Four Methods of Business Model Innovation

As IBM Business Institute and Harvard Business School professor Christensen said, a company's business model is the basic method of doing business), which contains four parts: customer value proposition, profit formula, value chain location, key resources & processes.

Business model innovation is to change the basic operation methods of enterprises. In general, there are four ways: the revenue model innovation, enterprise model changing, the industry model innovation, and technology-driven innovation.

To change the revenue model is to change the definition of an enterprise’s customer value and the corresponding profit equation or revenue model. This requires companies to determine the user's new demands from the start. This is not looking for the new demands of users in the marketing category, but redefining the user needs in a more macro level, which is a deep understanding of what tasks users need to accomplish or what goals users want to achieve when buying your product. In fact, when users complete a task, they require not only the product, but a solution. once /confirm/ied, this solution will determine the new user-defined value, and turn the business model innovation.

From this point, Internationally renowned drill enterprises company Hilti to find the new users’ needs and re-confirm the user-defined value. Hilti has been providing a wide range of high-end industry drills for the construction industry, but in recent years, global competition makes drills become low-interest standard commodity. Thus, by focusing on what needs to be done by users, Hilti realized that what users really want is not a drill, but to get a drill in the best state at the right time and place. However, users have no enough integrated management capabilities of a large number of complex drills, which often results in schedule delays. Accordingly, Hilti immediately changes its user-defined value, no longer sells but rents drill, provides integrated management services such as drill inventory, repair and maintenance. Hilti changes its business model from the hardware manufacturer into a service provider, transfers manufacturing to third parties, and changes the profit model. Dell, Wal-Mart, Dow Corning, Zara, Netflix and Ryanair all make commercial model innovation like this. (www.chinainout.com)