Finding the business model sweet spot can help companies generate both incremental growth from optimizing existing offerings and transformational growth from generating entirely new offerings. Rather than simply figuring out more streamlined or efficient ways to operate in existing markets, the components of business models can, individually or collectively, be reinvented to create entirely new markets and new opportunities. With Business Model Innovation, companies can build new pathways to creating value, inventing new ways to conduct business and formulating new ways to get paid for it.
Let’s explore Amazon and their pathway to becoming the most dominate retailer on the web. There is no doubt that Amazon’s e-commerce structure created a competitive advantage over traditional retail distribution channels. Such features as “1-click check out” created a highly efficient shopping experience that attracts suppliers and customers alike. But Amazon also recognized the potential to transform the way we shop by building the next generation platform and infrastructure that facilitates a “virtual mall” and gives customers unprecedented choice, scope and value.
By building the online shopping platform, Amazon reinvented its business model by creating an entire ecosystem of products available for purchase. This platform structure also supports the success behind the Kindle e-reader with not only selling the device itself, but also offering the content to download directly to Kindle. It also facilitates a double-sided platform – “Amazon Marketplace” – where sellers can offer new and used items alongside Amazon’s offerings. Instead of competing directly, the company earns commissions on each sale while gathering information on consumer buying habits. This allowed Amazon to substantially grow its customer base and to become a relative indicator of product popularity with its “best sellers list”.
But business model innovation hasn’t stopped there – Amazon’s infrastructure facilitates the Elastic Compute Cloud product that is designed to make web-scale computing easier for developers. It allows companies to quickly respond to IT needs, ramping up hundreds or thousands of servers as workloads grow and scaling back down when demand slows.
Amazon’s exceptional business model facilitates company’s diversity of products and remains their main competitive advantage. Incorporating innovative practices into their business model structure allowed Amazon to build the next generation platform that sets the foundation for highly scalable business growth. As Amazon demonstrates, with business model innovation it is possible for growth opportunities to flow from the basic way a business is put together.
- How can you configure your business in unique ways?
- What new revenue streams can you create?
- What is your main product platform (technological, process, service)?
- How many product platforms should you define?
- What leveraging strategy can be adopted for the platform?
- How do you maximize the scope of your product platform?
image credit: growthstrategy.com
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Wayne Simmons is an accomplished executive, innovator, value creator, and entrepreneur and co-author of GrowthThinking: Building the New Growth Enterprise. As CEO and Co-Founder of The Growth Strategy Company, Wayne leads the vision, strategy and growth of the company. He has worked for global advisory firms Ernst & Young, Deloitte Consulting, and has been a trusted advisor to C-level executives at Fortune 500 corporations, venture capital firms, and small and midsized companies. Wayne was trained in airborne reconnaissance for US Army Intelligence; and is an alumnus and Fellow of The Wharton School of the University of Pennsylvania.
Keary Crawford is a results-driven executive leader with extensive experience in operations, M&A and finance for start-up, entrepreneurial and middle-market companies. As co-founder and COO of The Growth Strategy Company, she manages the strategic growth and vision, and day-to-day operations; and is co-author of GrowthThinking: Building the New Growth Enterprise. Keary was trained in Behavioral and Social Sciences and is a Fellow and alumna of the Executive Development Program at the Wharton School of the University of Pennsylvania.