How to innovate with your business model ?

“Innovation is one of the least well-managed areas in most companies,” says David Midgley, a marketing professor at INSEAD and author of The Innovation Manual. “This leads to wasted resources and costly mistakes. It’s not the effort that companies put into innovation that decides success. Instead it is how firms go about doing innovation that separates leaders from the rest.” (…)

To illustrate this idea, Midgley uses the example of the Apple iPod. (…) But, he says, that success is not because the iPod is an innovative product as there are many similar devices. The real point behind the iPod is the service that allows the customer to easily download music and the business model that allows both Apple and the music industry to make money from those downloads.

“Apple negotiated a business model with the music industry that allowed everybody to get what they want — the music industry to get their royalties, Apple to sell downloads and the iPod itself, and the customer to be able to select the songs they want rather than putting up with the compilations the industry offered because of its previous business model,” Midgley says. “These are Apple’s real innovations – the rest is just good electronics.”(…)

For Midgley, there are three categories of challenge – the customer, technology, and business model. (…)

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