What is the purpose of your business?

Beginning of the week, I had a long discussion with Dr. oec. Susan Müller and  Prof. Dr. Thierry Volery, two researchers at the University of St. Gallen. They want to figure out how high the excess return is earned by business model innovators. They want to know which kind of business innovation like value innovation or architectural innovation leads to what kind of über return or excess return.

Very interesting question in particular since most researchers including myself are still using case studies to make our point.

What made the discussion even more interesting was that we discussed what a business model is. There are several technical definitions like mine but for us more interesting was why the term became so prominent in the last years. With the term business model the word business returned to prominence in the conversation on strategy. Continue reading What is the purpose of your business?

Business Model Innovation and the Red Queen Effect

The blog is about business model innovation or innovation in strategy, some name it strategic innovation. The point is very simple. Most companies try to differentiate themselves from their competitors by better products or improved processes leading to a better cost structure. The problem is that their competitors do the same thing at the same time so after a firework of new products the situation is pretty much the same. You moved forward but your competitor also moved forward. If you do not move you fall behind.

This effect is also called the Red Queen effect. The term is taken from the Red Queen’s race in Lewis Carroll’s Through the Looking-Glass. The Red Queen said, “It takes all the running you can do, to keep in the same place.” That is the typical situation most companies find themselves in. You move, you move but you gain no competitive advantage. Continue reading Business Model Innovation and the Red Queen Effect