journey and a business venture with clarity and purpose.

Though vital, business planning doesn’t have to be a chore. Business plans for lean startups and solopreneurs can simply outline the business concept, sales proposition, target customers and sketch out a plan of action to bring the product or service to market. These plans will serve as strategic documents outlining your company’s vision, mission statements, business objectives, target market, financial forecasts and growth strategies.

To simplify the creation of a robust business plan as an entrepreneur, you can harness the power of a business plan maker . This invaluable tool streamlines the process and ensures a polished and well-organized presentation.  Startup business plan templates provide pre-designed frameworks that can be customized to suit your specific industry needs, saving valuable time and effort while preserving the essential structure of a comprehensive business plan.

Ready to begin? Let’s go!

Just so you know, some of our business plan templates are free to use and some require a small monthly fee. Sign-up is always free, as is access to Venngage’s online drag-and-drop editor.

Click to jump ahead:

• Laying the foundation of your startup business plan
• Business plan executive summary
• Writing your business description
• Marketing & sales strategies
• Startup operational plans
• Financial plans – forecasting and projections
• Team and management
• Appendix and supporting documents

FAQs on startup business plans

• Use Venngage to create your startup business plan

Preparation and research: 6 steps to laying the foundation of your startup business plan

• What problem does your product or service solve? 
• Who are your target customers? 
• What differentiates your offering from existing solutions in the market? 

This self-reflection will help you establish a clear direction for your startup.

• Next, conduct market research to gather valuable insights about your target market , including demographics, preferences, and purchasing behavior . This data will enable you to tailor your product or service to meet the specific needs of your customers. Identify trends, industry growth projections, and any potential barriers or challenges you may encounter.
• Competitive analysis is another critical aspect of preparation and research. Study your competitors to understand their strengths, weaknesses, and strategies. Analyze their pricing, marketing tactics, customer experience, and product/service features. This analysis will allow you to identify gaps in the market and position your startup to offer a unique value proposition .
• Financial research is equally important during this phase. Calculate the costs associated with starting and operating your business , including overhead expenses, production costs, marketing expenses, and employee salaries. Assess potential revenue streams and estimate your expected sales. This financial analysis will help you determine the feasibility of your business idea and outline a realistic financial plan.
• Additionally, gather information about legal and regulatory requirements that apply to your industry and location . Understand the necessary permits, licenses, and certifications you need to operate legally. Complying with these regulations from the outset will prevent potential setbacks or legal issues in the future.
• Finally, organize your findings and insights into a coherent business plan. Create your business plan outline , list your business plan goals, strategies, target market, competitive analysis, marketing plan, financial projections and any other relevant information. This compilation will serve as a roadmap for your startup, guiding your decisions and actions moving forward.

You’ve just encountered a wealth of information and are well on your way to becoming a seasoned business owner! This can sometimes feel overwhelming. But don’t worry, take a moment to breathe deeply and remember how far you’ve come. You’ve got this!

To help you condense and organize your essential points, I have brilliant one-page samples of business plan layouts and templates that will capture everything in a concise format.

Knowing when to use a one-page business plan versus a more comprehensive plan depends on various factors. A one-page business plan is ideal for providing a quick overview, saving time, and internal planning. However, it may not suffice for detailed information, complex business models, or meeting external stakeholders’ expectations.

Ultimately, consider the purpose, audience, and complexity of your business when deciding whether to utilize a one-page business plan or opt for a more detailed approach.

Executive Summary: Your Startup’s Elevator Pitch

First impressions are crucial, and a concise yet comprehensive executive summary is your chance to grab potential investors’ attention.

To create a compelling elevator pitch, consider the following key elements:

Problem Statement : Clearly articulate the problem or pain point that your startup addresses. Emphasize the significance of the problem and the potential market size

Solution : Concisely describe your innovative solution or product that solves the identified problem. Highlight its unique features or benefits that differentiate it from existing alternatives.

Target Market : Define your ideal customer segment and outline the market potential. Demonstrate a deep understanding of your target audience’s needs, preferences, and behavior.

Competitive Advantage : Showcase the competitive edge that sets your startup apart from competitors. This could include intellectual property, strategic partnerships, cost advantages, or disruptive technology.

Business Model : Briefly explain how your startup generates revenue and sustains profitability. Outline your monetization strategy, pricing model, and any recurring revenue streams .

Traction and Milestones : Highlight any significant achievements or milestones reached by your startup. This could include customer acquisitions, partnerships, product development progress, or market validation.

Team : Showcase the expertise and qualifications of your founding team or business partners. Highlight key members and their relevant experiences demonstrating their ability to execute the business plan.

I can sense your eagerness to dive right in! To expedite your progress, I’m excited to present you with a collection of meticulously crafted executive summary templates. These templates have been thoughtfully designed and structured by Venngage designers, ensuring seamless integration into your thorough business plan. All you need to do is infuse them with your brilliant startup ideas, and you’ll be well on your way to success!

Now, remember that there’s still a ton of work to be done. Let’s take a moment to regroup and ensure we’re on the right track. Before diving into the process of writing your business plan , it’s imperative to gather a wealth of essential information. Conducting comprehensive research is key, and it should encompass the following aspects:

How to assess your target audience

To gain comprehensive insights into your potential user base, creating a user persona report is invaluable. This persona guide report will help you develop a detailed understanding of various user profiles, enabling you to tailor your products or services to meet their specific needs and preferences.

Understanding Your Market and Competition

Analyze your market and any trends relevant to your startup. Research your competitors, their strengths and weaknesses, and identify what differentiates your offering from the competition.

Developing a Unique Value Proposition

A business Unique Value Proposition (UVP) is a concise statement that communicates the unique advantage a product or service offers over competitors, addressing a specific problem or need. It highlights the distinctive value and benefits customers can expect, helping businesses attract and retain customers by differentiating themselves in the market.

Your unique value proposition (UVP) is the cornerstone of your startup, defining what sets you apart from your competitors. A strong UVP focuses on the specific benefits and solutions your startup offers to customers.

Company Description: Painting the Picture

Your company description allows you to showcase your startup’s unique features and provide more in-depth details about your business. This section should include:

The Purpose of the Company Description

Clarify the purpose of your business, your goals and how your startup is uniquely positioned to achieve them.

Essential Information to Include

Include details such as your company’s legal structure, location and a brief history of any founders or key personnel.

Showcase Your Company’s Unique Features

Emphasize the unique aspects of your startup, explaining how these features translate into a competitive advantage.

Allow me to provide you with a dash of inspiration to ignite the momentum for your startup business plan:

When it comes to showcasing your company’s unique features, keep in mind that it is essential to emphasize and highlight the distinctive aspects of your startup . Clearly articulate how these features set your company apart from competitors and translate into a tangible competitive advantage . 

Whether it’s through cutting-edge technology, innovative business models, exceptional customer service, or a combination of factors, conveying the value and impact of these unique features is crucial. By effectively communicating the benefits they bring to customers, investors, and partners, you can demonstrate the significance of your offerings and differentiate yourself in the market.

Product/Service Line: What You’re Bringing to the Table

This section highlights the finer details of your product or service offerings:

Detailing Your Product/Service Offerings

Provide a thorough description of your products/services, highlighting key features and their intended use.

Highlighting Features, Benefits, and Solutions

Demonstrate how your startup’s offerings solve specific problems or address customer needs through an analysis of product features and associated benefits.

Defining Your Pricing and Revenue Model

Outline your startup’s pricing strategy and how it aligns with the overall business model. Detail any plans for scaling or expanding your revenue sources in the future.

Presenting Your Market Research Findings

Share insights from your market research, including target customer demographics, market size, and growth potential.

Identifying Market Trends and Opportunities

Discuss current trends, emerging opportunities, and how your startup will capitalize on these developments.

Marketing and Sales Strategies: Spreading the Word

Developing a robust marketing and sales strategy plan aligns with your overall business strategy and ensures steady growth. Marketing planning will be an essential part of your journey once you’ve got your business plan tight-knit! Also, creating a marketing strategy can be the most fun part of your business plan!

Developing a Comprehensive Marketing Strategy & Plan

• Outline Specific Marketing Goals : Clearly define your marketing objectives, whether it’s increasing brand awareness, driving website traffic, generating leads, or boosting sales . Set measurable targets to track progress.
• Identify Target Audience : Conduct thorough market research to identify your ideal customer profiles. Understand their demographics, behaviors, preferences, and pain points. Tailor your marketing messages to resonate with their needs.
• Select Effective Marketing Channels : Consider both digital and traditional channels that align with your target audience and marketing goals. This may include online advertising, social media marketing, content marketing, search engine optimization (SEO), email campaigns, print media, events, or partnerships.
• Craft Compelling Messages : Develop persuasive and consistent messaging that highlights the unique value proposition of your products or services. Clearly communicate how your offerings solve customer problems or improve their lives.

5 Tips for Effective Sales Techniques and Growth Strategies + free templates

• Define Your Sales Strategy : Outline the approach and tactics your sales team will use to reach and convert customers. This may involve direct sales, channel partnerships, online sales, or a combination of strategies. Specify your sales process, including lead generation, qualification, nurturing, and closing.
• Expand Your Customer Base : Identify opportunities to expand your customer reach. Consider targeting new customer segments, entering new geographic markets, or exploring untapped market niches. Develop strategies to attract and engage these potential customers.
• Penetrate New Markets : Assess the feasibility of expanding into new markets or verticals. Market research will help you understand the dynamics, competition, and customer needs in these markets. Adapt your marketing and sales strategies accordingly to effectively penetrate and capture market share.
• Innovate Products/Services : Continuously evaluate and enhance your product or service offerings to meet evolving customer demands. Identify areas for innovation or improvement and develop a roadmap for launching new features, versions, or complementary offerings.
• Perform a SWOT analysis : By conducting a sales SWOT analysis , you will gather valuable insights to enhance your department’s performance. This analysis involves evaluating your company’s strengths, weaknesses, opportunities, and threats, enabling you to identify areas for improvement and capitalize on advantageous factors in the market.

Here’s a hack to get you organized – Get right into it with the help of these growth strategy templates and strategic planning templates :

Operational Plan: How Your Startup Will Run

Define an efficient and scalable operational plan, keeping in mind the following points:

Defining an Efficient and Scalable Plan

Outline the day-to-day operations, including processes, timelines, and necessary resources.

Legal Considerations for Your Startup Business

Identify any legal requirements or considerations, such as licenses, permits, or regulations that may apply to your startup.

Key Elements of Supply Chain Management and Logistics

Discuss supply chain and logistical aspects relevant to your business. Include details on how you plan to manage and scale these processes.

Here’s a kickstart on how you can structure your operating plans:

Financial Projections: Crunching the Numbers

A startup’s financial projections are vital in securing investor buy-in. This section should address:

The Importance of Financial Forecasting and Budgeting

Explain the significance of accurate financial forecasting, budgeting, and the assumptions made in your projections.

Identifying Key Performance Indicators (KPIs)

Highlight the KPIs used to gauge your business’s financial health and growth trajectory.

Outlining Funding Requirements

Detail the amount and type of funding your startup requires , including how the funds will be allocated and how this investment positions the company for growth.

Team and Management Structure: Building Your Dream Team

Your startup’s success depends on the people behind it. This section should cover:

Tips for Building the Right Team

Share your strategy for assembling a skilled team that supports your startup’s vision and growth trajectory.

Founders’ Background and Roles

Provide an overview of the founders’ backgrounds, their roles within the company, and how their skills contribute to the startup’s success.

Organizational Structure and Key Management Personnel

Outline your startup’s organizational structure, including any key management personnel who play a pivotal role in day-to-day operations.

Appendices and Supporting Documents: Backing Up Your Plan

Include any other relevant supporting documents, such as:

• Research data, market analysis, or competitor analyses.
• Financial statements, budgeting or forecasting data, and other financial documentation.
• Legal documents, agreements or contracts, and any patent or trademark information.

Finally, remember to review and update your business plan regularly as the industry, market, and competitive landscape evolve!

1. Why is a business plan essential for a startup?

A startup business plan is crucial for a startup because it provides a framework for strategic decision-making, facilitates financial planning, helps assess risks, aligns teams, communicates your vision, and ensures effective resource allocation. 

2. What should a startup business plan include?

A startup business plan should include:

• Vision and Direction : Set clear goals and objectives, and outline strategies to achieve them. With a well-defined plan, you will stay focused, make informed decisions, and ensure alignment with your vision.
• Market Analysis : A business plan necessitates thorough market research to understand your target market, identify competition, and assess product/service demand. These insights enable you to tailor offerings, meet customer needs, and gain a competitive edge.
• Financial Planning : By constructing a financial roadmap through projected statements such as income, cash flow, and balance sheets, a business plan unveils the expected revenues, expenses, and profitability. This comprehensive planning not only anticipates challenges and sets realistic goals but also serves as a magnet for attracting investors and securing funding.
• Risk Assessment : Devise strategies for risk mitigation and contingency planning. By proactively doing this, you can significantly enhance the likelihood of success by anticipating and effectively addressing potential obstacles.
• Communication and Team Alignment : From fostering effective communication with both internal and external stakeholders to aligning team members and showcasing your startup’s unique value proposition, a business plan plays a crucial role. It enables you to articulate target market insights, competitive advantages, and growth strategies to potential investors, partners, and employees.
• Resource Allocation : A business plan helps you identify the resources required to launch and operate your startup successfully. It includes an assessment of your human resources, technology needs, infrastructure requirements, and other key resources. By understanding your resource needs, you can allocate them effectively, ensuring that you have the necessary assets to execute your business strategy.
• Adaptability and Flexibility : Your business plan should be flexible enough to accommodate changes and adapt to new circumstances. Startups operate in dynamic environments, and a well-designed plan allows you to monitor progress, evaluate outcomes, and make adjustments as needed. This agility enables you to seize new opportunities and navigate challenges effectively.

3. What is the ideal length for a startup business plan?

The optimal length for a startup business plan typically depends on the specific requirements and intended audience, but a concise and focused plan of around 20 to 30 pages is often recommended.

4. How to write a good startup business plan?

To write a good and effective startup plan, include an executive summary, company description, market analysis, detailed products/services description and a clear marketing and sales strategy. Also incorporate a comprehensive financial plan, outline your organizational structure, and demonstrates your team’s expertise and capabilities. Your plan should be well-researched, concise, and compelling, with a focus on your company’s unique value proposition and market opportunity, making it attractive to investors and stakeholders.

Utilizing Venngage templates & other tools for success

A visually appealing and professional business plan needn’t be a daunting task. Leverage tools like Venngage Business Plan Maker for effective templates that cater to various industries and streamline the process. 

• Leveraging Venngage for Visually Appealing and Professional Business Plans

Venngage offers a range of templates designed specifically for business plans, allowing you to craft a polished and visually engaging plan without any design experience. Simply choose a template, customize it to suit your startup’s branding, and populate it with your content.

• Exploring Additional Resources and Tools for Entrepreneurs. In addition to Venngage, several other resources and tools can assist entrepreneurs in crafting the perfect business plan. Examples include:
• Small Business Administration (SBA) – Offers guidance on writing business plans and provides templates and resources for each section.
• SCORE – A nonprofit organization providing mentorship, workshops, and other resources for entrepreneurs.
• Industry-specific resources – Research relevant professional organizations, industry publications, and blogs to stay up to date on industry trends and insights.

Embarking on the entrepreneurial path may present formidable challenges, yet it offers abundant rewards in various aspects. Embrace the art of continuous learning, delving not only into the essence of your business idea but also immersing yourself in the vast world that surrounds it. Cultivate a genuine passion for understanding every facet of your enterprise, for it is through this journey of exploration that you will uncover invaluable insights and experience the true fulfillment of entrepreneurship.

Business Plan Ideas: Innovating the Traditional Model

By GGI Insights | April 20, 2024

Table of contents

Decentralization, powered by technologies like blockchain, offers transparency and efficiency. In sector-specific plans for fintech and healthtech, we explore how disruptive technologies are reshaping industries. The digital age introduces interactive plans, engaging stakeholders with multimedia elements, and AI-generated plans that leverage data-driven insights. By embracing these innovations, you can position your business plan for success in a dynamic world.

Business plans have long been a cornerstone of entrepreneurship . They outline a company's goals, strategies, and financial projections, providing a roadmap for success. However, in today's rapidly changing business landscape, it's crucial to continuously innovate and adapt traditional business plan concepts to stay ahead of the curve. In this article, we explore pioneering ideas that can revolutionize the way we approach business plans.

Pioneering Business Plan Concepts

The world of business is constantly evolving, and staying ahead of the curve requires embracing innovative concepts , such as those necessary for a successful bakery business plan . Two such concepts that have gained significant traction in recent years are ESG considerations and decentralization. Let's explore these concepts in more detail:

ESG Considerations

Environmental, Social, and Governance (ESG) considerations are increasingly gaining importance in the business world. As companies face mounting pressure to be socially responsible and environmentally sustainable, integrating ESG factors into business plans becomes essential.

When addressing ESG considerations in your business plan, it is crucial to focus on various aspects. One key aspect is the carbon footprint. By analyzing and reducing your company's carbon emissions, you not only contribute to environmental sustainability but also demonstrate your commitment to combating climate change.

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Another aspect of ESG considerations is diversity and inclusion. Embracing diversity within your workforce and creating an inclusive work environment not only fosters innovation but also reflects the values of a socially responsible organization. By highlighting your commitment to diversity and inclusion in your business plan, you attract talented individuals who value equal opportunities and fair treatment.

Corporate governance is yet another crucial aspect of ESG considerations. By implementing strong governance practices, such as transparent decision-making processes and effective risk management, you establish a solid foundation for long-term success. Investors and stakeholders are increasingly interested in companies that prioritize good governance, as it ensures ethical conduct and accountability.

By integrating ESG considerations into your business plan, you not only demonstrate your commitment to ethical practices but also appeal to conscious consumers and socially responsible investors. This can create a competitive advantage and open doors to new partnerships and opportunities.

Decentralization

In today's interconnected world, decentralization has emerged as a disruptive force, challenging traditional business models. By embracing decentralized technologies like blockchain, companies can create business plans that foster trust, transparency, and efficiency.

Decentralization eliminates the need for intermediaries, reducing costs and streamlining processes. By leveraging blockchain technology, companies can create secure and immutable records of transactions, ensuring transparency and minimizing the risk of fraud. This increased transparency can also help build trust with customers and partners.

Furthermore, decentralization enables peer-to-peer interactions, allowing individuals and businesses to directly engage with each other without relying on intermediaries. This opens up new possibilities for collaboration and innovation, as it removes barriers and facilitates direct communication and cooperation.

Integrating the concept of decentralization into your business plan can unlock exciting opportunities for innovation and open up new markets. By leveraging decentralized technologies, you can differentiate your business from competitors and position yourself as a forward-thinking organization.

Incorporating ESG considerations and decentralization into your business plan can have a profound impact on your company's success. By addressing environmental, social, and governance factors, you demonstrate your commitment to ethical practices and attract conscious consumers and investors. Embracing decentralization allows you to leverage cutting-edge technologies, foster trust and transparency, and unlock new opportunities for growth and innovation. Stay ahead of the curve and embrace these pioneering concepts to shape the future of your business.

Sector Disruption & Business Plans

The financial technology (fintech) industry has transformed the way we manage money, disrupting traditional banking systems. Fintech companies are leveraging technology to create innovative solutions that address the pain points of consumers and businesses alike. When crafting a business plan for a fintech venture, it is crucial to outline how your solution addresses these pain points and enhances the customer experience.

One area where fintech has made significant strides is in the realm of payments. Traditional banking systems often involve lengthy processes and high transaction fees. Fintech companies have introduced frictionless transactions, making it easier and more cost-effective for individuals and businesses to send and receive money. By incorporating cutting-edge technologies like artificial intelligence and blockchain, fintech companies are able to provide secure and efficient payment solutions.

Another aspect to consider in your business plan is the potential for personalized experiences. Fintech has the ability to leverage data analytics to gain insights into consumer behavior and preferences. This allows companies to offer tailored financial products and services that meet the specific needs of their customers. Imagine a future where financial services are accessible to all, regardless of their income or background, with personalized recommendations that help individuals make informed financial decisions.

Another sector that is ripe for disruption is healthcare. Advances in technology and data analytics are revolutionizing the way we approach healthcare and wellness. In your business plan, it is important to highlight how your healthtech solution improves patient outcomes and streamlines healthcare processes.

One area where healthtech has made significant progress is in the integration of telemedicine. Telemedicine allows patients to consult with healthcare professionals remotely, eliminating the need for in-person visits for non-emergency cases. This not only saves time and reduces healthcare costs, but also improves access to healthcare services, particularly for individuals in rural or underserved areas.

Wearable devices are another aspect of healthtech that has gained popularity in recent years. These devices, such as fitness trackers and smartwatches, enable individuals to monitor their health and wellness in real-time. By collecting data on factors like heart rate, sleep patterns, and physical activity, wearable devices provide valuable insights that can be used to promote preventive care. Your business plan should highlight how your healthtech solution incorporates wearable devices and data-driven analytics to empower individuals to take control of their health.

The future of healthtech promises a paradigm shift in the global healthcare landscape. With advancements in technology and the increasing availability of data, there is immense potential for innovative solutions that improve patient outcomes, streamline healthcare processes, and promote preventive care. By addressing these key aspects in your business plan, you can position your healthtech venture as a disruptor in the industry.

Audience-Specific Plans

Crowdfunding.

Crowdfunding platforms have seen tremendous growth in recent years, empowering entrepreneurs to reach out to a wide audience for financial support. When planning your crowdfunding campaign, clearly define your target audience, create compelling incentives, and showcase your unique value proposition. Utilize your free business plan to establish trust and credibility, ensuring potential backers understand how their investment will drive your business forward.

One effective strategy to engage your target audience is to leverage social media platforms. By creating engaging and shareable content, you can generate buzz around your crowdfunding campaign. Consider running targeted ads on platforms like Facebook and Instagram to reach potential backers who align with your business's mission and values.

Another important aspect of a successful crowdfunding campaign is to provide regular updates to your backers. Keeping them informed about the progress of your project builds trust and demonstrates your commitment to delivering on your promises. Consider sending out newsletters or hosting live Q&A sessions to keep your backers engaged and excited about your venture.

Angel Investors

Angel investors play a pivotal role in funding early-stage startups. To attract angel investors, your business plan must effectively communicate your vision, growth potential, and market opportunities. Highlight your competitive advantage, explain your revenue model, and showcase your team's expertise. Additionally, emphasize how your business aligns with an angel investor's personal interests or investment thesis, as this can significantly increase your chances of securing funding.

When approaching angel investors, it is crucial to do thorough research and identify those who have a track record of investing in businesses similar to yours. Tailor your pitch to address their specific investment preferences and demonstrate how your venture aligns with their portfolio. Personalize your communication to show that you have taken the time to understand their investment strategy and how your business fits into it.

In addition to the financial aspect, angel investors often bring valuable expertise and connections to the table. Highlight how their involvement can add strategic value to your business and help accelerate its growth. This can include their industry knowledge, network, and experience in scaling businesses. By showcasing the potential synergies between your venture and the angel investor, you can make your pitch even more compelling.

Business Plans in the Digital Age

The digital age has brought about significant changes in various aspects of business, including the way business plans are created and presented. Utilizing an effective business proposal format , such as a one page business plan , can greatly enhance the clarity and persuasiveness of these documents. In today's competitive landscape, it is crucial for entrepreneurs and companies to adapt to these changes and leverage the power of technology to create compelling and engaging business plans. Alongside these modern approaches, traditional formats like the SBA business plan continue to be pivotal, especially for those seeking government-backed funding and support.

Interactive Plans

Traditional business plans often lack interactivity, making them less engaging and compelling for potential investors and stakeholders. However, in the digital age, interactive business plans offer an immersive experience that enables users to interact with your vision, financial projections, and product prototypes.

Imagine presenting your business plan to potential investors and stakeholders and allowing them to explore your ideas in a more dynamic and interactive way. With the use of multimedia elements and interactive tools, you can captivate your audience and leave a lasting impression.

You can incorporate videos, animations, and infographics to visually showcase your product or service. By allowing users to click on different sections of your business plan and providing them with additional information or real-time updates, you can create a more engaging and personalized experience.

Interactive business plans can also facilitate collaboration and feedback. By integrating features that allow users to leave comments or ask questions directly within the plan, you can encourage active participation and foster a sense of involvement among your stakeholders.

AI-Generated Plans

Artificial intelligence (AI) is revolutionizing various industries, and business planning is no exception. By harnessing AI technologies, such as natural language processing and machine learning, companies can generate business plans quickly and efficiently.

AI-generated plans can provide data-driven insights, conduct risk analyses, and optimize strategy formulation. By analyzing vast amounts of data and identifying patterns and trends, AI algorithms can help businesses make more informed decisions and improve the accuracy of their projections.

AI can automate certain aspects of business plan creation, such as market research and financial analysis, saving valuable time and resources. This allows entrepreneurs and business owners to focus on other critical aspects of their ventures.

While AI can be a powerful tool, it is essential to ensure that the human touch and critical thinking are not lost in the process. Business plans should still reflect the unique vision, creativity, and expertise of the individuals behind them. AI should be seen as a valuable assistant that enhances the planning process, rather than a replacement for human ingenuity.

The digital age has opened up new possibilities for business planning. Interactive plans offer a more engaging and immersive experience, while AI-generated plans provide data-driven insights and efficiency. By embracing these advancements, entrepreneurs and companies can create business plans that not only impress potential investors but also serve as valuable strategic tools for their own growth and success.

Innovating the traditional business plan model is essential to thrive in today's dynamic business environment. Seeking the expertise of professional business plan writers can be a strategic move for entrepreneurs who wish to ensure the highest quality and effectiveness of their plans. By incorporating pioneering concepts, like ESG considerations and decentralization, businesses can demonstrate their adaptability and forward-thinking mindset. Additionally, sector-specific plans, such as those for fintech and healthtech, capitalize on emerging opportunities and disruptive technologies. As we embrace the digital age, interactive and AI-generated plans offer novel ways to engage stakeholders and streamline the planning process. By embracing these innovative ideas, entrepreneurs can position themselves at the forefront of their respective industries and unlock new avenues for success.

Remember, each business plan idea discussed in this article should be considered within the larger context of your unique venture. Tailor these concepts to suit your specific industry, target market, and company goals. Embrace innovation, adaptability, and a forward-thinking mindset to create a business plan that sets you apart from the competition and paves the way for future success.

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Business Model Innovation

Product and service innovation are essential, but business model innovation can deliver more lasting competitive advantage, particularly in disruptive times. BCG helps leaders leverage innovative business models to tackle their most pressing challenges and capture their greatest opportunities.

In the past 50 years, the average business model lifespan has fallen from about 15 years to less than five. As a result, business model innovation is now an essential capability for organizations seeking to drive breakout growth, reinvigorate a lagging core, or defend against industry disruption or decline.

What Is Business Model Innovation?

Business model innovation is the art of enhancing advantage and value creation by making simultaneous—and mutually supportive—changes both to an organization’s value proposition to customers and to its underlying operating model. At the value proposition level, these changes can address the choice of target segment, product or service offering, and revenue model. At the operating model level, the focus is on how to drive profitability, competitive advantage, and value creation through these decisions on how to deliver the value proposition:

• Where to play along the value chain
• What cost model is needed to ensure attractive returns
• What organizational structure and capabilities are essential to success

Business model innovation is also critical to business transformation . Many organizations share a common set of concerns: What type of business model innovation will help us achieve breakout performance? How do we avoid jeopardizing the core business? How do we build the capability to develop, rapidly test, and scale new models? Inspiring an organization to change is not a trivial undertaking, but given the current strategic environment, it’s a critical one.

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Our Approach to Business Model Innovation

Companies hoping to drive growth through business model innovation face a number of critical questions: How broad should the scope of the effort be? What’s the appropriate level of risk to take? Is it a onetime exercise, or does it call for an ongoing capability?

To answer those questions, it’s important to realize that not all business model innovation efforts are alike. Understanding the four distinct approaches to business model innovation can help executives make effective choices in designing the path to growth:

1. The reinventor approach is deployed in light of a fundamental industry challenge, such as commoditization or new regulation, in which a business model is deteriorating slowly and growth prospects are uncertain. In this situation, the company must reinvent its customer-value proposition and realign its operations to profitably deliver on the new superior offering. 

2. The adapter approach is used when the current core business, even if reinvented, is unlikely to combat fundamental disruption. Adapters explore adjacent businesses or markets, in some cases exiting their core business entirely. Adapters must build an  innovation engine  to persistently drive experimentation to find a successful “new core” space with the right business model. 

3. The maverick approach deploys business model innovation to scale up a potentially more successful core business. Mavericks—which can be either startups or insurgent established companies—employ their core advantage to revolutionize their industry and set new standards. This requires an ability to continually evolve the competitive edge or advantage of the business to drive growth. 

4. The adventurer approach aggressively expands the footprint of a business by exploring or venturing into new or adjacent territories. This approach requires an understanding of the company’s competitive advantage and placing careful bets on novel applications of that advantage in order to succeed in new markets. 

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Business Model Innovation – The What, Why, and How

In the last couple of decades, we’ve seen a dramatic increase in the popularity of business model innovation – and for good reason.

Technology has made it easier than ever to adopt a wide variety of novel business models effectively. At the same time, increased pace of innovation and global competition has made differentiation more important than ever .

In addition, with the havoc caused by COVID-19, we're already seeing that even though many businesses are battling for survival, there are also winners. Those winners usually possess very robust business models, which further outlines the importance of business model innovation in times like this.

In this article, we’ll look into what exactly it is, why it is so important, as well as how one can make it happen with the help of quite a few examples.

Table of contents

• What is business model innovation?
• Why is it important?
• Examples of innovative business models
• How to create business model innovation

The Definition of Business Model Innovation

One of the common mistakes people make when it comes to business models is that they simply look at them very narrowly as just the pricing model for their products and services.

While it certainly is a key part of the business model, the term is actually defined as the way an “organization creates, delivers and captures value”.

Business model is the way an organization creates, delivers and captures value.

Successful business models thus take a very holistic approach by integrating these different aspects of the business into a well-organized and thought out system.

Business model innovation, then is simply a novel way to put these pieces together to hopefully create a system that produces more value for both customers and the organization itself.

Why Is Business Model Innovation So Important?

Without realizing it, a business that doesn’t explicitly focus on their business model as a whole often ends up compromising their initial strengths.

For example, many businesses start to gradually drift apart from the true needs of their customers unless they specifically focus on avoiding that. Some might focus too heavily on just optimizing the delivery of their products and sacrifice their ability to create value.

There are many reasons for these phenomena. Perhaps management focuses too heavily on what the competition is doing, or perhaps there’s pressure from shareholders to optimize for short-term profit.

Regardless, there are countless industries where the true interests of the customers and those of the service providers have become opposite.

The healthcare sector is a prime example of this: a private hospital has strong incentives for wanting you to be chronically sick so that you’d keep coming back regularly and they could charge you for each visit. You naturally want the hospital to take good care of you, but ideally, you’d just want to stay healthy and not have to go to the doctors’ in the first place.

Business model innovation is simply put probably the most important tool for building a business that creates maximal value for all stakeholders: customers, shareholders, employees, and the society at large.

This obviously leads to a wide variety of benefits :

• Increased value creation will lead to increased growth , even for otherwise stagnant businesses
• As business model innovation often requires new operating models and is thus often very difficult for established competitors to copy
• …which can lead to an extend period of competitive advantage
• The right kind of business model also helps overcome objections to sales and create positive brand recognition
• As mentioned, some business models can make the business much more robust towards market cycles and unexpected “black swan” events, such as the recent COVID-19 crisis

To conclude, business model innovation is a flexible tool for building a great business irrespective of the industry. That’s why you’ll see most of the fastest growing and most disruptive businesses including business model innovation as a key part of their “innovation mix” .

Examples of Business Model Innovation

Before we get into the part where we look at how to actually do business model innovation, let’s first take a look at a few examples of business model innovation to get a better picture of what it can look like in practice.

Subscription models

Subscription models are a powerful way to turn one-off purchases to a more predictable, and over time larger, stream of revenue while ensuring that the customer keeps getting value and is also able to better afford higher-end services due to the purchase occurring over time.

Subscription models are equally applicable for both B2B and B2C businesses.

On the B2B side, Software as a Service (SaaS) products like Microsoft Office 365 and Infrastructure as a Service (IaaS) offerings like Amazon Web Services are great examples of this approach.

Subscription businesses tend to have quite distinct, straightforward value chains but do require some capabilities that many product businesses might not be very strong at, such as delivery and customer support.  

Freemium is a portmanteau of the words free and premium. It refers to business models where a company offers a free version of their product, typically with certain limitations, in order to attract users and eventually upgrade them to paying “premium customers”.

For businesses with a good product, high gross margins and high customer acquisition costs, such as most content and software businesses, this can be a very powerful model, especially in crowded markets.

The Freemium model is quite common for B2B software products that tend to have bottom-up adoption like Slack and Zoom , but also for many B2C services, such as Spotify and Apple iCloud .

The downside is that without strong value creation, freemium models might make it difficult for the business to capture enough value.

In essence, platforms are places that aggregate and/or facilitate supply and demand meeting. Platforms are characterized by their distributed approach to creating value.

In practice that means that they’re basically either matchmakers or marketplaces, but still come in many shapes and forms. They typically earn money by either taking a commission of the transactions, or by charging the supply side for the value-added services they provide.

These days you mostly hear the term being used for digital platforms, but the business model far predates online services. Shopping malls and classified ads in newspapers are just a couple of examples of traditional platform business models.

The challenge with platform business models is that it's often really hard to get platforms off the ground and achieve a critical mass where they become self-sustaining.

Direct-to-Consumer (D2C)

Both consumer and industrial goods manufacturers have traditionally relied on a, often complicated, supply chain of wholesalers and retailers to sell their goods.

Before the Internet, that allowed them to have a much larger geographical reach and thus benefit from economies of scale.

However, with the rise of e-commerce, we’ve seen a rapid rise in the popularity of the Direct-to-Consumer business model in many categories of consumer goods.

This approach provides the manufacturer with higher margins as the middlemen are removed, gives them much more control over the brand, customer experience and relationship, and provides them with more data, that is also of higher quality, on demand and customer preferences.

Ads, affiliates & sponsorships

For as long as there have been content and communication channels, there’s been advertising in one form or the other, and that hasn’t changed recently.

With the rise of the Internet, smartphones, and the democratization of content creation, we’ve seen a dramatic increase in content, which has made the traditional business model of monetizing content with advertising and sponsorships harder since there’s so much more competition for people’s attention.

For the right kind of audiences, typically in very specific niches, it can still be a viable business model in itself and for other businesses with a sizeable following, it can become an additional secondary source of income.

For example, while Spotify generates the vast majority of its revenue and profits from its subscribers, advertising revenue does provide the company with a solid secondary revenue stream that can be used for investing in growth.

Loss leaders & add-on services

While there’s nothing new in selling professional services, we’ve seen many interesting novel business models built around them.

A great example of this is the business model of open source software companies like WordPress, Red Hat and Elastic . These companies have built very popular open source software products that they let other companies use completely for free.

When you give away great software for free, it tends to become extremely widely adopted, as has certainly been the case for the aforementioned three products. Without the open source model, these companies would never have been able to reach the kind of market share they’ve actually managed to get to.

Once their products have been adopted at scale, the open source companies are obviously well positioned to either sell professional services or offer hosting services for this large base of users.

The same basic logic of giving something away for free, or at a loss, and then sell additional products or services to that wider customer base is also known as a loss leader strategy. It has been widely adopted across many industries, such as retail where stores might offer a real bargain for certain attractive products to lure in more foot traffic.

In general, selling maintenance contracts and other add-on services has become a ubiquitous business model especially in B2B, but also for more expensive B2C products, such as cars.

Razor & blades

Interestingly, just like with so many other stories of innovation , the story of the business model being invented by Gillette when he first created disposable razor blades isn’t true . In reality, it was invented by the competitors that entered the market once Gillette’s patents expired.

Since then, the model has been adopted by many companies selling goods like film cameras, printers and Nespresso capsules .

While the aforementioned examples cover some of the innovative business model patterns that we’ve seen gain popularity in the recent years, there are many others as well: franchising, auctions, micropayments, pay-what-you-want , the list goes on.

The Business Model Navigator is a very convenient and easy-to-use tool for browsing these patterns.

There are literally countless ways you can combine the different business models together with different product and service offerings to try to maximize the value created by your products and services.

Another example of this is Peloton . They sell high-end exercise equipment like bikes and treadmills for home use, and couple that with a subscription service that provides exercise programs, virtual classes and many other engaging features to accompany the bike. According to the company, even though their devices are quite expensive, they aim to sell them at break-even and then make money with the subscriptions.

This obviously means that to make a profit, they need to ensure that their customers stay motivated and keep exercising, which is what ultimately keeps them fit and creates value for everyone involved.

The leadership of the company may not have managed the business optimally, which has led to severe financial challenges after the lockdowns ended but that doesn't take anything away from the fundamental strength of the business model. Still, this is a great reminder that while a strong business model is a great foundation, there's more to running a successful business than that.

How Do You Create Business Model Innovation?

The examples above have hopefully provided you with some inspiration on what kind of new business models might be possible.

However, if you’re looking to create a business model innovation for your business, here are a few tips that can help you find the right model for you.

1. Start with customer value

The first step, as with every innovation, is to start with customer value.

• What is “the job” that the customer wants done?
• What are the obstacles that currently prevent them from getting the job done?
• What are your customers now using to get the same job done, or why are they putting off doing it?
• How do they know if the job is done or not?

Once you have a clear answer to these questions, you’ll already be well on your way.

2. What are your strengths?

Every business should obviously build their business models to benefit from and take advantage of their own strengths and unique capabilities.

For example, if you have plenty of data and when and how your products break, you’re obviously the party that’s best positioned to provide novel maintenance services, or maybe even insurance for these products.

3. What are your objectives for the business?

Some businesses want to focus on profitability, others want to grow as much as possible, and some simply want to do as good of a job as possible for their customers.

These goals ultimately matter a lot when you’re trying to design the perfect business model as different business models are better suited for different kinds of goals.

Some companies might simply want to find ways to expand their current business with minor tweaks to their model where others might be looking for bigger, more transformative kind of changes.

For example, if you’re looking to maximize growth, you should choose a business model where the customer gets almost all of the value and keep costs down to maximize adoption.

In the short term, you will take a financial hit compared to some of the other models, but this can make the business unattractive for competitors, thus providing you with a big competitive advantage in the long run. The Freemium and open source models are obvious examples of this approach.

4. Look for patterns by benchmarking leading innovators

As mentioned, the best business models are tailored to the needs of your customers, the characteristics of your industry, as well as your business objectives.

Thus, whenever you’re looking to design a new business model, it’s usually a good idea to benchmark what the most innovative companies in the world are currently doing.

You should obviously know where your competition is but remember that the point of business model innovation is to find a way that allows you to provide much more value than they do, either at a lower price or with better margins, maybe even both, so don’t just copy them!

Thus, the best benchmarks are often from very different industries.

As mentioned, the Business Model Navigator is a great resource for this benchmarking process. It’s a website that features 55 different business model patterns that you can try to apply for your own business, including most of the examples we presented above.

5. Put it all together to identify the right model

The next step is to combine your findings from steps 1, 2, 3 and 4. Find ways where you can create as much value for your customers as possible, that uses your strengths, and allows you to capture a fair share of that revenue as determined by your business objectives.

This is obviously the creative part, so it might take some time and effort to get this right, but remember that you can always look at the examples we’ve mentioned above.

On the other hand, if you are selling products, you probably want to turn one off sales into a more predictable stream of revenue, as well as grow the amount of business you get from each customer. In this case, the solution is to either sell add-on services that help your customers make the most out of your products, or to look for ways that you could use to turn those one-off product sales into subscriptions with some service components.  

6. Validate and iterate

As with any other kind of innovation, you typically don’t get business model innovation right the first time around either.

In the end, the only way to know if it works is by testing the business model in practice.

The challenging part with many business model innovations are that they often require drastic changes to your current operating model, which you obviously shouldn’t do unless you have strong evidence for the transition being worth it.

Thus, it’s crucially important that you validate the assumptions that you’ve done in the steps leading to this point, starting from your most critical assumption , and pilot that with a small subset of your customers.

Validating the business model at smaller scale obviously saves costs and resources, but has another key advantage: speed. Learning and moving fast is essential for innovation success.

Learning and moving fast is essential for innovation success.

It can sometimes take quite a few of those tweaks to figure out the right business model, even if your products are brilliant, which is why you need to learn, iterate, and move fast when your window of opportunity is still open.

To conclude, business model innovation is a powerful, yet still very underappreciated tool.

It’s one of those topics that is quite straightforward to get the hang of, and can thus help make a difference quite soon.

If you’re not seeing the business results you think you should be getting with your products and services, or you’re looking to take significant market share from entrenched competitors, give business model innovation a try.

If you want a powerful tool to get started with your innovation process, you might want to try Viima ! It takes just minutes and is completely free.

And, consider joining the thousands of innovators already following our latest articles!

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How to Come Up with an Innovative Business Idea

• 21 Jul 2020

Entrepreneurship is the pursuit of opportunity beyond currently controlled resources. By definition, entrepreneurs seek to fill a need in a new way.

For aspiring entrepreneurs, however, generating strong, novel business ideas can be challenging.

If you’re interested in being an entrepreneur , brainstorming ways you can satisfy needs and solve problems is a good place to start.

Remember the golden rule of brainstorming: There are no bad ideas. As your thoughts flow, jot them down so you can later prune the list to focus on your strongest concepts.

Here are some thought-starters for coming up with innovative business ideas and examples of how entrepreneurs have used them to build successful companies.

Access your free e-book today.

How to Come Up with a Business Idea

Is there an easier way.

One place to start brainstorming potential business ideas is by asking yourself, “What task can I make easier?”

A common denominator for successful businesses is their ability to fulfill customer needs . In this case, the need is to create a product or service that makes people’s lives easier.

Related: How to Identify an Underserved Need in the Market

The most innovative businesses have flourished from simple ideas. For example, HelloFresh has taught people how to cook and provided tools to prepare meals more efficiently. It started with a need to make meal planning and grocery shopping easier. By preparing meal kits that directly fulfill busy people’s needs, this idea has seen major growth.

Check out our video on how to come up with innovative business ideas below below, and subscribe to our YouTube channel for more explainer content!

This method of creating a product to fill a need can be viewed through the lens of Harvard Business School Professor Clayton Christensen’s jobs to be done theory , which he presents in the online course Disruptive Strategy .

“A ‘job to be done’ is a problem or opportunity that somebody is trying to solve,” Christensen says. “We call it a ‘job’ because it needs to be done, and we hire people or products to get jobs done.”

Look for these kinds of opportunities in your own life. Every “job” presents an opportunity to create an easier way to get it done.

By centering your business plan on a particular need, you can increase your chances of building a profitable business.

Related: Jobs to Be Done: 4 Real-World Examples

Can I Make This More Accessible?

There are many useful products and services that aren’t readily available to the entire market, creating an opportunity to produce a similar, more accessible product offering.

The founding of Airbnb by Brian Chesky and Joe Gebbia is an example that HBS Professor William Sahlman uses in the online course Entrepreneurship Essentials .

“Chesky and Gebbia observed how hard it was to find housing during big local events,” Sahlman explains. “They decided to list online three air beds in their apartment for people coming to San Francisco for a design conference.”

From there, they added a third member to their founding team, Nathan Blecharczyk, who built the platform for connecting people with spare rooms to travelers needing a place to stay. They called it AirBed and Breakfast, which later became Airbnb .

Chesky and Gebbia noticed hotel rooms weren’t easy to book during large events, recognized a business opportunity, and devised a solution to fulfill a need for accessible, short-term lodging.

There are countless industries and companies whose offerings are inaccessible to certain market segments or during specific periods. Consider how you might fill those needs.

Related: 10 Characteristics of Successful Entrepreneurs

What Can I Improve About This?

For every successful product offering, there's a multitude of ways to make it better. Think of companies you admire and imagine how you could improve their products. As you do so, consider the following four factors.

1. Delivery Process

Your business idea doesn’t have to be entirely new—it just has to fill a need. If you can identify a more convenient way of delivering an existing service, it could be an opportunity for your business.

Uber is used as an example in Entrepreneurship Essentials . Taxis have existed for decades, but Uber delivered its services in a new, innovative way by linking drivers in their own cars to customers via an app.

This example also shows there are no limits to what type of business you can create. Your business’ ability to fulfill a need will matter more than whether it’s a brick-and-mortar or online business.

Related: 3 Effective Methods for Assessing Customer Needs

2. Location

One of the simplest improvements to a product or service is bringing it to a new location.

Returning to the Uber example in Entrepreneurship Essentials , ride-sharing company Didi was founded in China—a location Uber hadn’t yet reached. Didi used a similar platform and model as Uber but filled a location gap Uber had left open.

What products, services, or concepts have you experienced in other places that you’d like to bring to your community?

One improvement that can make a significant impact is cost. Determining how to make a high-quality equivalent to a leading product and offer it for a fraction of the price has great potential.

Home security brand Wyze was founded using this logic. After four ex-Amazon employees discovered they could produce high-quality security cameras and sell them for one-tenth the cost of leading competitors, they sold one million security cameras in their first year as a company.

It takes testing to ensure product quality isn’t sacrificed for a lower price, but finding a way to reduce the cost of an in-demand item could jumpstart your entrepreneurial journey.

4. Customer Experience

Taking an existing offering and improving the customer experience for all or a segment of the market can be a valuable way to fill a need.

One example of an organization that’s done this well is Wanderful , a platform that, similar to Airbnb, connects travelers to locals who can offer lodging and travel advice—with the provision that all users are women.

Beth Santos, founder and CEO of Wanderful, noticed that female solo travelers made up 11 percent of the travel industry , which failed to take into consideration the safety, gender norm, and cultural concerns of women traveling alone.

She improved this experience by creating a network of women that can be tapped into for lodging, travel advice, or just a friendly face in a new location. Wanderful has since expanded its mission to give female and non-binary travelers voices in the travel industry through conferences, communities, and recognition programs.

If there’s an opportunity to improve the experience of a specific group of people, act on it and see where the opportunity leads.

Related: 6 Questions to Ask Before Starting a Business

Is It Time to Pivot?

When starting a business, you may need to pivot from your original idea as new needs arise in the market.

For instance, Jebbit , a tech startup that originally offered a platform to pay students for the advertisements they watched, saw a rising need for privacy and consent in the consumer data space. It pivoted to create a platform for secure, declared customer data.

Another instance in which it makes sense to pivot is during technological evolution.

In Disruptive Strategy , Christensen explains that technological advancements can be either sustaining or disruptive innovations , depending on how they impact your company.

Take Netflix : The service was created to allow people to watch movies without going to the video store and accomplished this by mailing DVDs to customers’ homes with prepaid return envelopes.

When streaming came on the scene in 2007, Netflix implemented the new technology into its business model and has continued to adapt as it’s evolved. Because Netflix was able to adopt new technology to continue serving its customers, streaming was a sustaining innovation.

In the case of video store Blockbuster , streaming was a disruptive innovation that it tried but couldn’t affordably adopt. It ultimately led the business to shut down.

When technological advancements arise, think of how your current business model could shift to use innovation as a sustaining force.

More Examples of Innovative Business Ideas

As you think of ideas for businesses, take inspiration from the world around you. Analyze the foundational needs other businesses have fulfilled for society and how they’ve adapted to what customers want.

Remember: As a future business owner, it’s critical to understand your company’s core mission. Focusing on that can help align your startup ideas and provide a greater chance for success.

To gain even more insight and inspiration, consider the following examples, which show how diverse your business model and mission can be.

Notarize , the first online platform for legally signing and notarizing documents is just one example of an online startup that discovered an overlooked need. For many, it’s a hassle to find a notary public to sign a document in person. This prompted Pat Kinsel, founder and CEO of Notarize, to make this difficult, but necessary, task more convenient.

"It really struck me that notarized documents are often some of the most important things people sign, and yet, we have this system that’s 100 years old," Kinsel said in an interview with Inc .

Kinsel designed the Notarize app to connect people to licensed notary publics via video chat so they can see their documents signed in real time.

This need for notarized documents seemed to be a common, but overlooked, need for many professionals. By thinking outside the box, Notarize seized a business opportunity and brought it to its fullest potential.

The development of Starbucks under former chairman and CEO Howard Schultz is another example that highlights how to efficiently choose locations for your brick-and-mortar.

“Schultz admired the sidewalk coffee shops he’d visited in Italy and decided he would introduce the same basic idea in the United States,” Sahlman says in Entrepreneurship Essentials. “That venture became Starbucks.”

Now, it’s rare to walk a few blocks without seeing a Starbucks on a corner. Strategic locations within high traffic routes created a customer base that’s made Starbucks an essential part of their lives.

Perhaps one of the most well-known companies in the world, Amazon is a prime example of fulfilling people’s need for convenience.

This e-commerce business made it the norm to buy items online—including books, music, movies, housewares, and electronics—and have them quickly and conveniently delivered.

Think Like an Entrepreneur

Coming up with an innovative business idea isn’t difficult if you’re observant. By asking yourself key brainstorming questions, you can generate a list of business ideas that fill market needs, improve existing products, and make daily life easier and more enjoyable.

Do you want to turn an idea into a viable venture? Explore our four-week Entrepreneurship Essentials course, six-week Disruptive Strategy course, and other online entrepreneurship and innovation courses to discover how you can harness the power of innovation. Download our free course flowchart to determine which best aligns with your goals.

This post was updated on September 19, 2022. It was originally published on July 21, 2020.

About the Author

Business Model Innovation: What It Is And Why It’s Important

Industry Advice Business

Amazon launched in 1995 as the “Earth’s biggest bookstore.” Fast-forward 22 years, and that “bookstore” is now a leader in cloud computing, can deliver groceries to your doorstep, and produces Emmy Award-winning television series. 

The trillion-dollar organization has achieved this growth by being continuously willing to innovate upon its business model in order to address new challenges and pursue new opportunities. 

“Amazon is amazing at new business model development,” says Greg Collier, an academic specialist in   Northeastern’s D’Amore-McKim School of Business and the director of international programs for the Center for Entrepreneurship Education . “They look at themselves from a customer-defined perspective.”

That approach has helped Amazon scale because rather than rely on one revenue stream or customer segment, the company continuously asks “ What’s next?” This has allowed leadership to iterate on its business model accordingly, repeatedly experimenting with a process known as business model innovation .

As Amazon’s success demonstrates, this process can be incredibly exciting and impactful when you’re in control. However, when the need to innovate your business model is thrust upon you by outside forces, it can also feel quite disruptive. 

For instance, today, the novel coronavirus is causing tremendous shifts in both the national and global economy. Many companies are being forced to innovate and adapt their business models in order to meet these challenges, or else risk falling victim to these drastic changes.

Read on to explore what business model innovation is and why it is so important for businesses to be capable of change.

What Is Business Model Innovation?

A business model is a document or strategy which outlines how a business or organization delivers value to its customers. In its simplest form, a business model provides information about an organization’s target market, that market’s need, and the role that the business’s products or services will play in meeting those needs. 

Business model innovation , then, describes the process in which an organization adjusts its business model. Often, this innovation reflects a fundamental change in how a company delivers value to its customers, whether that’s through the development of new revenue streams or distribution channels.

Business Model Innovation Example: The Video Game Industry

Amazon is not the only company known for continuously innovating its business model.

The video game industry, for example, has gone through a number of periods of business model innovation in recent years, Collier says, by envisioning new ways in which to make money from customers.

When video games were first created, the consoles that housed them were expensive and bulky, which put them out of reach of most consumers. This gave rise to arcades, which would charge customers to essentially purchase credits needed to play the games. 

As manufacturing processes and technological advancements made it easier to create smaller, more economical units, however, companies like Atari took advantage of the demand by selling units directly to the customer—a massive departure from what had been the accepted practice.

More recently, game developers have had to undergo rapid business model innovation in order to meet the evolving demands of customers—many of whom want to be able to play their games right on their smartphones. 

Originally, many companies adjusted their practices in order to put their games in this format, charging consumers a subscription fee or making them pay to unlock new levels. Some of those businesses, however, were able to innovate their business models to make gameplay free to the end-user by incorporating in-app advertising or selling merchandise such as T-shirts and plush toys. This practice, they found, was able to dramatically increase their reach, while also bringing in substantial funds from consumers.

As Collier notes, “Competitors can easily change how they price.” That’s why it’s crucial for companies to consider how their products are being delivered.

The Importance of Business Model Innovation 

Business model innovation allows a business to take advantage of changing customer demands and expectations. Were organizations like Amazon and Atari unable to innovate and shift their business models, it is very possible that they could have been displaced by newcomers who were better able to meet the customer need.

Business Model Innovation Example: Blockbuster vs. Netflix

Take Blockbuster, for example. The video rental chain faced a series of challenges, particularly when DVDs started out selling VHS tapes. DVDs took up less shelf space, had higher quality video and audio, and were also durable and thin enough to ship in the mail—which is where Netflix founders Reed Hastings and Marc Randolph spotted an opportunity.

The pair launched Netflix in 1997 as a DVD-by-mail business, enabling customers to rent movies without needing to leave their house. The added bonus was that Netflix could stock its product in distribution centers; it didn’t need to maintain inventory for more than 9,000 stores and pay the same operating costs Blockbuster did.

It took seven years for Blockbuster to start its own DVD-by-mail service. By that point, Netflix had a competitive advantage and its sights set on launching a streaming service, forcing Blockbuster to play a game of constant catch-up. In early 2014, all remaining Blockbuster stores shut down .

“Blockbuster’s problem was really distribution,” Collier says. “DVDs inspired Netflix, and the technology change then drove a change in the business model. And those changes are a lot harder to copy. You’re eliminating key pieces in the way a business operates.”

For this reason, it’s often harder for legacy brands to innovate. Those companies are already delivering a product or service that their customers expect, making it more difficult for teams to strategize around what’s next or think through how the industry could be disrupted.

“Disruption is usually then done by new entrants,” Collier says. “Established organizations are already making money.”

Business Model Innovation Example: Kodak

By focusing solely on existing revenue streams, however, organizations could face a fate similar to Kodak. The company once accounted for 90 percent of film and 85 percent of camera sales . Although impressive, that was just the problem: Kodak viewed itself as a film and chemical business, so when the company’s own engineer, Steven Sasson, created the first digital camera, Kodak ignored the business opportunity. Executives were nervous the shift toward digital would make Kodak’s existing products irrelevant, and impact its main revenue stream. The company lost its first-mover advantage and, in turn, was later forced to file for bankruptcy.

Business Model Innovation Example: Mars

Mars started as a candy business, bringing popular brands like Milky Way, M&M’s, and Snickers to market. Over time, however, Mars started expanding into pet food and, eventually, began acquiring pet hospitals. In early 2017, Mars purchased VCA —a company that owns roughly 800 animal hospitals—for $7.7 billion. further solidifying its hold on the pet market.

“Mars looked at its core capabilities, which is what corporate entrepreneurship is all about,” Collier says. “It’s about looking at your products and services in new ways. Leverage something you’re really good at and apply it in new ways to new products.”

The Role of Lean Innovation

Implementing lean innovation is advantageous. Lean innovation enables teams to develop, prototype, and validate new business models faster and with fewer resources by capturing customer feedback early and often.

Collier recommends companies start with a hypothesis: “I have this new customer and here’s the problem I’m solving for him or her,” for example. From there, employees can start to test those key assumptions using different ideation and marketing techniques to gather customer insights, such as surveying. That customer feedback can then be leveraged to develop a pilot or prototype that can be used to measure the team’s assumptions. If the first idea doesn’t work, companies can more easily pivot and test a new hypothesis.

“This is a big part people forget to do,” Collier says. “Lean design allows us to rapidly test and experiment perpetually until we come to a model that works.”

Pursuing Innovation in Business

In addition to business model innovation, companies could also pursue other types of innovation , including:

• Product Innovation : This describes the development of a new product, as well as an improvement in the performance or features of an existing product. Apple’s continued iteration of its iPhone is an example of this.
• Process Innovation : Process innovation is the implementation of new or improved production and delivery methods in an effort to increase a company’s production levels and reduce costs. One of the most notable examples of this is when Ford Motor Company introduced the first moving assembly line, which brought the assembly time for a single vehicle down from 12 hours to roughly 90 minutes .

The choice to pursue product, process, or business model innovation will largely depend on the company’s customer and industry. Executives running a product firm, for example, need to constantly think about how they plan to innovate their product.

“When the innovation starts to slow down, that’s when firms should be thinking of and looking at next-generation capabilities,” Collier suggests.

If a company is trying to choose where to focus its efforts, however, the business model is a recommended place to start.

“Business model innovation is often more impactful on a business than product innovations,” Collier says. “It’s Amazon’s business model that’s disrupting the market.”

Innovation Doesn’t Always Come Easy

While the examples above demonstrate that innovation is an important part of running a business, it’s also clear that it doesn’t always come easy. Corporate history is littered with examples of companies that were unable to innovate when they needed to the most.

Luckily, there are steps that business owners, entrepreneurs, and professionals can take to become better suited to pursuing innovation when an opportunity appears. 

Learning the fundamentals of how businesses and industries change will prove to be instrumental in enabling you to carry out your own initiatives. Assess and dissect the successes and failures of businesses in the past, and learn how to apply these valuable lessons to your own challenges. 

This article was originally published in December 2017. It has since been updated for accuracy and relevance.

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Innovation Strategy: Developing Innovative Strategies in Business

Published: 27 February, 2024

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Table of Contents

Innovation has become an imperative for organizations worldwide, yet the multitude of methods and frameworks available often lead to confusion rather than clarity. While various approaches focus on specific aspects such as user experience or design thinking , they often fail to provide a cohesive strategy for innovation from start to finish. An innovation strategy is key to capturing and  sustaining innovation , it serves as a detailed roadmap, comprising a series of strategic steps that propel an organization toward its future objectives. Beyond being a mere guide for business success, this roadmap is essential for ensuring a company remains competitive in its industry by continually devising new and innovative approaches to address challenges.

At Digital Leadership , our core belief is that by harnessing emerging technologies and innovative business models , we can revolutionize customer experiences. Crafting an innovation strategy is crucial for a company’s success. It entails fostering collaboration within the organization to stimulate new ideas and establishing a well-thought-out framework for future growth. It’s crucial to understand that no two innovation strategy plans are identical. 

We specialize in making and putting into action creative plans that work and help organizations not just accept innovation but to do well in the always-changing digital world through our innovation consulting services to bring business growth through innovation as an essential roadmap that leads enterprises towards their unique success. Utilizing our Innovation Blueprint service as a starting point provides a robust foundation for your business. We carefully assess how you currently approach innovation and smoothly integrate those practices into your overall business plan .

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Corporate training, innovation consulting and much more.

What is Innovation Strategy?

An innovation strategy is a planned and organized way of using new technologies and creative ideas to bring about significant changes in a company. It involves creating a detailed plan that closely matches the company’s main goals, encouraging a culture of constant improvement. Think of an innovation strategy as a commitment to a shared goal of innovation, including a structured set of activities designed to drive the future growth of the organization. 

Each innovation strategy is unique. This innovation strategy plan is more than just a guide for business success; it functions as a compass, steering the organization through new and creative approaches to address challenges. Developing a company innovation strategy includes clearly defining an innovation mission, aligning activities with long-term business goals , and promoting a culture that welcomes change and creativity. Following such a strategy ensures that organizations stay ahead in their industries, always adjusting and evolving to meet emerging needs.

Much more innovation approaches, you will find in our book  “ How to Create Innovation “.  Recognizing that innovation is a dynamic process, this guide emphasizes adaptability. Stay ahead of the curve by understanding how  innovation strategies  evolve with market dynamics, ensuring sustained relevance and competitiveness.

The Only Book On Innovation You’ll Ever Need

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Business Innovation Strategy: What is Innovation Strategy In Business

In the business environment, remaining competitive necessitates ongoing evolution to address evolving customer demands. Establishing an innovation strategy becomes imperative for organizations aiming to excel in this dynamic setting. One prevalent initial step in crafting such a strategy involves gaining a comprehensive grasp of the organization’s innovation initiatives and overarching business goals . This encompasses identifying the market landscape, comprehending customer requirements, and discerning the most effective strategies to optimize customer satisfaction while utilizing resources efficiently.

Once you have a grasp of your organization’s innovation landscape, the next step is to define a common innovation mission. This mission should align with your overall business strategy and focus your innovation efforts on creating value for your customers. An effective innovation strategy must also include setting specific innovation goals and metrics to measure success. By establishing clear objectives, businesses can better track their progress and adapt their innovation programs as needed.

So, Why are Innovation Strategies Important in Business

• Generating and capitalizing on returns from innovations serves as a primary source of competitive advantage.
• Complex and resource-intensive activities like R&D, product design, and collaboration can impact a firm’s competitive standing. Without strategic guidance, these efforts may yield fragmented and short-term outcomes.
• With globalization, firms face a multitude of opportunities and threats across various markets. A strategic approach to innovation helps navigate this landscape effectively.
• Organizational structures and innovation processes must align with the overall corporate strategy. For instance, R&D efforts may differ depending on whether the firm aims to lead or follow in innovation.
• Articulating long-term strategic objectives for innovation is crucial for engaging with public-sector policies, fostering collaborations, and attracting patient investors.
• A firm that prioritizes innovation strategically is more likely to attract talented individuals seeking opportunities for creative engagement.

The “UNITE Innovation Approach” Model acts as a guide for entrepreneurs to build a strong innovation strategy framework. This model smoothly combines market insights, aligns with business goals, and offers a structured way of generating and implementing ideas. By employing the UNITE model, entrepreneurs gain a strategic advantage, ensuring that their innovation efforts are intentional steps toward lasting success, not haphazard. 

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The UNITE Innovation Approach | Overview

Steps of developing innovation strategy framework.

Innovation is crucial not only for large corporations but also for small and medium-sized enterprises (SMEs). It serves as a vital competitive advantage and is often considered a core capability of firms. For SMEs, innovation is particularly important due to resource constraints, making it an effective means to enhance productivity and performance. However, research findings on Heineken Beverage Industry reveal that the organization’s innovative strategies, particularly in process, market, and product innovation, are weak and fail to significantly contribute to its performance and productivity levels. To strengthen their innovation efforts, SMEs can follow several steps in developing an effective innovation strategy.

Step 1: Innovation Strategy Setup

In the crucial first step of Setup within the innovation strategy , organizations lay the groundwork for success. This involves defining the business intentions and direction, outlining high-level Search Fields, and identifying detailed Opportunity Spaces. By articulating the Business Intention, organizations clarify the problem they aim to solve or the legacy they aspire to leave behind, ensuring alignment with organizational goals.

You can now access the complete Business Intentions Package, including a full presentation, related models and instructions for use.

The UNITE Business Intentions

Utilizing tools like the Search Field Matrix aids in analyzing dimensions like trends and market segments, guiding prioritization of areas for innovation within the overarching innovation strategy. Opportunity Spaces then pinpoint specific intervention sites, outlining Jobs to be Done and target customers in alignment with the innovation strategy’s objectives. Building the core team, led by an experienced entrepreneur, is essential for executing the innovation initiative effectively. Operating in a protected environment, clear goals are set for each stage, with regular updates provided to stakeholders, ensuring smooth organizational setup and progression through subsequent stages.

You can now access the complete UNITE DEFINITION OF SEARCH FIELDS & OPPORTUNITY MATRIX, including a full presentation, related models and instructions for use.

THE UNITE Definition Of Search Fields & Opportunity Spaces

Step 2: problem/solution fit.

In step 2 of developing an innovation strategy, the focus is on achieving Problem/Solution Fit , and aligning customer needs with viable solutions. This involves three key streams of work: Stream A delves into understanding Jobs to be Done, Stream B crafts a Value Proposition, and Stream C defines the Business Model. Bringing the team up to speed is essential, involving active briefings with stakeholders and thorough research to refine objectives. Properly framing the broader objective, clarifying the JTBD, and conducting initial market research are vital steps before proceeding further, ensuring a solid foundation for subsequent actions.

You can now access the complete UNITE PROBLEM / SOLUTION FIT, including a full presentation, related models and instructions for use.

The UNITE Business Model Innovation Patterns

The Jobs-to-be-Done (JTBD) framework is a powerful tool for understanding customer needs and driving innovation. By focusing on tasks rather than demographics, businesses gain deep insights into their target market. Through qualitative interviews and quantitative surveys , companies validate insights and identify growth opportunities. This approach helps in creating solutions that precisely match customer needs, reducing the risk of failure and increasing market success. Continuous iteration based on customer feedback ensures a competitive edge in today’s customer-centric landscape. Embracing JTBD is essential for fostering innovation and delivering value to customers.

You can now access the complete JTBD Customer’s Job Statement Package, including a full presentation, related models and instructions for use.

The UNITE Jobs-To-Be-Done Statement & Map

It offers a systematic approach to understanding customer needs and shaping innovative solutions. By focusing on the tasks or objectives customers are trying to accomplish, rather than just their demographic or psychographic profiles, businesses can uncover deep insights into unmet customer needs and opportunities for improvement.

To effectively outline the tasks and activities customers undertake to fulfill their job using the UNITE Jobs-to-be-Done Universal Job Map, convene your team and set up a whiteboard or wall with eight columns representing the eight steps in the Job Map. From defining and planning to concluding, each step provides insight into the customer’s journey. For example, when purchasing a bottle of wine, steps may include defining preferences, locating a store, preparing by comparing options, confirming the choice, executing the purchase, monitoring the taste, modifying preferences based on satisfaction, and concluding the purchase experience. Understanding these steps is vital for developing solutions that precisely meet the customer’s needs.

You can now access the complete Jobs to be Done Universal Map Package, including a full presentation, related models and instructions for use.

At this stage, having gone through the Jobs-to-be-Done process and developed initial Customer Promises, we find ourselves within a relatively narrow solution space ripe for exploration using methodologies like Design Thinking. The next step involves translating these initial promises into robust solutions by treating each promise as a mini-opportunity Space. Ideation is the key here. We encourage exploring a plethora of ideas, ranging from ambitious “moonshots” to targeted solutions addressing specific but unsolved problems. It’s about being smart in approach, knowing when to think big and when to focus narrowly, all while keeping the original customer needs at the forefront.

To navigate this process effectively, we recommend leveraging frameworks such as the Value Proposition Canvas . This tool provides a structured approach to deep dive into the value proposition, ensuring alignment with customer needs and market demands. Crafting a robust value proposition isn’t just about generating ideas; it’s about understanding the core essence of what your offering brings to the table. By embracing ideation, divergence, and strategic frameworks, businesses can unlock innovation potential and create value propositions that resonate deeply with their target audience.

You can now access the complete Business Model Canvas Package, including a full presentation, related models and instructions for use.

The UNITE Business Model Canvas

(3) solution/market fit (mvp).

In step 2, we’ve pinpointed our customers’ needs, tested potential solutions, and outlined a solid business model. However, jumping straight into execution is risky. While we may have a good grasp of what our customers want, our concept hasn’t been fully validated yet. Step 3 of developing an innovation strategy, where customers actually buy and use our product, is crucial for true validation. Rushing into scaling before perfecting our concept can lead to wasted resources and the need for costly adjustments later on. It’s essential to ensure our business concept is finely tuned before expanding.

Innovation strategy hinges on the meticulous execution of a Minimum Viable Product (MVP) , a streamlined version of your offering that validates key business assumptions while conserving resources. The MVP approach, epitomized by Zappos’ early success, emphasizes real-world validation over elaborate prototypes, focusing on tangible customer experiences. Yet, challenges like imitation and reputational risk loom large, necessitating strategic differentiation and brand management. Moreover, maintaining quality is paramount, ensuring that the MVP not only functions but delights users, fostering genuine feedback. Executing an MVP entails two phases: development and launch, followed by rigorous testing and iteration. This iterative process drives continuous improvement , steering your innovation strategy towards tangible value creation .

You can now access the complete Unite Solution/Market Fit (MVP) Scorecard, including a full presentation, related models and instructions for use.

The UNITE Problem-Solution Fit & Minimum Viable Product (MVP) Scorecards

In the initial phase of MVP development and launch, four key work streams drive the process: Marketing focuses on brand development and campaign planning, while the Business stream refines models and tests pricing strategies. Product & UX teams develop and test the MVP, while Technology sets up technical infrastructure. Phase B shifts focus to live testing and tweaking, with Marketing launching test campaigns and Business refining operating models.

Step 4: Build & Scale Your Innovation Strategy

After countless tests and a number of pivots and iterations, you have quantitatively proven with real customers that you have achieved a Solution/Market Fit. In other words, your product works and customers have actually bought it! In Stage 4 of developing an innovation strategy, you will be shifting gears and moving from incubation (concerned with finding a working Business Model) to acceleration (building and scaling the identified Business Model). With your business concept now proven and well-defined, the next challenge is getting it to scale. That is the core purpose of this stage: to build and scale the business concept that you have been working on thus far and now get it out into the market to scale as quickly as possible. But moving from your business concept (the strategy) to an actual business (the execution) is inherently difficult. Many organizations fail to bridge the Strategy-Execution Gap , meaning they fail to implement the strategy, or business concept, they originally designed. According to the available statistics, up to 70% of organizations struggle with moving from strategy to execution.

One key ingredient we propose to overcome the Strategy-Execution challenge is to establish how you are going to execute using a well-defined and communicated Operating Model. The Operating Model Canvas emerges as a potent solution, offering a blueprint for execution. Establishing a well-defined and communicated Operating Model is pivotal in overcoming the Strategy-Execution challenge.

You can now access the complete GROWTH-HACKING PROCESS, including a full presentation, related models and instructions for use.

The Growth-Hacking Process

To ensure the effectiveness of the innovation strategy , it is imperative to embed innovation within the organization’s processes and overall strategic framework. This necessitates the allocation of resources, including time, finances, and skilled personnel, to innovation initiatives, while fostering a culture that champions and rewards innovative thinking.

By adhering to these guidelines for formulating an innovation strategy , businesses can position themselves for sustained success and growth amidst a rapidly evolving market landscape. Through a steadfast commitment to customer value creation and adaptability to uncertainty, organizations can pave the path to industry leadership through innovation.

Types of Innovation Strategies

Elaboration on innovation strategy typologies has been provided by various scholars (Freeman and Soete 1997; Goodman and Lawless 1994). These typologies encompass proactive strategies, characterized by technological and market leadership with a strong research focus, often associated with firms embracing first-mover advantages and taking significant risks. Active strategies involve defending existing technologies and markets while remaining agile to respond swiftly to emerging opportunities. Reactive strategies, on the other hand, are adopted by firms with a slower response to innovation, often prioritizing cost-cutting measures over technological advancements. Finally, passive strategies entail engaging in innovation only in response to customer demands, typically involving low-risk initiatives.

Examples of passive strategies can be observed among supplier firms in industries like automotive manufacturing, where lower-tier suppliers often rely on fulfilling specifications rather than driving innovation themselves.

1) Proactive Innovation Strategy

Being ahead in innovation defines successful companies that stand out in the ever-changing business world. These forward-looking organizations don’t just react to changes; they actively search for new opportunities and predict future trends. This proactive approach allows them to take control of the market by introducing fresh and distinctive products or services that capture consumer attention.

Within proactive innovation strategies, several paths contribute to an organization’s overall success:

• Product Innovation: At the core of being proactive in innovation is making new and groundbreaking products. Companies that do well put money into research and development, always trying to do things that haven’t been done before to meet new needs and go beyond what customers expect. Whether it’s using the latest technology or coming up with creative designs, creating innovative products is a big reason why these companies lead the market.
• Process Innovation : To ensure internal efficiency and stay ahead of the competition, organizations with a proactive innovation strategy focus on optimizing their internal operations. Process innovation becomes crucial, streamlining workflows, improving productivity, and fostering a culture of continuous improvement.
• Business Model Innovation : Recognizing that how value is provided and money is made is as crucial as the products themselves, organizations embracing proactive innovation strategies engage in business model innovation. This involves reimagining the fundamental structure of the business, exploring new revenue streams, and adapting to changing market dynamics.
• Open Innovation : Proactive innovators often collaborate with external partners, startups, or research institutions through open innovation practices. By tapping into a broader pool of ideas, expertise, and resources, these organizations enrich their innovation ecosystem and stay at the forefront of industry advancements.
• Sustainability Innovation: Forward-thinking companies, under a proactive innovation strategy, increasingly incorporate sustainability into their product development and business practices. This aligns with societal and environmental expectations, positioning them as responsible and future-ready entities.

Essentially, a proactive innovation strategy goes beyond mere adaptation; it positions organizations as catalysts of change, architects of the future, and leaders in industries where innovation is the key currency.

For instance, proactive innovators like DuPont and Apple exemplify a commitment to technological leadership through continuous innovation. Microsoft, employing an active strategy, strategically leverages existing technologies while adapting swiftly to market shifts. In contrast, firms like Dell may adopt a more reactive approach to technology adoption but remain proactive in their production and distribution models.

2) Active Innovation Strategy

Active innovation represents a dynamic approach for organizations to swiftly respond to market changes and evolving customer preferences. Embracing flexibility and agility, companies adopting this strategy proactively lead rather than merely follow in the ever-changing business landscape. Key aspects of the active innovation framework include:

• Proactivity : Organizations take the lead in meeting the needs of the continually evolving market.
• Incremental Innovation : Constant, small improvements to existing products or processes keep offerings up-to-date and aligned with customer preferences.
• Service Innovation: Beyond product creation, organizations focus on enhancing the overall customer experience by listening to customer feedback and adapting services accordingly.
• Adaptability : Rapid response to new demands, including staying abreast of technological changes.
• Technology Innovation: A pivotal component, organizations prioritize staying updated on technological advancements to provide modern solutions in the digital era.

Active innovation places a premium on a proactive mindset, swift actions, and a deep understanding of the market. This strategy positions organizations not only to navigate changes effectively but also to capitalize on new opportunities, establishing them as leaders in their respective industries.

3) Reactive Innovation Strategy

In the Reactive Innovation Strategy , businesses respond to market changes as needed. While not always the first to introduce groundbreaking products, these companies prioritize adaptability in the competitive environment. Cautious in their responses, organizations employing this strategy carefully evaluate market shifts before making changes. Though the pace of innovation may be slower compared to proactive approaches, this strategy holds advantages, especially in industries where stability and a deep understanding of market dynamics are paramount.

Strengths of Reactive Innovation:

• Adaptive Innovation: Enables precise adjustments in response to changes, maximizing resource utilization.
• Cost Innovation: Focuses on finding cost-effective solutions and operational efficiencies.

For organizations embracing Reactive Innovation , balancing responsiveness with forward-looking anticipation is key. While not always the first movers, strategic and well-timed responses to market shifts make them resilient players in the ever-changing business landscape. This approach proves particularly relevant in industries experiencing gradual changes, where staying attuned to market demands remains the primary focus.

4) Passive Innovation Strategy

In passive innovation , organizations show limited involvement in the innovation process , often missing opportunities and potential advancements. This cautious approach relies on established practices, avoiding proactive exploration. However, this passivity, while providing stability, can be a double-edged sword, risking stagnation in a quickly changing landscape.

• Imitative Innovation: Organizations that embrace passive innovation may tend to copy successful ideas from competitors or industry leaders, finding security in proven models but sacrificing the agility and originality of more proactive strategies.
• Stability vs. Stagnation: While passive innovation gives a sense of stability, organizations must be aware of potential downsides, including the risk of falling behind in industries where rapid advancements are the norm.
• Open Innovation Bursts : To counteract potential stagnation, passive innovation strategies may benefit from occasional bursts of open innovation. Drawing on external ideas and collaborations brings in fresh perspectives and helps maintain relevance in dynamic industries.

Developing an effective innovation strategy requires a comprehensive approach, incorporating key elements and following a systematic framework. By understanding the market, aligning strategies with business goals , and fostering a culture of innovation , organizations can stay ahead in the ever-evolving business landscape. The examples of successful innovation strategies from industry leaders further highlight the importance of innovation in achieving sustained business growth and competitiveness.

This nuanced understanding of innovation strategy underscores the dynamic interplay between technological advancements, market dynamics, and organizational capabilities, shaping firms’ strategic orientations towards innovation.

Innovation strategies vary widely, each tailored to specific organizational contexts and objectives. Also, there are five styles of Innovation Strategies

• Leadership ignites entrepreneurial energy within teams.
• Culture of rapid innovation and creation of new business models.
• Suitable for industries facing rapid changes.
• Management involves sharing the vision, establishing internal markets for ideas, and encouraging intrapreneurship.
• Managers innovate within existing business structures.
• Transformation of business structures over time.
• Ideal for companies seeking significant yet sustainable change.
• Management practices include experimentation, empowering teams, and customer-centricity.
• Exploration of new directions beyond existing strategic assets.
• Pursuit of radical change in response to limited growth opportunities.
• Management involves identifying crucial assets, encouraging cross-pollination of ideas, and seizing opportunities beyond core areas.
• Conducting low-cost experiments to overcome obstacles hindering major innovations.
• Cautious yet progressive approach to innovation.
• Suitable when significant opportunities are sensed, but details remain unclear.
• Management practices include goal-focused research, patience, and continuous exploration.
• Outsourcing creativity and investing in startups.
• Acquisition of promising startups.
• Feasible with available resources to leverage discoveries from smaller players.
• Management involves maintaining internal R&D capacity, scouting for acquisition prospects, and efficient integration processes.

Innovation Strategy of the Four main Types of Innovation

Four primary types of innovation —radical, architectural, disruptive, and incremental—provide a comprehensive innovation strategy framework for organizations to navigate the complexities of innovation and achieve their strategic objectives. Each type offers unique opportunities and challenges, catering to different levels of risk tolerance and resource availability. Understanding these distinct approaches to innovation is essential for organizations seeking to adapt, evolve, and thrive in an ever-changing marketplace. Let’s explore each type of innovation strategy in detail to gain insights into their applications and implications for organizational success.

• Radical Innovation : Radical innovation involves the development of entirely new technologies, products, or services that often disrupt existing markets or create entirely new ones. It represents a significant departure from current offerings and requires a high level of investment and risk.
• Architectural Innovation : Architectural innovation focuses on reconfiguring or redesigning existing systems, processes, or components within an organization to create new value. It involves changing the underlying structure or design of a product or service while keeping its core functionality intact.
• Disruptive Innovation : Disruptive innovation refers to the introduction of a product, service, or business model that fundamentally changes the way an industry operates, typically by targeting underserved or overlooked segments of the market. It often starts at the low end of the market and gradually improves to challenge established competitors.
• Incremental Innovation : Incremental innovation involves making small, gradual improvements to existing products, processes, or services over time. It focuses on optimizing and refining existing offerings rather than introducing radical changes, making it a lower-risk approach to innovation.

Innovation Strategy Examples

(1) apple innovation strategy.

Apple’s innovation strategy revolves around creating groundbreaking products that seamlessly integrate hardware, software, and services. Their focus on user experience and design sets them apart in the technology industry. This dedication matches the core of t he marketing innovation strategy – putting user happiness first by creating new and exciting solutions.

(2) Amazon Innovation Strategy

Amazon’s innovation strategy centres around customer-centric approaches, such as one-click purchasing, Prime membership benefits, and advanced supply chain management. Their focus on enhancing customer experience sets the standard for e-commerce.

(3) Tesla Innovation Strategy

Tesla’s innovation strategy includes advancements in electric vehicles, renewable energy solutions, and autonomous driving technology. Constantly pushing boundaries, Tesla exemplifies the essence of value innovation strategy, delivering cutting-edge solutions that reshape the automotive industry.

(4) Netflix Innovation Strategy

Netflix’s innovation strategy lies in content creation, personalized recommendations, and streaming technology. They continually invest in original content and technological advancements to stay ahead in the entertainment industry.

(5) Microsoft Innovation Strategy

Microsoft’s innovation strategy encompasses a diverse range of products and services, from operating systems to cloud computing. Their commitment to empowering individuals and organizations through technology fuels continuous innovation.

(6) Google Innovation Strategy

Google’s innovation strategy revolves around search algorithms, online advertising, and a wide array of digital services. Their commitment to organizing the world’s information and making it universally accessible drives innovation in various sectors.

(7) Nike Innovation Strategy

Nike’s innovation strategy focuses on product design, materials, and technological advancements in sportswear. They continuously introduce new technologies, such as Nike Adapt, to enhance athletic performance and customer experience.

Types of Innovation Strategies Examples

Innovation strategies can vary significantly depending on the industry, organizational goals, and market dynamics. Here are several types of innovation strategies along with examples:

• Example: Apple’s continuous development of the iPhone, introducing new features and designs with each iteration.
• Example: Toyota’s implementation of lean manufacturing principles, led to streamlined production processes and reduced waste.
• Example: Netflix transitioning from a DVD rental service to a subscription-based streaming platform, revolutionizing the entertainment industry.
• Example: Airbnb’s platform, enables individuals to rent out their properties to travellers, disrupting the traditional hospitality industry.
• Example: Procter & Gamble’s Connect + Develop program, which sources innovation ideas from outside the company to fuel new product development.
• Example: Tesla’s electric vehicles disrupt the automotive industry by challenging traditional gasoline-powered vehicles with innovative technology.
• Example: Coca-Cola introduces new flavours or packaging variations of its beverages to maintain consumer interest and market relevance.
• Example: SpaceX’s development of reusable rocket technology, aims to revolutionize space travel and exploration.

Elements of a Great Innovation Strategy

Crafting an innovation strategy plan entails navigating a dynamic landscape, demanding a flexible and multifaceted approach.

• Nurturing an Innovation culture : Establishing an environment that fosters creativity and embraces change is crucial for fostering innovation.
• Embracing Digital Transformation strategy : Incorporating technology to enhance processes and business models is a key aspect of digital transformation.
• Top-Level Endorsement: Securing commitment and support from senior leaders is essential for successful innovation initiatives.
• Strategic Resource Allocation : Wisely allocating resources to support novel and imaginative ideas is paramount.
• Customer-Centric Focus : Prioritizing and comprehending customer needs throughout the innovation process is indispensable.
• Agile Adaptation : Remaining receptive to agile methodologies facilitates swift adjustments to evolving circumstances.
• Performance Measurement: Implementing metrics to assess the success and impact of innovation efforts is vital.
• Investment in Research and Development: Devoting funds to research and development endeavors represents a valuable investment.
• Learning from Risks and Setbacks: Cultivating a culture that embraces risk-taking and views failures as learning opportunities is critical.
• Innovative Business Models : Continuously reimagining and innovating fundamental aspects of the business model adds a layer of dynamism to the innovation strategy.

In essence, innovation is the cornerstone of organizational longevity and competitive advantage. By embracing diverse innovation strategies such as technological advancements, architectural refinements, disruptive shifts, and incremental enhancements, businesses can unlock fresh opportunities and deliver unique value propositions. Whether through revolutionary changes or gradual refinements to existing offerings, innovation is pivotal for adapting to market fluctuations and seizing value.

Central to these pursuits is the evolution or reinvention of the business model. By aligning with customer preferences, organizations can develop innovative solutions that resonate with consumers, thereby bolstering market presence and fostering growth. Ultimately, a well-crafted innovation strategy empowers organizations to stand out from the competition, achieve objectives, and ensure sustained success in today’s fiercely competitive business arena.

Frequently Asked Questions

(1) what role do senior leaders play in achieving innovation strategy.

Senior executives wield significant influence in propelling innovation strategy forward. Their unwavering commitment, backing, and visionary guidance establish the organizational ethos. They allocate resources judiciously and foster an atmosphere conducive to experimentation and bold risk-taking.

(2) How is product innovation strategy delineated in business?

Product innovation strategy in business encompasses the formulation and introduction of novel or refined products to satisfy consumer demands and attain a competitive edge. It revolves around the conception of pioneering features, designs, or functionalities that distinguish the product within the market milieu.

(3) What delineates the trifecta of Innovation Strategies?

The trinity of innovation strategies comprises proactive, active, and reactive approaches. Proactive strategies entail a proactive quest for novel opportunities, active strategies pivot swiftly in response to market dynamics, while reactive strategies are triggered only by exigencies.

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Home » Employer Resources » Startup Center » What is Innovation in Business Model?: Types, Strategies, & More

What is Innovation in Business Model?: Types, Strategies, & More

Inspiring change in an organization remains one of the most daunting tasks today, yet it’s paramount if success is desired in the ever-changing business landscape. To get through this barrier, more than just brainpower is required. Business model innovations lessen the difficulties executives have trying to achieve a competitive edge while preserving their core company values.

In this blog, we help you understand and create innovative business models through various approaches and examples so that your business stays resilient in the face of competition.

Table of Contents

What is Innovation in Business Model?

Business model innovation involves developing and implementing changes within the organization’s operational procedures. This might involve making changes to how companies seek the target market, what goods or services they offer, and how they generate profit. 

Additionally, this type of strategy entails looking at ways to increase profitability while providing a unique competitive advantage that ultimately makes a business more successful in producing value-added results. A good business model, like any other system, is‌ integral and holistic. To achieve success, companies must make sure all components work together as an integrated whole.

How to Create Innovative Business Models?

Business model innovation involves developing and implementing changes within the organization’s operational procedures. This might involve making changes to how companies seek the target market, what goods or services they offer, and how they generate profit.

Here are some suggestions that might help you innovate your firm’s business model.

1. Understand Your Customers’ Needs:

Understanding what customers want and need is a crucial first step in creating any new model or concept. This starts with pinpointing the precise “job” they need done and developing a concise strategy that can be carried out through your invention. It also involves:

• Analyzing the existing situation and asking yourself, “Why is this work not being done at the moment?” 
• Exploring what strategies individuals are using to manage the issue, or why they put it off?
• Determining how will success finally be assessed by customers?

The answers to these three questions will provide a solid base from which an innovation project may continue without difficulty.

2. Analyze Your Strength:

Each company should carefully analyze its strengths and how they might add value to customers. Afterward, devise a plan to take advantage of those abilities. This often requires strategic partners or outside investment when the resources needed are beyond internal means.

 3. Understand the Objectives

When it comes to forming the ultimate business model, some organizations may be aiming for more sizeable transformations, while others just desire development through minor modifications. To ensure the success and attainability of these goals, structuring a plan that supplies value to customers and reduces expenditures can result in successful expansion over time. 

4. Tailor Customer Needs

The greatest business models are tailored in accordance with your company’s goals, the demands of your target market, and the specifics of your sector. Therefore, it’s often a good idea to benchmark what the most innovative organizations in the world are presently doing anytime you’re trying to build a new business model. You should be aware of your competitors, but keep in mind that the goal of business model innovations is to discover a method to offer more value than your competitors do with better margins.

5. Optimize the Best Models

It is important to think creatively and use your strengths when seeking out ways to create value for customers. This requires spending time crafting the right strategies, taking into account business objectives that will allow you to achieve a fair share of revenue generated by those efforts. 

Consider researching examples created by other businesses who have succeeded in this respect as inspiration or use matrices that offer comparisons with stated objectives. By doing so, you could identify customer-centric solutions aimed at generating real profit while properly monetizing these opportunities along the way.

In general, if you already provide services, your goal should be to expand your clientele and increase profit margins. The method to accomplish these objectives is to productize the value. If you are successful, you will offer most of the value for a fraction of the cost, which will inevitably allow you to grow the business to a much larger client base while also increasing the margins of doing so.

6. Evaluate

After incorporating the above-listed suggestions, it is important you evaluate the models you have adopted to know what to modify, change, or completely stop using. Business models are like every other innovation in business, you have to go through trial and error in order to know which model works best for your current needs. However, making significant changes to your current methods of operation can be a daunting task, especially without solid proof that it will be beneficial. Therefore, verifying proposed assumptions and taking those ideas out for testing with certain customers first are essential steps when introducing new business models. 

Doing so can conserve both funds and energy involved in full company adoption if the concept turns out unsuccessful. There’s still an added benefit, moving fast is incredibly important for success when attempting innovation efforts within the organization.

Strategies to Innovate Business Models

It is important for companies to realize that no two business models are alike and, by understanding the differences between them, they can pick an approach that works best in their particular situation. Below are the different approaches:

1. The Adapter Approach

Companies use this approach when it appears that the existing core business, even if updated drastically, may not be enough to combat major disruption. Companies that use this method explore businesses or markets adjacent to their current one and, in some instances, will abandon their original product entirely. An innovation engine must be created so adequate experimentation can take place aiming for a “new core” space with an effective business model at its center.

2. The Adventurer Approach

This is used to expand a business’s reach into new or adjacent territories. It requires an understanding of the organization’s competitive edge and strategic decision-making to determine how that strength can be leveraged in unfamiliar areas. This approach involves taking calculated risks in order to capitalize on unexplored opportunities, which could ultimately lead to success within those new markets.

3. The Re-inventor Approach

This approach is used in situations where the industry faces a serious challenge, such as the commoditization of products or new regulations. In this situation, businesses may find that their model for growth and profits has become unsustainable over time. To survive under these conditions, companies must modify what they offer customers to provide something superior and realign operations accordingly so it can be done profitably.

4. The Maverick Approach

The Maverick model innovation is an approach that scales the core businesses with the potential for greater success. This kind of innovative thinking involves utilizing one’s existing strengths and abilities to revolutionize an industry or create new standards. Staying ahead requires continual evolution and refinement, using a competitive edge to expand market reach and generate more growth opportunities.

Types of Innovative Business Models

Below are sample model innovations for businesses to incorporate in organizations to maximize sales and profit:

1. Freemium

The freemium is a combination of two words – ‘free’ and ‘premium’. This term relates to business models that allow organizations to offer their product or service at no cost while providing fewer features than paid-for options. The purpose behind this method is an attempt to draw in users who may eventually be willing to upgrade into paying customers with additional benefits associated with these premium plans.

2. Ads, Affiliates and Sponsorships

Advertising has been an integral part of content and communication channels for generations, but the way organizations choose to leverage it is changing in response to technological advances. The increased access to online media platforms gives brands more possibilities when trying to capture their target market’s attention. However, there is also a lot more competition since so many other businesses are attempting similar tactics‌. To bridge this divide between advertising strategies constructed by traditional methods over newer ones optimized within today’s high-tech society, advertisers must balance elements from both sides into one cohesive package that appeals to multiple ages and demographics.

3. Platforms

A platform generates its revenue by acting as a medium, it can either be online or offline. Although the phrase is now mostly used to refer to digital platforms, the business model predates Internet services by a significant margin. Traditional platform business models include but are not limited to, malls and newspaper classified advertisements. Additionally, with the use of platforms, you can explore multiple services. For those looking to expand their business, free job posting sites can be very helpful.

4. Razor & Blades

The razor and blades business model is an offshoot of the earlier popularized loss leader strategy. This involves providing goods at a much lower price, even though it will incur a loss at the organization’s end. However, profit can be made by the organization from making supplementary sales over time. Thus, this model involves selling goods at a loss to attract the customer, but later selling complimentary goods to cover the loss.

5. Direct-to-Consumer (D2C)

Prior to ‌the Internet, companies were limited geographically in terms of their reach and potential customer base. This led them to pursue economies of scale within smaller confines. But currently, with advancements such as e-commerce, there has been a dramatic surge in Direct-to-Consumer business models for consumer products across many industries. 

This method enables the manufacturers to earn higher profit margins since the presence of middlemen is eliminated. Additionally, this channel provided high-quality data regarding customer demand or preferences that proved beneficial for both sides involved in business transactions.

Every organization needs a business model innovation to scale through the economy of the current market. Effective use of innovative models can enhance growth and productivity, it is important to note that not all models can be used to achieve the same goal. Therefore, when a model doesn’t work, it is recommended to change to a different model as business models are tailored to each unique advantage.

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Shailja Kaushik has been an Editor with Internshala since March 2023. She loves creative writing and experimenting with different forms of writing. She has explored different genres by working with journals and radio stations. She has also published her poems and nano tales in various anthologies. She graduated at the top of her class with Bachelor's in English and recently completed her Master's in English from the University of Delhi. Her experiments with writing continue on her literary blog.

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Value creation through business model innovation in US healthcare

US healthcare leaders are actively pursuing innovative business models, including both vertical integration and pure-play specialization (Exhibit 1). However, the growth rates of these business models have diverged in the past few years. While no organization focuses on just one of them, business models that emphasize vertical integration have produced the strongest growth, our research finds (Exhibit 2).

Much opportunity remains across all types of business models; even among the fastest-growing models, not all organizations are creating value. Leaders who can align their organizations with drivers specific to their business model archetype could position them for superior value. This article offers an in-depth exploration of the business models that US healthcare organizations are pursuing.

Vertical-integration-focused business models

How to improve outcomes in vertically integrated models.

Vertically integrated models seek to develop a seamless connection across healthcare segments while creating value throughout the patient journey. Success of these models in enhancing outcomes and generating value relies on excelling in three areas:

Risk-bearing value-based care. Risk-bearing value-based care (VBC) models play an important role in aligning incentives across the healthcare ecosystem with the goal of providing higher-quality, lower-cost care. Today, delegated risk models with VBC are growing but still represent a minority of spending (for example, only about 30 percent of Medicare Advantage lives and 10 to 15 percent of commercial and Medicaid lives were in full and partial capitation models in 2022, based on McKinsey analysis and Kaiser Family Foundation data).

Expanding VBC arrangements beyond their current state (for example, Medicare Advantage primary care physician groups within health maintenance organization plans) will require meaningful innovation. This innovation could include accelerating adoption of appropriate VBC models within preferred provider organization plans (which constituted 40 percent of Medicare Advantage plans in 2023 1 Based on CMS Medicare Advantage Landscape Files 2019-2023. and have grown two times faster than health maintenance organization plans since 2019) and expanding into geographies such as rural areas.

In addition, a specialty-focused approach (versus primary care only) has potential for meaningful upside; for instance, McKinsey analysis suggests that an optimal treatment selection can yield a 15-percentage-point increase in EBITDA as a percentage of revenue for orthopedists who adopt a full specialty risk model.

Digital member and provider engagement. The success of vertically integrated models depends on ongoing engagement with members and patients to enable care outside clinical settings and to engender connections with the care team. Digital modes of communication, health monitoring and tracking, and support for enabling self-care are important drivers of integration of care.

Ambulatory and virtual care. Optimizing sites of care is a major driver of value in payer-centered IDN business models. Indeed, there is a greater than $250 billion opportunity through optimization of sites of care. 2 Shubham Singhal, Mathangi Radha, and Nithya Vinjamoori, “ The next frontier of care delivery in healthcare ,” McKinsey, March 24, 2022. In many instances, ambulatory care settings can offer shorter average visit lengths—25.0 percent shorter than comparable hospital outpatient visits—and lower complication rates, exemplified by a 1.1 percent total hip arthroplasty complication rate in ambulatory care services versus 5.2 percent in hospital outpatient departments. 3 Audra T. Clark et al., “Analysis of operating room efficiency between a hospital-owned ambulatory surgical center and hospital outpatient department,”  American Journal of Surgery , November 2019, Volume 218, Number 5, pp. 809–12.

There are two kinds of vertically integrated healthcare business models (see sidebar, “How to improve outcomes in vertically integrated models”):

• Traditional integrated delivery networks (IDNs) have existed for decades. These models, in which hospital-centric health systems own health plans, have continued to derive 65 to 70 percent of their revenue from care delivery. 1 Definitive Healthcare. From 2017 to 2022, they grew faster in overall revenue than pure-play hospital systems, unlocking value in areas such as Medicaid by taking ownership of total managed-care dollars. In Medicare Advantage, traditional IDNs have delivered higher quality scores than other business models, 2 CMS MA Stars rating, CMS enrollment database. but their relative lack of scale has left them unable to generate sustainable margins.
• Capital-light IDNs emerged only in the past few years. These vertically integrated models combine traditional payer and provider functions, but notably without owning capital-intensive acute-care facilities. There are two types of capital-light IDNs: payer-centered and provider-centered. We focus on these models below.

Payer-centered IDNs

This business model has a payer at the center accompanied by ownership, or strong alignment with and enablement, of physician groups, nonacute care delivery, pharmacy, and healthcare services and technology (HST) assets. This model had the fastest growth in revenue from 2017 to 2022, and its organic growth has been higher than that of pure-play payers. Inorganic growth has been robust, featuring an active programmatic M&A agenda focusing on small to midsize companies and scaling them rapidly by retaining spending from the members within their payer business. As a result, the proportion of revenue from nonpayer businesses has grown to almost half (Exhibit 3).

While payer-centered capital-light IDNs have delivered substantial growth, not all organizations are creating value (Exhibit 4). Deriving the benefits of vertical integration beyond volume aggregation is challenging. These businesses must focus on operating each individual area as well as the pure plays do while ensuring coordination that unlocks the value of vertical integration. The capabilities and operating rhythms required to accomplish this dual objective are difficult to master.

Provider-centered IDNs

This model includes physician aggregators, clinical risk-bearing management services organizations, and value-based care (VBC) physician-practice ownership. These IDNs generate value by improving patient outcomes and appropriately managing utilization of care. McKinsey analysis of organizations’ public filings found that leading provider-centered IDNs have reduced inpatient admissions per thousand by 40 percent compared with fee-for-service.

While it often takes a few years to deliver strong economic performance given investments in enhanced care, successful models are demonstrating average medical expense ratios close to 50 percent, according to McKinsey analysis of VBC organizations’ investor materials. But organizations pursuing this model face challenges, even as their number grows. These IDNs operate predominantly with Medicare Advantage members, leaving them exposed to changes in reimbursement and rule changes to risk adjustment. They also rely on capital markets to finance losses in the first few years, which is more difficult to do when interest rates rise and financing tightens. Lower scale and diversification raise the risks for these organizations. Nonetheless, improvements in outcomes and policy support for VBC suggest that organizations that can invest to promote fundamental practice transformation will continue to grow.

Pure-play, specialization-focused business models

Pure-play specialization models seek to promote superior performance through a focus on core activities. These models can derive considerable value by excelling in three areas:

• Productivity. Wage increases in the aftermath of the pandemic and persistent shortages in clinical labor have increased the importance of productivity. 3 US Bureau of Labor Statistics; Department of Health and Human Services, AAMC. The value of productivity is not only in reducing costs but also in removing low-value work often associated with staff burnout. This is only one example of productivity. Enhancing productivity across its four subcategories—administrative, technological, care delivery, and clinical—can improve healthcare efficiency by $1 trillion.
• Economies of scale. Scale plays a pivotal role in profitability within the market. The minimum scale required for payers to break even has continued to increase, necessitating strategic investments in scale in search of lower administrative costs, according to McKinsey analysis of financial data from the National Association of Insurance Commissioners (NAIC). In the HST segment, scaling has resulted in a noteworthy decrease in administrative loss ratios from more than 60 percent to 20 percent, accompanied by revenue increases, our analysis of company financial data shows.
• Automation, digitization, and application of artificial intelligence. Adoption of technology capabilities presents substantial opportunities. For example, in many nonhealthcare areas, AI technologies, including generative AI, have equaled or surpassed certain human capabilities. 4 OpenAI; GitHub data. Adopting these technologies to redesign business models can deliver 5 to 10 percent in net savings as a percentage of total costs. 5 David M. Cutler et al.,  The potential impact of artificial intelligence on healthcare spending , National Bureau of Economic Research working paper, number 30857, January 2023.

Facing severe economic pressure since 2022, leading pure-play health systems have taken steps to improve productivity across their businesses. In addition, they have attempted to gain scale. Some have pursued innovative approaches to building shared capabilities and obtaining new sources of revenue through partnerships. Some pure-play systems are expanding their ambulatory footprints. For example, one system repositioned its portfolio to increase focus on ambulatory surgery centers, leading to a substantial improvement in return on invested capital.

Pure-play payers have also pursued scale through partnership models and capability-oriented or tuck-in acquisitions. The larger payers have achieved higher growth as scale requirements have risen, particularly in Medicare Advantage. For example, about 60,000 lives were needed to achieve EBITDA breakeven in 2022, up from 15,000 lives in 2017, McKinsey analysis of NAIC data found. Unlike vertical-integration-focused business models that have delivered growth, many businesses pursuing pure-play models have yet to fully tap into the improvement potential of their businesses.

The healthcare industry has a value creation opportunity worth more than $1 trillion (Exhibit 5). 6 Addie Fleron and Shubham Singhal, “ The gathering storm: The uncertain future of US healthcare ,” McKinsey, September 16, 2022. In the past few years, more companies have grown through business models focused on vertical integration. Looking ahead, opportunity exists across both types of business models. To succeed, healthcare leaders should seek to clarify the business model their organizations are best suited to pursue. Then, they should build capabilities specific to the business model and strive for superior execution.

Shubham Singhal is the global leader of McKinsey’s Social, Healthcare, and Public Entities (SHaPE) Practice. Alec McLeod is an associate partner in the Boston office. Naman Bansal is a consultant in the New Jersey office.

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Case Study: How Aggressively Should a Bank Pursue AI?

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• George Westerman

A Malaysia-based CEO weighs the risks and potential benefits of turning a traditional bank into an AI-first institution.

Siti Rahman, the CEO of Malaysia-based NVF Bank, faces a pivotal decision. Her head of AI innovation, a recent recruit from Google, has a bold plan. It requires a substantial investment but aims to transform the traditional bank into an AI-first institution, substantially reducing head count and the number of branches. The bank’s CFO worries they are chasing the next hype cycle and cautions against valuing efficiency above all else. Siti must weigh the bank’s mixed history with AI, the resistance to losing the human touch in banking services, and the risks of falling behind in technology against the need for a prudent, incremental approach to innovation.

Two experts offer advice: Noemie Ellezam-Danielo, the chief digital and AI strategy at Société Générale, and Sastry Durvasula, the chief information and client services officer at TIAA.

Siti Rahman, the CEO of Malaysia-headquartered NVF Bank, hurried through the corridors of the university’s computer engineering department. She had directed her driver to the wrong building—thinking of her usual talent-recruitment appearances in the finance department—and now she was running late. As she approached the room, she could hear her head of AI innovation, Michael Lim, who had joined NVF from Google 18 months earlier, breaking the ice with the students. “You know, NVF used to stand for Never Very Fast,” he said to a few giggles. “But the bank is crawling into the 21st century.”

• Thomas H. Davenport is the President’s Distinguished Professor of Information Technology and Management at Babson College, a visiting scholar at the MIT Initiative on the Digital Economy, and a senior adviser to Deloitte’s AI practice. He is a coauthor of All-in on AI: How Smart Companies Win Big with Artificial Intelligence (Harvard Business Review Press, 2023).
• George Westerman is a senior lecturer at MIT Sloan School of Management and a coauthor of Leading Digital (HBR Press, 2014).

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Along with the departure of two senior executives, the cuts added to signs of turmoil at the electric car company.

By Jack Ewing

Signs of turmoil at Tesla multiplied on Monday after the electric car company told employees it would lay off more than 10 percent of the work force to cut costs and two senior executives resigned.

The job cuts, amounting to about 14,000 people, come as the company faces increasing competition and declining sales. The management changes and layoffs are a reminder of the unpredictability of Elon Musk, Tesla’s chief executive, at a critical time for the company.

Mr. Musk has not outlined a plan to reverse a decline in car sales, and he appears focused on long-shot ventures such as a self-driving taxi, rather than new models that would help Tesla compete with cars being introduced by established carmakers and new rivals from China.

“As we prepare the company for the next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity,” Mr. Musk told employees in a Monday morning email, a copy of which was reviewed by The New York Times.

“There is nothing I hate more, but it must be done,” he wrote.

Hours after that email, Drew Baglino, a senior vice president who has played a big role in the company’s rise from start-up to dominant electric car maker, said he had resigned.

“I made the difficult decision to move on from Tesla after 18 years yesterday,” Mr. Baglino said in a post on X, the social media site. Mr. Baglino is one of only three managers besides Mr. Musk listed as a top executive on the company’s website . His longevity was unusual at a company known for high management turnover.

Mr. Baglino may have been blamed for some of Tesla’s recent troubles, said Gary Black, managing partner of the Future Fund, an investment firm. “Someone has to take the fall for the sharp deceleration in deliveries growth, near record inventories, and declining margins and it wasn’t going to be Elon,” Mr. Black said on X.

Tesla also appeared to be losing an executive key to winning regulatory approval for self-driving technology. Rohan Patel, a former aide to President Barack Obama who was Tesla’s head of policy and business development, tacitly confirmed reports that he was leaving. In a post on X, Mr. Patel thanked his co-workers and Mr. Musk for “the past eight years at Tesla.”

“My plans are to be a recess monitor for my second grade daughter, practice my violin, go to a bunch of bucket list sporting events and take my very patient wife on some long intended travel,” Mr. Patel said.

Investors often welcome job cuts because they can lead to higher profits. But that was not the case Monday, with Tesla shares ending the day down more than 5 percent.

Tesla regularly culls its work force to remove employees whose performance managers consider weak, but the numbers are typically smaller. “This is something Elon and Tesla have consistently done throughout his career,” said Scott Acheychek, chief executive of REX Shares, which offers funds investors use to bet on or against Tesla’s stock. “Ten percent is pretty big,” Mr. Acheychek added.

Mr. Musk’s email to employees was earlier reported by Electrek, an online news site, and Handelsblatt, a German business newspaper.

Mr. Musk did not indicate where the cuts would be made. Many of Tesla’s workers are based at four large car factories in Fremont, Calif., Austin, Texas, and Shanghai and near Berlin. Tesla also has a factory in Buffalo that produces charging equipment and a factory near Reno, Nev., that makes batteries.

The layoffs may help the United Automobile Workers union’s efforts to organize Tesla employees in the United States. The company’s workers may be more open to the union if they believe that representation would give them greater job security. Workers at a Volkswagen factory in Tennessee will vote this week on joining the U.A.W., and Mercedes-Benz workers in Alabama will vote next month.

Mr. Musk’s many other ventures, and his penchant for making polarizing political statements, have raised questions about his focus on managing Tesla. Wall Street is increasingly concerned about the company: Tesla’s share price has lost about one-third of its value this year.

Many investors had expressed hope that Tesla would revive flagging sales by introducing a car that would sell for about $25,000 as early as next year, increasing the number of people who could afford the company’s cars and responding to competition from Chinese companies that are already selling electric cars for as little as half that price tag.

Mr. Musk cast doubt on those plans by announcing this month that Tesla would unveil a Robotaxi in August. The self-driving taxi is seen as a long shot, in part because even the most advanced systems available today sometimes make glaring mistakes. In addition, federal and state regulators will have to sign off before Tesla can put such taxis on the road.

This month, Tesla reported a decline in sales that caught investors off guard . The company said it delivered 387,000 cars worldwide in the first quarter, down 8.5 percent from the year before. It was the first time Tesla’s quarterly sales had fallen on a year over year basis since the start of the pandemic in 2020.

The company slashed prices significantly over the course of 2023 to increase demand, which has reduced the profit Tesla makes on each car. Last week, Tesla reduced the price of its most advanced driver-assistance software to $99 a month from $199. But price cuts appear to be losing their effectiveness. Tesla will announce its financial results for the first quarter on April 23.

Rivals like BYD of China, BMW of Germany, and Kia and Hyundai Motor of South Korea reported increases in electric vehicle sales for the same period, suggesting that slower overall demand for battery-powered models was not the only explanation for Tesla’s problems.

Established companies are closing the gap with Tesla on battery technology, and have been building new assembly lines to achieve the cost savings made possible by mass production. Honda plans to begin producing electric vehicles at a factory in Marysville, Ohio, next year.

Hyundai will begin producing electric cars at a new factory in Georgia in October, José Muñoz, the president and global chief operating officer of Hyundai Motor, said in an interview last month. Hyundai will also begin allowing customers to buy cars on Amazon, an answer to Tesla’s practice of selling cars online.

Mr. Muñoz said that customers had been willing to pay more for Hyundai electric cars than they would for comparable Teslas. “At the beginning, Tesla was premium,” he said. “Now we’re premium .”

Jason Karaian and Melissa Eddy contributed reporting.

Jack Ewing writes about the auto industry with an emphasis on electric vehicles. More about Jack Ewing

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