> Innovating for growth: a spiral approach to business model innovation
Innovating for growth: a spiral approach to business model innovation
Innovate to achieve specific business outcomes
Understanding the customer is the top priority in strategic innovation.
Innovative companies are focusing on competitive advantage to achieve five business outcomes:
While the business outcomes in our framework are closely connected to each other, our participants offered valuable perspectives on each one:
Profitable growth Our research reveals broader measures of profit for innovation, particularly its importance as part of the value proposition. “What was previously kept secret as part of a company’s core arsenal is now increasingly transparent,” says Ernst & Young’s Markus Heinen.
“This is important for attracting funding from external investors as well as maintaining and increasing stakeholder confidence. So innovation as part of the value proposition is becoming highly relevant to market capitalization.”
Customer engagement Understanding the customer is the top priority in strategic innovation. Social media enable companies to use this understanding to achieve a deeper level of engagement, building customer feedback and data into R&D, so that customers drive their expansion.
Xander Slager, Chief Technology Officer at China’s Unitedstyles, confirms the power of a closer relationship with customers, saying, “I think the next 10 or 20 years are all about customer-driven, customer-designed trends. Anyone who controls the relationship with the customer will have enormous competitive advantage.”
Business sustainability The CEO of an electric car network operator says, “There is continuous volatility in an interconnected world that doesn’t allow you to sit back and say, ‘I’m protected for the next 10 years.’” Still, sustainability is possible if innovation goes beyond technological disruption to create a new experience, and strategic partnerships are based on mutual success.
“When we innovate, we have to design a business model that allows people to consume products with the same convenience as they have today. So, innovations on a macro level, a micro level and a financial level all have to come together to make the disruption more than just a new technology, so it is a new experience people want to consume.”
Strategic partnerships based on vested interests are changing supplier relationships. This stems partly from growth in cross-cultural collaboration as companies engage with a wider range of partners. These partners offer more extensive opportunities, as vested interests mean that partners are dependent on each other to fulfill their business commitments.
Productivity Standard measures of productivity are not always sufficient to measure the financial success of innovative products or processes. Employees are reluctant to risk their careers unless they are evaluated through appropriate measures of productivity and performance. Using the right measures (such as customized performance indicators) is also necessary to boost stakeholder and investor confidence.
Business agility In a business environment where companies gain profit and profit potential through tangible and intangible goods, new business models are designed to support leaner companies that access skills, talent and IP through external relationships.
This enables organizations to respond more quickly to changing opportunities, with financial capital, talent and operational flexibility built into their business model. However, agility differs according to industry sector.
Key growth drivers
Ability to execute against key growth drivers is what differentiates high-performing companies from the rest of the pack. These high achievers keep a laser-sharp focus on the four drivers, and they strike the right balance in their approach to each one.
In light of today’s increasing market variations, volatility, cost pressures and stakeholder nervousness, the outcomes that innovative companies aim to achieve are closely related to these essential drivers of business growth.
The best innovators, however, take these growth drivers a step further, allowing the drivers to evolve over time – progressing, for instance, from customer reach to customer engagement and expanding operational agility into business agility, thus taking the growth drivers for successful companies to the next level.
Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.