Sieze Advantage

In today's increasingly complex and fast-changing environment, business

model innovation is critical to success. Yet few understand when to make a change, or –

more importantly – how to execute. Based on a follow-up to our IBM Global CEO

Study 2008 and an analysis of 28 successful business model innovators, we gained

insight into when and how to innovate the business model.1,2 Organizations can

determine the right timing based on the economic environment, their own state of

industry transformation and a set of internal factors that includes the degree of product

and service innovation, and available financial resources. To increase execution success,

organizations must build a set of capabilities we call the Three A's: organizations need

to be aligned with customer value, analytical to gain insight from differentiated

intelligence, and enabled by an adaptable operating model.

From the IBM Global CEO Study 2008, we learned that So how do companies take advantage of change? CEOs told us

CEOs expected more turbulent change than ever before. But that innovating their business model is one of the most

few would have anticipated the severity and depth of the prominent strategies. In fact, seven out of ten companies

economic downturn that started in the second half of 2008 and pursue business model innovation to a large extent, and an

created a new economic environment. The CEO Study shows incredible 98 percent are adapting their business models to

that financial outperformers are able to leverage change to some degree (see sidebar, "There is growing agreement on

their advantage. Indeed, they proactively seek to disrupt what elements define a business model").3

competitors, redefine industries and gain share.

2 Seizing the advantage

There is growing agreement on what elements

define a business model:4

• What value is delivered to customers: Customer

segments, the value proposition, the specific "job

to be done," what is sold and how it is sold

• How revenue is generated: the pricing model and

forms of monetization

• How the company positions itself in the industry:

the company's role and relationships across the

value chain

• How the value is delivered: Key internal resources

and processes as well as external partnerships.

With unprecedented change upon us and business model

innovation becoming pervasive, two questions can help

companies develop their strategy and transformation approach

for the new economic environment:

• Under what conditions should companies innovate their

business model?

• What capabilities and characteristics support the design and

execution of successful business model innovation?

Building on ongoing IBM research into business model

innovation and a broad set of data available from our Global

CEO Studies, we explore these two questions. Here, we

provide practical guidance to help organizations define their

strategic agendas for business model innovation.

Our follow-up research to the IBM Global

CEO Study 2008 seeks to answer: When

should organizations innovate their business

models, and how?

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