Direct Marketing Article
Six Sources of Business Model Innovation
By Jim Muehlhausen
Savvy business owners understand that the best business plan will fail
without a solid business model. A business model is defined as the
proprietary methodology used to attract, service, and retain customers.
Simply put - Great business execution + lousy business model = a lousy
business. You can't outsmart or out-execute a stale business model.
All business models do go stale at some point. All you have to do is look at
former dynasties gone bad such as: Blockbuster, Playboy, Sears, Compaq, and
General Motors to see how business model innovation is critical to company
So how does an existing business improve the business model? The best source
of business model innovation is you. Who knows the industry or your business
better than you or your staff? However, if you are looking to augment your
own ideas, here are six places to find innovative business models:
1. Business books with case studies
Successful business owners learn from other successful business owners. One
of the best ways to innovate your business model is to learn from the real
life success and failed stories of other businesses. Think of all the great
stories and case studies in Tom Peter's book In Search of Excellence.
Peter's notes are interesting, however, what makes the book stand out are
the proven facts and studies. Avoid high-theory business books without
actionable content. Plenty of authors pepper real-world case studies into
their work - Focus on these books and you can take meaningful action from
everything you read.
If you can shut off your ego, you have much to can learn from your
competitors. Borrow their best practices and throw away their worst
practices. Don't forget to include indirect competitors in your list. For
instance, the indirect competitors of a restaurant might be: dieting,
grocery stores, fast food, and dinner co-ops.
Much like bumblebees cross-pollinate flowers, consultants collect
best-practices and cross-pollinate between businesses. Find a seasoned
consultant with experience in different industries to get the most best
4. Great companies outside your industry
Many businesspeople are closed-minded when it comes to finding ideas from
outside their own industry, when the truth is best practices and business
ideas can be found anywhere. In fact, my experience is that the best
best-practices always come from outside the industry. Outsiders do not have
the same constraints as those working in an industry a long time, therefore,
they are free to think more creatively. Work to find the commonality with
their business rather than the differences. Most of the time it is the title
insurance company that has the best practice for the metal working job shop.
That is, the oddball industry with seemingly no relevance to yours probably
has the best ideas.
5. Read the crystal ball
Your ability to predict the future within your industry can be a powerful
source of business model innovation. Once a year, look into your crystal
ball to evaluate if your current business model matches your vision of the
future of the industry. What trends can you ride? What markets are becoming
commoditized? How can we de-emphasize or exit these markets with little
Employees have a wealth of experience outside your business, both personally
and professionally. They can bring best practices with them from their
previous employers, family, friends, and general life experiences.
Additionally, forward-thinking employees can be an excellent source of
business model innovation.
Remember, every year that goes by, your business model, if unaltered, gets
weaker. You need to refresh your business model every so often to stay
About the Author:
If you would like a free analysis of your business model, visit
Model Evaluator. Jim Muehlhausen, author of "The 51 Fatal Business
Errors and How to Avoid Them." He currently serves as President of CEO
Focus, a national organization of business owners and is also a
non-practicing lawyer and CPA. The lessons in The 51 Fatal Business Errors
come from his own companies plus the 4000+ face-to-face coaching sessions he
has conducted with business owners. He has appeared in Inc., Entrepreneur,
MSNBC.com, ABC and NBC News programs, TheStreet..com, BusinessWeek.com,
Washingtonpost.com, numerous business journals and other business-related