Henry Chesbrough on business models

Stefan Lindegaard has a post with links to a lot of good innovation related material, including an interview with Henry Chesbrough.

The Chesbrough interview is terrific. He is best known for his research on open innovation, but a central part of that has been his work on business model innovation, which is the focus of the interview. In Chesbrough’s view, many good ideas for new products and services fail not because of any flaw in the idea, but because firms are unable to construct a business model for them that is different from their current one.

The moral of the story, my interest in this business model innovation is that if we are going to sustain research and development in our society, we have to take seriously the task of how to innovate not only new technologies but how to innovate business models to commercialize those technologies.

The main point here is that business model innovation is an essential element of success, but that firms often find it extremely difficult to implement new business models. Consequently, their success in innovation becomes an issue in effective change management, rather than simply relying on developing good ideas. This is a bit alarming because it’s hard enough just coming up with good new ideas! If you then have to change the structure of your firm to implement them, the challenges increase exponentially.

On the other hand, so do the payoffs. Most of the big success stories recently have not been the result of the introduction of novel new products or services, but instead have been due to creating effective new business models. There were book stores before amazon, search engines before google, and mp3 players and online music stores before iPod/iTunes. Those three have all been successful because of new business models – they have created new revenue generation mechanisms, new value propositions, and new value creation networks to build new business ecosystems around products and services that weren’t particularly novel. I am increasingly convinced that this is where we all should be concentrating our innovation efforts – particularly our management attention.

Student and teacher of innovation - University of Queensland Business School - links to academic papers, twitter, and so on can be found here.

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