The value matrix: a tool for assessing the future of a business model

Purpose Good companies innovate. In the process, they consider target markets, target customers, new product or service offerings, and the positioning of these relative to competitors. This forms a basic strategy for the innovation. However, the lesson of competitive dynamics today is that innovation effort stops short of its ultimate potential if it does not also embrace the business model possibilities provided by the innovation itself. This short article provides a strategic lens for considering the efficacy and power of a business model for a product or service innovation. Design/methodology/approach The current paper is grounded in the empirical results of an ongoing longitudinal study (undertaken by the authors team in the U.S., Canada and Ukraine) aimed at exploring the structure, characteristics, evolution, and performance outcomes of organizational business models. Findings The business model’s key characteristics are customer value (the “effectiveness side” of the equation, i.e., doing right things for customers that the latters are ready to appreciate and pay for, but not always to the focal firm) and business value (the “efficiency side” of the equation, reflecting translation of the customer value into profit). Importantly, our evidence strongly reveals the dynamic nature of the business model construct, implying that the companies evolve in terms of these two dimensions. Practical implications The recommendations part of the article is primarily based on the in-depth analysis of the recent history of large companies that were struggling to: sustain customer value, and develop and apply internal product and production platforms to increase operating efficiency, and hence business value. All these firms had either slipped into or were in the danger of slipping into Impostor status, and were seeking ways to regain and sustain their Innovation advantage, often over newer entrants in their respective industries. Originality/value Introduction of the Business Model Value Matrix allowing to analyze the current company’s business model; practical recommendations regarding getting to and remaining in the Winner quadrant