Business Model Innovation: A New Path to Market
Written by Nevin Decroo on April 20, 2023
Welcome to the final post in a three-part series about innovation, where we’ll delve into the exciting world of business model innovation. In two previous posts, I covered Product Innovation and Process Innovation. Today, we are taking a deep dive into the final type, which focuses on how a product is offered to the market.
Many businesses tend to overlook the potential of innovating their business models, but companies like Airbnb, Uber, and Amazon have shown that it can lead to remarkable success. By taking direct aim at the status quo of how business is done, they have disrupted entire industries and changed the way we live.
In this post, we will examine the innovative approaches of these companies and how they have benefited from business model innovation. Get ready to be inspired and discover the power of reimagining your business model.
Business model innovation examples: Airbnb, Uber, and Amazon Marketplace
By reimagining the way products and services are offered to the market, Airbnb, Uber, and Amazon Marketplace have been able to disrupt traditional industries, offer greater convenience and flexibility to customers, and scale rapidly. While business model innovation can be challenging, these companies have shown that it can lead to remarkable success if executed correctly.
By creating an online marketplace that connects people with extra space to travelers looking for a place to stay, Airbnb has disrupted the hotel industry and changed the way people travel. By not owning any of the properties themselves, Airbnb has been able to scale quickly and keep costs low. They have also been able to offer unique and authentic travel experiences that traditional hotels simply can't match.
Similarly, Uber has disrupted the transportation industry by creating a platform that connects drivers with passengers. By not owning any cars themselves, Uber has been able to scale rapidly and keep costs low. They have also been able to offer greater convenience and flexibility than traditional taxi companies, as riders can easily request a ride using the Uber app and drivers can choose when and where they want to work.
Finally, Amazon Marketplace has used business model innovation to become one of the largest online retailers in the world. By allowing third-party sellers to sell their products on Amazon's platform, Amazon has been able to offer an incredibly wide selection of products to its customers without having to invest in inventory or production. This has also allowed Amazon to keep costs low and scale quickly, making it a formidable competitor in the e-commerce space.
The network effect
There’s a thread that ties the business models of Airbnb, Uber, and Amazon Marketplace together that I want to dive into next. If you notice, these three companies have disrupted their respective industries with just a platform. They don’t actually own the products or directly hire the employees.
At this point, you may be thinking, “I’ll just create a cool new platform for something, and I’ll be a huge success.”
It’s not quite that easy. Or else we’d all be on a boat in the Bahamas.
There’s something called the network effect. Essentially, a system gets stronger and more valuable to those involved when a large number of people are on it. As more users join the platform, the value of the platform increases, which in turn attracts more users, leading to even greater value. This positive feedback loop can be a powerful driver of growth and can lead to dominant market positions and high barriers to entry for competitors.
Achieving this network effect is difficult - it takes lots of people jumping on board and contributing in a meaningful way. It’s not something that can be forced. It’s the result of a strong value offering to everyone involved.
Some of the strongest business models are set up so everyone can benefit. Airbnb solves a problem for homeowners and travelers. Uber enables people to conveniently get somewhere while giving others a chance to profit. Amazon Marketplace connects independent buyers and sellers around the world.
Successful companies understand the importance of win-win innovation and prioritize it in their business strategies. By creating value for both sides of the equation, they are able to achieve long-term growth and sustainability in a competitive marketplace. I encourage you to remember this as you innovate your business model.
At Differential, we deliver product strategy, design, and software development solutions that make real impact. We’ve partnered with brands such as Big Ass Fans, Proctor & Gamble, Lexmark, TaylorMade, and Whirpool to build and launch new digital products and serve as their outsourced digital-innovation team to test new ideas. Reach out today to unlock value for your team.