Industrial manufacturers are innovating their business models by shifting from selling products to selling outcome-based services, where the provider (manufacturer) guarantees to deliver the performance outcomes of the products and services.
This form of business model innovation requires a profound yet little understood shift in how value is created, delivered, and captured. Our study of two successful and four unsuccessful cases of this shift finds that effectiveness in business model innovation hinges on the three process phases that unfold in collaboration with the customers:
- value proposition definition,
- value provision design, and
- value-in-use delivery.
Study shows that that success is determined by the alignment of specific value creation and value capture activities in each phase (see Figure 1):
- identifying value creation opportunities — agreeing on value distribution in value proposition definition,
- designing the value offering — deciding on the profit formula in the value provision design, and
- refining value creation processes — regulating incentive structures in the value-in-use delivery.
Figure 1: A Process Framework of Value Creation and Value Capture Alignment in Business Model Innovation
Research provides a thorough understanding of how alignment of value creation and value capture processes is ensured, whilst paying special attention to their interdependence and the interactions between provider and customer.
Value Creation and Value Capture Alignment in Business Model Innovation: A Process View on Outcome-Based Business Models, Journal of Product Innovation Management 37(2), 158–183.
– David Sjödin, Vinit Parida, Marin Jovanovic, Ivanka Visnjic
Open Access Link: https://onlinelibrary.wiley.com/doi/full/10.1111/jpim.12516