Reinventing your business model: the 4 epicenters of innovation

Posted Oct 8, 2013, 6:15 am

Excerpt from New Generation Business Model, by Alexander Osterwalder and Yves Pigneur (Editions Pearson)

Ideas for new business models can come from anywhere (…). We can distinguish four epicenters of innovation: resources, supply, customers and finance. Each of the four epicenters can serve as: starting point for a major change in the economic model † In some cases, the innovation will emerge from different epicenters. Change is also often rooted in areas identified by: SWOT analysis: an exploration of strengths, weaknesses, opportunities and threats of an economic model

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These innovations are rooted in existing infrastructure or partnerships of an organization to expand or transform its business model.

Example > Amazon Web Services leverages Amazon’s existing distribution infrastructure to provide server capacity and data storage space to other companies.

Amazon website, 2013

Offer

This kind of innovation creates new value propositions that have an impact on the other blocks of the economic model.

Consult

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Example > when Mexican cement maker Cemex pledged to supply bulk cement to construction sites in four hours instead of the usual two days, the company needed to transform its business model. This innovation has helped Cemex, a regional player, to become the second largest cement producer in the world.

Customers / Consumers

These innovations are: based on consumer needs, better accessibility or more convenience. Like all innovations that arise from one epicenter, they affect the other blocks of the economic model.

Example > 23andMe has the DNA Tests in the Range of the Largest Number – a service until now reserved only for researchers and health professionals. This had significant implications for both the value proposition and the delivery of test results, for which 23andMe uses mass customization web profiles

23andMe Lab Tour

https://www.youtube.com/watch?v=6cYGPlQCeLA

Finance

Innovations based on new revenue streams, new pricing mechanisms or more efficient cost structures that affect the other blocks of the business model.

Another example

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Example > when Xerox invented the Xerox 914—one of the first plain paper copiers—in 1958, it was priced too high for the market. Xerox has therefore developed a new business model. The company has rental copiers $95 a month, package includes 2,000 free photocopies, and sold 5 cents per additional copy. Customers were won over and started making thousands of copies every month.

different epicenters

Innovations driven by multiple epicenters can have a significant impact on multiple blocks of the business model.

Hilti, website 2013

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Example > Hilti, the global manufacturer of professional construction tools, simply has: refrained from selling tools to its customers in order to rent them toolboxes† This represents an important evolution of the value proposition, but also of the revenue streams, as they now consist of: recurring service revenue

pearson

Title : Business model, new generation

Authors: Alexander Osterwalder and Yves Pigneur

Publisher: pearson

Publication date : August 2011

Number of pages : 281

Price : €35.50

Alexander Osterwalder is a consultant specialized in business models. Yves Pigneur teaches at HEC Lausanne.

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