Business Model Innovation Meets Organizational Design

“We have to be equally analytical about the choices we make, not only about business models, but about organizational culture.” —Bill Fischer, Senior Lecturer at MIT Sloan, now teaching a new Business Model Innovation for Organizational Transformation course.

We tend to think of technological advances first—but it is business model innovation that provides the greatest source of market disruption, customer choice, and competitive advantage.

Business leaders looking to launch new models need to look beyond the innovation challenge—which is only half the story.

It is equally important to revise the company’s organizational design, or at least to critically examine whether the old organization is still fit for purpose.

The key question to ask is: are we the organization ready to deliver the new model effectively?

Generating new business models

“Leadership is about choices. We shouldn’t be casual about the choices we make. All too often what I see is a great deal of casualness in the way business model innovation and organizational transformation is regarded,” says Bill Fischer, Thinkers50 Hall of Famer and Senior Lecturer at MIT Sloan.

For Fischer, who is an engineer by training, Alexander Osterwalder’s Business Model Canvas provides a valuable template for avoiding ‘casualness’, forcing precision, and giving structure and coherence to the whole process—from business model innovation to implementation. It is a template that encompasses three key elements: desirability, feasibility, and viability.

The Business Model Canvas maps out these nine basic building blocks of business model generation in a pre-structured canvas—with ‘value proposition’ the motor that pulls it all together. Key Partners; Key Activities; Value Proposition; Customer Relationships; Customer Segments; Key Resources; Channels; Cost Structure; Revenue Streams

Plotting how every part of the organization is involved—from partners, customer segments and relationships, resources, channels, revenue streams and more—Osterwalder’s model carries the powerful effect of legitimizing innovation right through the organization, Fischer notes.

The right culture for a new business model

“Think of ourselves as architects of culture, with the choices we make aimed at our vision,” Bill Fischer.

While the business model concept must always come first, once a clear vision is confirmed it is essential then to design an organizational culture to support that vision.

Here Fischer suggests Jay Galbraith’s 1960’s Star Model is still useful—the five points of the star representing the five categories of business model strategy and implementation that influence, and are influenced by, organizational culture.

Vision – which determines strategic direction.

Organization – the structure of decision-making power.

How we work together – the business processes and flow of information.

Value metrics and rewards – which influence the motivation to achieve the vision.

Skills and talent – human resource, mindsets and capabilities.

Crucial to the deployment of this model, Fischer notes, is how those five categories interrelate.

A dynamic, innovative, and transformational environment

Steering an organization to a successful new business model launch raises a couple of key questions for leaders:

Question 1: Should innovation be small ‘i’ incremental innovation, or should it be big ‘I’ radical Innovation?

Fischer councils that there is no need to choose, as in practice, the two tend to merge. That said, in the search for innovation ideas, leaders should start by looking as deep in the organization as possible.

Question 2: How do you avoid cannibalizing or damaging the existing business and the existing cash flows?

For Fischer there are two routes around this potential pitfall:
1- Split the team to run parallel business models—and there is no harm in having multiple cultures within an organization.
2- Go ‘all in’ for the new model—a brave choice but—with a concept meriting high confidence— faster and more impactful results are the reward.

Eights tips for leading business model innovation

Based on a distinguished career at the leading edge of innovation, from start-up participant to teaching executive students on his new course at MIT Sloan, Business Model  Innovation for Organizational Transformation, Fischer has eight concise, impactful tips for leading business model innovation today.

1. Make your company ‘customer experience centric’, rather than just customer centric.
2. Consider how and where to intercept the customer journey.
3. Be more experimental, and experiment faster.
4. Be more daring.
5. Foster the development of a diverse range of skills.
6. Be generous and radically open to improve customer interactivity.
7. Engage with ecosystems, form strategic alliances, and seek outside expertise.
8. Be aware how sustainability issues are influencing business models.

This article is based on the MIT Sloan Executive Education webinar Re-examining Business Model-led Transformation with Bill Fischer.

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Join Bill Fischer on MIT Sloan’s Business Model Innovation for Organizational Transformation program

Dates: Aug 30–Sept 1;  Dec 13–15, 2021  |   Format: Live online 3 days x 5 hours

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