Summary "Business model innovation: it's not just about technology anymore"

Topics: Strategic management, Value, Business model Pages: 2 (473 words) Published: November 16, 2014
Summary: “Business model innovation: it’s not just about technology anymore” by Henry Chesbrough According to Henry Chesbrough’s article, technologies can no longer be relied upon to earn a satisfactory profit, but instead innovation must include business models. A business model needs to function as both value creation and value capture. Value creation is the defining of activities that will yield a new product that in turn will create a net value. Value capture, in comparison, is turning those previously defined activities into an operation that will earn a profit. Along with these two functions, Chesbrough determined that “a better business model often will beat a better idea or technology.” In addition, Chesbrough points to six parameters in which innovation might generate new value in an industry: value proposition, target market, value chain, revenue mechanism, value network of ecosystem, and competitive strategy. These six parameters, therefore, could improve a specific business model if managers thought in business model advancement. The Business Model Framework sequences possible business model from basic to advance, with basic being least valuable and advance most valuable. Through this model, companies can understand their potential and therefore create the necessary steps for achieving success. According to the Business Model Framework, a company could have six different types of business models. The first type is when a company has an undifferentiated business model, that is when a business competes on price and availability, and serves customers who buy on those criteria. Type two is when a company has some differentiation in its business model, either in its products or services. The third type is a company that develops a segmented business model, in which the firm’s business model is more distinctive and profitable. Type four is when a company has an eternally aware business model, in which the company has started to open itself to...
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