A framework for Business Model Innovation

Innovation as a key enabler of value creation has been the subject matter for study by several strategy researchers in the past few decades. However, the notion of business model innovation has not been distinctly established in the previous studies. This paper seeks to fulfill this objective. We develop a framework for business model innovation using a two-fold process. On the one hand, we explore theoretical foundations of creating and sustaining competitive advantage of firms and deduce factors that play an important role in the process. On the other hand, we study 18 successful business models from a variety of sectors of industry in the US and identify key success factors. The study identifies several useful implications for practice. Our framework suggests that incumbent firms and start-ups differ vastly in their approach towards business model innovation. Moreover, the success of a business model innovation hinges closely on the degree of differentiation and the degree of sustainability that the business model innovation provides to the innovating firm.