Friday, May 23, 2008

Business model management

Business models may be used on a routine basis and in a systematic way as part of managing and operating an organization. This means incorporating business model design and innovation as part of a continuous and integral process in the organization. This is in particular relevant for organizations that deal regularly with introducing new business models and improving established business models. What is require from organizations that may want to do this?

For identifying and formulating business model opportunities and problems, it is helpful that the organization has business model awareness. All persons in the organization should understand what business models are (and what they are not) and what they can mean for the organization. In this way the identification and formulation of business model opportunities and problems can become much more effective and efficient.

It is advisable to experiment with new business models first to test them and to try out different models and variations. Business model experimentation requires fast and flexible cycles between business model design and innovation, implementation, and monitoring and evaluation. The capability to experiment with innovative business models can be an organizational innovation in itself. Moreover, experimentation can also enables an organization to develop the capabilities required by a particular business model and, therefore, be more ready for a full scale roll-out later. One of the advocates of business model experimentation is Chesbrough in his discussion of open business models.

It is also important to take into account that organizations can have multiple business models (sequential and parallel) and need to manage the dependencies. For the business model design and innovation this means that the organization has to take into account where synergies between business models can be created and where trade-offs are required. This may imply that an organization needs an overall business model vision that can guide them with making forward-looking and consistent choices. Mitchell and Coles address in their book ‘The Ultimate Competitive Advantage’ the continuous development of business models and the need for a business model innovation vision.

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