Innovating Your Business Model

This article was originally posted on the PNC Business Insights e-news section. Guest blog post by Rich Meyer, Purdue Technical Assistance Program

Many companies are starting to think about innovation as it relates to their products or services. This is a very positive trend because companies that create unique products are more profitable. Companies also need to think about innovating their business models.

The definition of the term "business model" can vary widely. What I'm referring to is how companies get paid for their work. Is there some other way to deliver products and services while receiving payment from your customers that makes you more money?

Job shops have a great opportunity for business model innovation. They often don't think of themselves as providing services, but that is precisely what they do. One company I worked with viewed themselves as "just a machine shop," but in truth they helped companies solve tough production challenges. Once they realized their true value, they began marketing and getting paid full value for their problem-solving capabilities.

You can change your business model in a number of ways. I've seen companies transform from a cash-only business to one that finances customer purchases. One company moved from selling plant automation services to selling packaged software. The Internet has enabled many companies to evolve from brick-and-mortar stores to drop-ship facilitators. Other options include changing how your customer pays you: subscription for unlimited service, renting, buying, financing or leasing. Distributing products is another area of potential innovation. You could choose to sell wholesale, sell through distributors, license products, sell online, sell through auctions, etc.

The key to innovating your business model is to focus on what you're really good at. Think about what you could do, not about what you've always done, and start innovating your business model today.