Business Model Evolution

Introduction

In the context of innovation management, a business model refers to the framework through which an organization creates value for customers, delivers that value efficiently, and captures economic returns. 

With rapid technological changes, globalization, and evolving customer expectations, business models have undergone significant transformation. Understanding business model evolution and design is essential for managing and marketing innovation effectively.

Evolution of Business Models

The evolution of business models reflects changes in market structures, technological progress, and competitive dynamics.

1 Traditional Business Models

Traditional business models were primarily product-oriented and focused on mass production and cost efficiency. Value creation was linear, moving from producers to end consumers through well-defined value chains.

Key Features:

• Asset-heavy operations
• One-time sales transactions
• Limited customer engagement

Hindustan Unilever Limited (HUL): Traditionally focused on mass production and distribution of FMCG products through an extensive physical retail network.

Tata Steel: Operated on a linear value chain model, producing steel and selling it directly to industrial customers.

Bata India: Followed a product-centric retail model with physical stores and one-time footwear sales.

2 Service-Oriented and Value-Based Models

With increasing competition and customer awareness, organizations shifted towards service-based and value-driven models. Emphasis was placed on customer satisfaction, relationship management, and customized offerings.

Key Characteristics:

• Focus on customer experience
• Long-term relationship building
• Value-added services

Maruti Suzuki: Expanded beyond car sales to include after-sales services, service packages, and customer relationship programs.

LIC of India: Transitioned from pure insurance selling to long-term value-based financial planning and customer servicing.

Apollo Hospitals: Integrated healthcare services with preventive care, diagnostics, and post-treatment services.

2.3 Platform-Based Business Models

The advancement of digital technologies gave rise to platform-based business models, where organizations facilitate interactions between multiple stakeholders rather than producing goods directly.

Characteristics:

• Network effects
• Reduced dependency on physical assets
• Data-driven operations

Flipkart: Acts as a digital marketplace connecting sellers and buyers without owning inventory.

Ola: Operates as a mobility platform connecting drivers and riders using a digital interface.

Paytm: Facilitates transactions among consumers, merchants, and financial institutions through a digital platform.

2.4 Innovation-Driven and Digital Business Models

Modern business models focus on continuous innovation, flexibility, and scalability. Digital platforms, subscription services, and freemium models are prominent in this phase.

Key Features:

• Continuous innovation
• Digital delivery
• Scalable revenue models

Zerodha: Disrupted traditional stockbroking through a low-cost, technology-driven model.

Byju’s: Adopted a digital subscription-based education model with personalized learning.

Jio Platforms: Leveraged digital ecosystems, data services, and bundled offerings to rapidly scale operations.