Business Model Innovation

I found large differences in the organizational anchoring of Business Model Innovation BMI processes. BMI usually has a top management sponsor (C-level or C-level -1). In most companies, the BMI project lead is either a manager from the technology side with a background in research/innovation, or one from the business side, including members of the business unit management, product management, or business development departments.

From my experience Governance is a success factor – and is usually perceived as too weak: BMI is a task for the top management first of all. It needs to be sensitive to trends and opportunities and must give directions and incentives.

Governance is a central topic and needs to be allocated to an appropriate level with sufficient power and scope of control – ideally to higher or the highest management levels.

Top management sponsorship is not enough. A BMI project requires defined responsibilities and capacity to secure the entrepreneurial passion and drive behind it.

A conflict of goals arises between the practicality of delegating BMI management to lower levels and the required power/scope of control from higher levels. To overcome this conflict, you should designate BMI teams that assist managers from across the group with the BMI process by providing tools, know-how and a network:

At FOCUS I had a dedicated BMI team that helped client with their various businesses to push BMI from early analysis to implementation. Similarly, another few projects had established dedicated Idustry 4.0 units that were directly responsible for developing this field and driving BMI, exploited the opportunities from both the technical as well as the business model side.

These approaches were a way of ensuring that BMI projects are supported with appropriate leadership, relevant skills and entrepreneurial mind-sets. Not all companies, though, have dedicated resources or organizational structures for BMI management (support) in place, which is usually the case when BMI and product innovation processes have not been differentiated.

Companies with a dedicated BMI project team staff them from different departments to create an interdisciplinary unit (e.g., Sales, Marketing, R&D, IT, Operations, Legal, HR, etc.) and, in some cases, even cross-business units and cross-legal entities. However, the majority of project owners criticized weaknesses of internal interfaces, politics and silo mentality as a barriers to effective internal collaboration.

This is a significant problem as Industry 4.0 requires closer collaboration and integration between different departments, especially IT and Operations, but also with client-facing functions

“An important aspect is the close alignment of IT and operations/production – functions that usually don’t work well together due to different mind sets, cultures and paces.”

In my experience only in one case was internal collaboration praised as “open – including between organizational layers”, “enthusiastic”, and “intrinsically motivated”.

We even collaborate with intrinsic motivation beyond legal entities because employees are interested in the topics and feel they can contribute to change.

External partnerships became equally essential to complement skills, gain access to technology or markets, and benefit from the partners’ structures and management:

There are different approaches to partnerships, ranging from loose development partnerships to joint businesses with differing levels of success. Some companies rely on ad-hoc partnership management, while others introduce dedicated functions for partnering and offer guidelines and support for easier initiation, collaboration, and control.

I believe that professional partnering and openness of BMs is one of the core success factors in the course of Industry 4.0, given its requirement to combine and link interdisciplinary skills, data relationships, and value creation processes.

Corporate culture is another important contingency for BMI. I repeatedly experienced that bureaucratic structures and a conservative “company DNA” impede and delay BMI efforts.

In order to become more flexible, companies should establishing a more entrepreneurial mind-set with higher degrees of freedom and responsibility for employees as well as more advanced failure management:

In the Industry 4.0 environment in particular, where entirely new value propositions and value-generating structures will arise, a more entrepreneurial culture fostering openness, pragmatism, and strategic thinking with appropriate risk acceptance is required to overcome conflicts within rigid structures. This becomes even more relevant if existing business structures are disrupted directly. Accordingly, internal targets need to be aligned to incentivize joint BMI efforts.

Finally, Business Model Innovation requires dedicated resources and tools.

Their development and deployment is today to be scattered between companies. The bandwidth ranges from not having a dedicated BMI toolkit at all to having a sophisticated and IT-supported solution in place.

Frequently used tools are Osterwalder’s Business Model Canvas as a tool for structuring BM ideas

and Gassmann’s BM Patterns for creativity support. Interviewees appreciate the simplicity and practicability of these tools in a workshop setting.

Most clients however, criticized these tools as being too high-level, too restrictive within the parameters they defined, and lacking consistency over the entire process.

As an example, support for preceding analysis, like modelling the ecosystem, or for subsequent steps e.g., detailing, evaluation and implementation guidance, is not yet properly supported by the standard tools and templates available today.

Business Model Innovation for Industry 4.0 requires such tools to systematically analyze and understand relationships within the ecosystem and to define compelling value propositions. Thus, some companies modified and supplemented the tools with their own ideas.

We supported a client to developed a toolbox that included an analysis method for business ecosystems, a modelling tool for business models, a business model testing tool, as well as a framework for business planning which can be customized depending on project requirements. Our senior advisory team provides consultants with BMI know-how to the business units and assists with the management of the process.

A few companies have also adopted existing tools for product lifecycle and portfolio management for BMI. But overall, I conclude that the heterogeneity of tools observed indicates that there is a need for more and better tools.