This paper addresses business model innovation as a managerial and business concept and its significance for an organization’s performance and development.
Business model innovation is the process of mutually supportive and simultaneous changes of a company’s operating model and value proposition. At the level of value proposition to clients, changes may address the revenue model and the choice of products, services, and target segments. At the level of the corporate operating model, changes relate to competitive advantage value creation or profitability (Lopes et al., 2016). In other words, business model innovation is organizational strategies for growth, development, competitiveness, and the avoidance of decline.
Innovation is traditionally seen as a managerial and business concept as it is implemented for the improvement of management processes and the achievement of business goals. First of all, innovation may optimize organizational processes and lead to higher productivity of employees (Clegg, Harris and Hopfl, 2011). Moreover, innovation may reduce costs and increase profit by addressing clients’ expectations without increasing headcount. In addition, innovation may help a company build solid relationships with consumers through excellent customer service (Goffin and Mitchell, 2017; Dodgson, Gann and Satter, 2008). In addition, innovation adds value to business – first, it allows to creation a product or service that has never existed before (Satell, 2015). Second, innovation helps differentiate an existing product or service in a competitive market. Both principles may be observed using the example of Facebook. In 2004, an innovator Mark Zuckerberg, introduced a social network website in a format that had never existed before (Phillips, 2007, Grossman, 2014). Subsequently, unique features and options were added along with new strategies of rebranding and new values to keep its products recognizable and competitive (Mark Zuckerberg rethinks the office, 2020; Chaykowski, 2016; Paul, 2022). The development of modern companies is impossible without continuous business innovation.
It goes without saying that innovation may presuppose the formation of innovative and collaborative networks. However, management may face particular challenges in this process. First of all, it may be the absence of reliable information concerning the expedience of innovation and its strengths and weaknesses (Hayes, 2018; Frishammar et al., 2018). In this case, innovation will not contribute to the improvement of business processes. In addition to forming collaboration networks, management may face internal difficulties, such as employees’ rejection to change and a lack of governance within groups that may cause poor productivity and tension.
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