Why is business model innovation challenging?

Business model innovation is challenging because it is a form of innovation that has not been often explicitly recognized and presents significant challenges for organizations.

‘When executives think of innovation, they all too often neglect the proper analysis and development of business models which can translate technical success into commercial success’ (Teece, 2010).

Chesbrough and Rosenbloom (2002) warn that the current business model as dominant logic can hinder organizations in defining new business models because ‘the choice of business constrains other choices, filtering out certain possibilities, even as other prospects are logically reinforced.’ In line with this, Zott and Amit (2007) state that more established firms may be more constrained by path dependencies and inertia than more entrepreneurial firms.

According to Johnson et al. (2008) companies are confronted with two challenges. Firstly, there is a lack of understanding into the dynamics and process of business model development in general. Secondly, most companies do not understand their existing business model well enough to determine when they can leverage it and when a new model is required.

References

Chesbrough, H., & Rosenbloom, R. S. (2002). The role of the business model in capturing value from innovation: Evidence from Xerox Corporation's technology spin-off companies. Industrial and Corporate Change, 11(3), 529-555.

Johnson, M. W., Christensen, C. M., & Kagermann, H. (2008). Reinventing your business model. Harvard Business Review, 86(12), 50-59.

Teece, D. J. (2010). Business Models, Business Strategy and Innovation. Long Range Planning, 43(2-3), 172-194.

Zott, C., & Amit, R. (2007). Business Model Design and the Performance of Entrepreneurial Firms. Organization Science, 18(2), 181–199.