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Creating and capturing value with Business Model Innovation

Updated: Jun 9, 2022

"Innovation is creating new value and/or capturing value in a new way. Value is the keyword, stressing the difference between innovation and invention.” This quote is from Victor Fernandes, one of the directors of the cosmetics company, Natura. It encompasses the meaning of business model innovation.

Innovating your business model is increasing important for companies as the world’s technology continues to advance, creating new ways of working and new consumer demands. During the Covid-19 lockdowns, many businesses were forced to innovate to keep trading in the new market conditions.

Looking at ways in which you can adjust the way your business captures or delivers value can be a useful exercise to stay ahead of your competition and ensure that you remain relevant in a quickly changing market.

One of the most famous examples of a business that failed to do this is Blockbuster, who, while streaming services such as Netflix began to dominate the market, insistently kept their brick-and-mortar stores, renting out physical films.

A more recent example of Business model innovation is Facebook, or Meta, which recently transferred its focus away from the social media platforms that had established its success and into the “metaverse”, or “the next evolution of social connection”. Not only would the Metaverse deliver value in new ways (through Virtual and Augmented reality experiences), but the requirement to buy the right technology to take part in these systems is also creates a new method for capturing value.

However, the success of this innovation is yet to be determined. One company that successfully innovated its business model is Microsoft, which launched Office 365 (now Microsoft 365) in 2017 as a subscription service for their Microsoft Office products and services that had previously been sold on a one-off basis. This allows them to collect income on a continuous basis as subscriptions are renewed monthly or yearly while offering users automatic updates and access to their files across all their devices.

To begin innovating your business model, it is important to consider what it is that your customer wants to do and the pains and gains associated with those tasks: the right side of the value proposition. Blockbuster’s customers just wanted to watch movies and, once it was no longer a necessity, the trip to the store to pick up and return physical DVDs became an insurmountable obstacle to the company’s continued survival.

Even small adjustments to a business model can make a surprisingly large difference and business model innovation is an effective tool to ensure continued growth.


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