Material Detail

When Apple introduced the iPod, it did something far smarter than wrap a good technology in a snazzy design. It wrapped a good technology in a great business model. Combining hardware, software, and service, the model provided game- changing convenience for consumers and record-breaking profits for Apple.

Great business models can reshape in- dustries and drive spectacular growth. Yet many companies find business-model innovation difficult. Managers don’t under- stand their existing model well enough to know when it needs changing—or how.

To determine whether your firm should alter its business model, Johnson, Chris- tensen, and Kagermann advise these steps:

1. Articulate what makes your existing model successful. For example, what cus- tomer problem does it solve? How does it make money for your firm?

2. Watch for signals that your model needs changing, such as tough new competitors on the horizon.

3. Decide whether reinventing your model is worth the effort. The answer’s yes only if the new model changes the industry or market.