As noted in my previous post, part of what makes business model innovation fundamentally different at an established company (versus a traditional start-up) is the availability of resources from the existing business to help in launching the new one. I am not convinced, however, that most Fortune 500 companies have a well-developed understanding of how the resources in their possession might benefit a new venture.
I use resources to refer to physical assets as well as human capital and expertise and business relationships (nontangible assets). I do not mean to suggest that companies have not considered what gives them a competitive advantage. Rather, few companies have taken the time to consider their business holistically. They don’t understand how the complex interplay of business model components contribute to their a competitive advantage.
Contributing to the problem is the absence of a common taxonomy of what are their business model “components.” Surprisingly, there is a considerable lack of consensus with regard to what precisely a business model is. It’s a situation almost like when Justice Potter Stewart’s said, “I know it when I see it.”
I attribute much of the confusion to the varying purposes for which a speaker might intend to describe a business model. Put simply, a model is a simplified description of a more complex system that aids in understanding and discussing that system. A business model, then, is a simplified description of how a company creates and captures commercial value from a product and/or service offering.
Much like with economic models, more than one description of how a company creates and captures commercial value might exist without any being a perfect description or any necessarily being “wrong.” We have the most basic economic model of supply and demand, and then we have econometric models.
The source of disagreement around business models comes from the level of simplification or abstraction. It makes sense, then, that the level of abstraction would depend on the purpose at hand.
For the purposes of brainstorming and exploration, I have found Osterwalder’s business model canvas provides the best, high level understanding of a business model. It reduces the complexity to a manageable degree while still including enough detail to translate a business model design into more actionable terms, to go from business requirements to functional specifications.
The business model canvas describes the business model at the strategic level. That may be good for executives isolated in their C-suite, but manager need to have tactics they can execute against. The abstract needs to be made more practical.
The enabling operational, organizational, and relationship structures need to be defined to make the conceptual business model canvas real, but that would be later in the process of business model innovation. At present, my point is only that companies require a holistic understanding of their business at the strategic level built on a framework like that of the business model canvas (www.businessmodelgeneration.com).
To figure out what benefits the established company might offer a new venture requires first understanding the current business at the level of the business model canvas. You have to know where you are starting from to figure out how to get where you are going. Companies can then use the business model canvas again to brainstorm and identify what combination of resources (or in the parlance of Osterwalder, what business model elements) might confer some benefit or advantage on the new venture.
If you want to learn more about the business model canvas or how it can help in business model innovation, I highly recommend reading the book Business Model Generation.
 Shafer et al., “The Power of Business Models”; and M. Morris, M. Schindehutte and J. Allen, “The Entrepreneur’s Business Model: Toward a Unified Perspective,” Journal of Business Research 58, no. 6 (June 2005): 726-735