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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 success.

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.

2. Competitors
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.

3. Consultants
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 practices.

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 disruption?

6. Employees
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 competitive.

About the Author:
If you would like a free analysis of your business model, visit Business 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 publications.

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