How to Innovate Your Business Model?
How do you innovate from a business model perspective? Business model innovation is especially relevant in our current global health economic climate. At the InnoDays Training, we had the privilege of hearing from Michel D’Ausillio from Enel X and Claus von Riegen from SAP on this topic. Enel X is the innovation arm of Enel — one of the world’s largest energy companies — while SAP is a broadly global software provider. Both Enel X and SAP strive to provide smart and sustainable new business solutions. In this blog post, we summarize the key insights from our interview with Claus and Michel.
What is business model innovation?
Business model innovation is one of the most important mechanisms to differentiate and stay competitive in new markets. It creates additional value for customers by using different business levers. It is collaborative; interaction with other players (like startups or customers) is important and it happens neither solely inside nor solely outside the company. It is about changing the way you do business in order to stay competitive and to realize sustainable change.
There are many ways to do business model innovation. You can pursue individual endeavors, such as evaluating new ways to use current products, changing revenue models, or transforming operating processes. Alternatively, you can take a more holistic approach, for instance developing new solutions for unexplored use cases.
“The whole game is about being competitive, and that means to challenge ourselves and challenge our own business model. It’s better to disrupt ourselves rather than be disrupted by someone else.” — Michel D’Ausilio, Enel X
Why do large companies need to stay competitive?
For any given index of large companies, after 20 years a majority of the largest companies are no longer the largest. Smaller companies grow faster; they are more agile which can make them better at competing and taking market share. For large companies, it is especially crucial to focus on renewal and innovation to ensure good business in the future. You need to listen to customers, understand their pain points, and find mechanisms to build repeatable products in this space. However, it is not enough to just listen to customers; you also need to study industry trends. Customers can help you learn what is relevant for them now, but they might not tell you what they expect the day after tomorrow.
“If you don’t grow, others will grow faster and they will surpass you in the end.” — Claus von Riegen, SAP
Core tenets of business model innovation
There are 3 main principles of business model innovation:
1. Focus on current business needs
2. Be ready for big, unexpected events
3. Stay one step ahead
1. Focus on current business needs
It’s important to keep in mind what is impacting your business right now. This includes listening to customers to provide new products adapted to their current needs. It is also imperative to initially keep your innovation away from your core business; that is, the main way you do business today.
2. Be ready for big, unexpected events
One of the keys to this core tenet is your ability to innovate and reshape something that already exists in your portfolio. Develop and practice the right mindset that will enable you to face the challenges that come with unexpected events.
3. Stay one step ahead
Look at trends of the future and try to predict what will drive your business. This requires a strong network and openness to working with small players and startups as well as large corporations.
Being ready for unexpected events can sound difficult in practice. Cultivating cultural and business flexibility as a consistent goal will help you sharpen the tools you need to successfully adapt to challenges as they arise. Michel shared with us a real experience demonstrating this strategy; Enel X developed a new software tool called city analytics together with Here Technologies, a startup scouted by the San Francisco Hub. The solution allows to track urban flows around cities and understand where users go in order to make decisions about what services to deliver. Recently, in the wake of the covid-19 emergency, they enhanced their analytics software system to provide not only urban flows but also information about how people move from one region to another during lockdowns. This gave stakeholders real-time insights into whether lockdown measures were actually effective. In this case, Enel X was able to harness their adaptive skill to make the most of the challenges brought by the unexpected events of covid-19.
Practicing flexibility can be rewarding in other ways, as well. If you can apply one solution to multiple industries, you can expand your customer base, extract more value out of your resources, and grow your organization more sustainably. Claus shared his experience of working with companies in the palm oil industry in Southeast Asia. He and his team supported an SAP internal venture to create and go to market with a simple, secure solution that provides information to palm oil buyers indicating how much of their purchased oil is produced sustainably. They were able to leverage this work and apply it to other industries like soybean production in North America, and the circular economy around plastics recycling and reuse.
It was great to hear real-world stories of true business model innovation at work and we hope that the examples from Enel X and SAP will inspire more companies to lead the way towards sustainable innovation.
Thank you for a great session, Michel and Claus!
About the InnoDays
The InnoDays bring companies and talent together to prototype ideas with a positive impact in 48 hours. We guide our participants’ innovation journey with our training program before and after the event with inspiring input and helpful methods. Find out more about InnoDays on our website.
