• Learning Objectives for Project Managers and Innovation Personnel
• To understand what is meant by a business model
• To recognize the skills needed to participate in business model development
• To recognize the relationship between the firm's business model and innovation activities
• To recognize the types of business models

INTRODUCTION

“The business world is littered with the fossils of companies that failed to evolve. Disrupt or be disrupted. There is no middle ground.”

“Disruption causes vast sums of money to flow from existing businesses and business models to new entrants.”

— Jay Samit, Disrupt You! Master Personal Transformation, Seize Opportunity, and Thrive in the Era of Endless Innovation

Innovation project management can create products and services that have the potential of producing long-term business value. The way the organization delivers and captures the desired value for economic gain is through the company's business model, which interacts within the marketplace to take advantage of a commercial opportunity. Simply stated, innovation creates value opportunities and business models deliver and capture the value generally in economic terms. Business model development focuses on how a firm intends to maximize the usage of its resources and core competencies.

In theory and practice, the term business model is used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, business process, target customers, offerings, strategies, infrastructure, organizational structures, sourcing, trading practices, and operational processes and policies including culture. The process of business model construction is part of business strategy and includes innovation project management processes. Business models are used to describe and classify businesses, especially in an entrepreneurial setting, but they are also used by managers inside companies to explore possibilities for future development and to increase competitiveness.

Business model development is most frequently a trial-and-error process. Business models must be reassessed frequently due to rapidly changing markets and a high degree of uncertainty.

Traditional or rational project management is viewed as a structured environment with well-defined requirements at project initiation and constraints on time, cost, and scope. Innovation for new products and services is often considered as work that is free flow, without boundaries, and with very little pressure from the triple constraints of time, cost, and scope. However, this does not mean that innovation projects run forever. All projects have an end, and it may be difficult to identify this end on an innovation project. Is it when all funds have been expended, a critical date has arrived, technology has changed, the customers' tastes or expectations of value have changed, etc.?

Historically, the words project management and innovation were not used in the same sentence. If they were used together, it would most likely be for technical innovation in a Department of Defense (DOD) contract to create new products and services based on advanced levels of technology. But even then, innovation was limited because of statement of work requirements that excluded out-of-scope work, thus limiting out-of-the-box thinking needed due to project complexity and uncertainty. Improvements in traditional project management focused on adding in more control, rather than increasing the flexibility of the methodology needed for projects such as innovation.

For business model innovation, project managers may find themselves in a completely unfamiliar environment. As examples:

• There may be no statement of work.
• Project managers are brought on board before a business model business case is developed (assume one is developed) and must interface with the customers and users in the marketplace.
• Project managers may need to participate in market research.
• Project managers may need to perform a great many experiments.
• Project managers may have to build and test numerous prototypes.
• Project managers must understand the organization's core competencies concerning resources and capabilities, and how they fit into the design of a business model.
• Project managers may need a completely diverse set of tools for business model innovation.

Mainstream literature on project management would have us believe that we can equate projects and innovation, and that the principles of project management can be applied to all types of innovation projects. Lenfle (2008) argues that a distinction should be made between the various types of projects where project management practices are well-suited. Lenfle's arguments certainly have merit.

In traditional project management, most projects are somewhat confined and have limitations imposed by the business case, the statement of work, the assumptions, and the constraints. There may be some degree of risk and uncertainty, and this can be managed according to the risk management processes in the PMBOK® Guide.^* Traditional project management practices may be appropriate for some innovation projects, such as incremental product or services innovation that focus on existing or modified technology. But as we get into the more complex types of innovation that may lead to a radically new or disruptive marketplace, such as with new platforms, the number of unknowns and the accompanying risks and uncertainty may not be handled effectively using traditional project management practices.

Another critical issue is that when companies change business models, the way they handled risk management previously may not work as well in the new business model. Boeing's 787 project had a completely different set of risks than Boeing's 777 project.

The project environment gets even worse when companies try to use traditional project management for business processes such as business model innovation where you have the greatest degree of risk and uncertainty, where traditional risk management planning will not work and where a great deal of flexibility is needed for decision making. Different project management approaches, many requiring a high level of flexibility, will be differentiated by the level of technology, the amount of product versus product changes, and whether the impact is expected to disrupt the markets.

FROM PROJECT MANAGER TO DESIGNER

Business model innovation requires that the project manager assume the lead role as the designer of the model. According to Van Der Pilj et al. (2016, 9):

Design is fundamentally about enhancing the way you look at the world. It's a learnable, repeatable, disciplined process that everyone can use to create unique and qualified value. Design is not about throwing away the processes and tools you have. In fact, quite the opposite is true. Just as design has enabled countless upstarts to create new business models and markets, design will also help you decide when to use what tools in order to learn something new, persuade others to take a different course, and at the end of the day, make better (business) decisions.

Most of all, design is about creating the conditions by which businesses thrive, grow and evolve in the face of uncertainty and change. As such, better businesses are ones that approach problems in a new, systematic way, focusing more on doing rather than on planning and prediction. Better businesses marry design and strategy to harness opportunity in order to drive growth and change in a world that is uncertain and unpredictable.

The skills needed for the design effort requires imagination and experimentation and testing of a variety of models to identify the best approach. As stated by Kaplan (2012, 142–143):

As a Business Model Designer, you will design for change by:

• Leading and contributing to ethnographic fieldwork to generate powerful customer experience observations and insights
• Leading and contributing to design teams through analysis and synthesis of ethnographic work to distill the most important insights leading to transformational business model concepts
• Developing testable business model concepts and prototypes
• Leading and contributing to real-world business model experiments
• Creating and implementing frameworks to measure results and impact of business model experiments
• Crafting and executing compelling multimedia stories that help stakeholders understand and connect with the work
• Capturing and packaging learning from business model experiments to inform other efforts and ensure maximum leverage

BUSINESS MODELS AND VALUE

Business models are often treated as value networks. Innovations can take place in processes within the business model to bring added value in each network step. Included in the business model can be the relationships/partnerships and contractual agreements with the suppliers and buyers. The relationship with the suppliers and buyers can be highly advantageous and bring long-term business value to all parties if each party has similar business value drivers such that the business relationship is mutually beneficial to all. In such situations, it becomes important when evaluating potential business partners to make sure that there are similar interpretations of business value so that the business models of each party are complementary. Effective design and enhancements to a business model can give a company a sustainable competitive advantage.

Value is like beauty; it is in the eyes of the beholder. Highly diversified companies may need different business models for whom they are creating value. Typically, customer segments can be classified as mass markets, niche markets, segmented markets and diversified markets. Each market segment may require a different business model, and each company within the segment may have a different interpretation of the value being provided through your business models.

BUSINESS MODEL CHARACTERISTICS

“Organizations are not designed for innovation. Quite the contrary, they are designed for ongoing operations.”

— Vijay Govindarajan, The Other Side of Innovation: Solving the Execution Challenge

Every company has a unique business model based on their core competencies and technologies they use. However, there are some generic commonalities between business models. Business model design, as described by Osterwalder and Pigneur (2010), includes the modeling and description of a company's:

• Value propositions (What value and benefits will the customers receive from the products and services?)
• Target customer segments (What desires and expectations do the customers have when purchasing your products and services?)
• Distribution channels (What are the ways that a company keeps in touch with its clients?)
• Customer relationships (What are the different links that a company can use to maintain relations with various market segments?)
• Value configurations (How have we arranged our resources and activities to bring value to our clients?)
• Core capabilities (What are our core competencies that support our business model?)
• Partner network (What are our partnership agreements with other companies that assist us in providing commercialized value?)
• Cost structure (How have we leveraged our financial investments in the business model to provide commercialized value?)
• Revenue generation model (What are the ways in which the business model supports revenue flows?)

Osterwalder refers to these nine items as the business model canvas, which outlines your business model in the shape of a story to describe how you create, deliver and capture value. IPMs should not assume that the project team understands the company's business model. By preparing a business model canvas, it is easier to understand the business model attributes.

If you have direct competitors that appear to have a good business model, it may be beneficial to create a business model canvas for their business and see their strengths, weaknesses, opportunities, and threats. This may provide you with ideas about your new business model.

STRATEGIC PARTNERSHIPS

It is unrealistic to expect companies to own all the resources needed to remain competitive. Companies view strategic partnerships as a way of building competitive business models. Osterwalder and Pigneur (2010, 38) identify four types of partnerships:

1. Strategic alliances between non-competitors
2. Cooperation: strategic partnerships between competitors
3. Joint ventures to develop new businesses
4. Buyer–supplier relationships to ensure reliable supplies

There are several benefits in these relationships. The partners either employ or have access to resources that are critical to your business model. The partners can help reduce risk and uncertainty as well assisting you in identifying and responding to threats. You may be able to access new market segments through the business models of your strategic partners.

In traditional project management activities, project managers are accustomed to working with suppliers and partners for the procurement of materials and components. Quite often, these activities are handled through a contract administrator. With IPM activities, the burden of responsibility falls on the IPM who must interface with the partner's business personnel and make business rather than technical decisions. This mandates an understanding of your own business model as well as those of your strategic partners.

BUSINESS INTELLIGENCE

Business intelligence is information that a company needs to make the best business decisions based on facts and evidence rather than just guesses. This information may be stored in a database or data warehouse. Business intelligence technologies provide historical, current, and predictive views of business operations. Common functions of business intelligence technologies include reporting, online analytical processing, analytics, data mining, process mining, complex event processing, business performance management, benchmarking, text mining, predictive analytics, and prescriptive analytics.

Business intelligence can be used by enterprises to support a wide range of business decisions, from operational to strategic. Basic operating decisions include product positioning or pricing. Strategic business decisions involve priorities, goals, and directions at the broadest level.

Business intelligence tools allow organizations to gain insight into new markets, to assess demand and suitability of products and services for different market segments and to gauge the impact of marketing efforts. This can result in a competitive market advantage and long-term stability. Business intelligence can identify the following:

• Strategic opportunities for new products and services requiring innovation
• Strategic opportunities for improvements in your company's business model
• Strengths and weaknesses in the business models of your competitors
• Strengths and weaknesses in your company's business model and where competitors may attack

Historically, project managers came out of the engineering ranks, and many of them had advanced degrees in a technical discipline. These individuals were strong technically but often had a poor understanding of how the business functions. Business-related decisions were usually placed in the hands of the project sponsors or governance committees.

It is extremely difficult, if not impossible, for IPMs to be involved with business modeling without business knowledge. Some companies, IBM as an example, are encouraging their project managers to become certified by PMI® and to become internally certified by IBM. IBM's internal certification program focuses on IBM's business practices. Companies are now following IBM's lead because almost every project management methodology, whether flexible or inflexible, contains business processes. Some companies believe that project managers of the future will possess significantly more business knowledge than technical knowledge. The argument provided is that a company can always hire a multitude of highly technical people to assist in project decision making, but making effective project-related business decisions, especially for IPMs, may require a strong understanding of the business model and business operations.

SKILLS FOR THE BUSINESS MODEL INNOVATOR

For more than five decades we have attempted to define the core skills that project managers should possess. All of this was done while thinking about the traditional project management approach and the traditional types of projects. For innovation projects, there are additional skills needed. Van Der Pilj et al. (2016; 12–13) list the following (and explain them in detail in their book):

• Keep close contact with the customer (understand your customer not just their transactions with you).
• Think and work visually (on how your business create value).
• Rely on others who possess more information than you have.
• Tell stories and share experiences.
• Keep it simple.
• Set up small experiments.
• Embrace uncertainty.

Developing the right skills implies that you also have the right tools. Van Der Pilj et al. (2016, 265) identify 20 tools that innovation project managers need as part of business model design activities:

1. Screenplays
2. Team charter
3. Vision of five bold steps
4. Vision of cover story
5. Design criteria
6. Storytelling canvas
7. Customer journey
8. Value proposition
9. Context canvas
10. Business model canvas
11. Creative matrix
12. Business model ideation
13. Wall of ideas
14. Innovation matrix
15. Sketching
16. Paper prototype
17. Riskiest assumption
18. Experiment canvas
19. Validation canvas
20. Investment readiness

The traditional tools that are identified in the PMBOK® Guide may no longer be appropriate by themselves but may have value in combination with other tools such as these 20 tools.

In traditional project management, the project manager may rely on the business case for the identification of the assumptions. Some project managers may mistakenly believe that the assumptions remain constant for the duration of the project, regardless of the length of the project.

Today, project managers are tracking the assumptions over the full life cycle of the project. For business model design, even small changes in the assumptions regarding consumer behavior, consumer expectations of value, and activities of your competitors can lead to major changes in the design of a business model. Metrics, such as shown in Figure 8-1, can be used to track the assumptions.

Kaplan (2012, 52–53) identifies 15 fundamental principles that define the DNA of business model innovators:

• Connect: Business model innovation Is a team sport
  1. Catalyze something bigger than yourself.
  2. Enable ransom collisions of unusual suspects.
  3. Collaborative innovation is the mantra.
  4. Build purposeful networks.
  5. Together, we can design our future.
• Inspire: We do what we are passionate bbout
  6. Stories can change the world.
  7. Make systems-level thinking sexy.
  8. Transformation is itself a creative act.
  9. Passion rules—exceed your own expectations.
  10. Be inspirational accelerators.
• Transform: Incremental change isn't working
  11. Tweaks won't do it.
  12. Experiment all the time.
  13. Get off the whiteboard and into the real world.
  14. It's a user center world; design for it.
  15. A decade is a terrible thing to waste.

Kaplan (2012, 136–137) also identifies 10 behavioral characteristics he uses to recognize someone as a potential innovator:

1. Innovators always think there is a better way.
2. Innovators know that without passion there can be no innovation.
3. Innovators embrace change to a fault.
4. Innovators have a strong point of view but know that they are missing something.
5. Innovators know that innovation is a team sport.
6. Innovators embrace constraints as an opportunity.
7. Innovators celebrate their vulnerability.
8. Innovators openly share their ideas and passions, expecting to be challenged.
9. Innovators know that the best ideas are in the gray areas between silos.
10. Innovators know that a good story can change the world.

BUSINESS MODEL ENHANCEMENTS

Companies invest a great deal of time and effort for innovation for products and services. Unfortunately, considerably less effort is applied to the firm's business model until a threat appears. As stated by Jim Collins (2009, 5):

I've come to see institutional decline like a staged disease: harder to detect but easier to cure in the early stages, easier to detect but harder to cure in the later stages. An institution can look strong on the outside but already be sick on the inside, dangerously on the cusp of a precipitous fall.

Most firms are relatively slow in identifying threats and even when they see them, there is often a complacency attitude and a slow response time in deciding whether enhancements are needed to the existing business model or if a totally new model is needed. The competition between most companies today is between business models, not with the products and services provided (Gassmann et al., 2013). Products and services can be duplicated whereas business models are usually unique to a firm because they tap into the firm's specialized strengths.

Several factors can act as triggers indicating that the business model processes must be reevaluated:

• Changes in consumers' needs for your products and services
• New competitors entering the marketplace
• New suppliers entering the marketplace
• Changing relationships with your strategic partners in the business model
• Significant changes in your firm's core competencies
• Significant changes in the assumptions made about the enterprise environmental factors

Lüttgens and Diener (2016) looked at the threats to a business model using Porter's five forces that describe the competitive forces within an industry. Porter defined the five factors as the bargaining power of buyers, bargaining power of suppliers, competitive rivalry, threats of new entrants, and threats of substitutes. Changes in these five forces can be used as early warning signs or triggers that there are threats to the business model.

In traditional project management, where companies adopt an enterprise project management methodology, the project managers assigned to the PMO perform process improvements on the methodology and monitor the enterprise environmental factors as outlined in the PMBOK® Guide. For business model process improvement, the assigned project manager must have a line of sight to senior management, and especially marketing personnel, to monitor the enterprise environmental factors that can impact the business models. The innovations necessary to make changes to a business model and its accompanying processes must be fast and can be more complex than product or service innovations.

The purpose of a business model is to create business value in a profitable manner. Therefore, enhancements must focus on the processes associated with the five dimensions of value (Baden-Fuller and Morgan 2010; Beinhocker 2007; and Abdelkafi et al. 2013):

• Value proposition
• Value creation
• Value communication
• Value in distribution channels
• Value capture

The result of process innovations can be either added value or cost reductions.

Core competencies are the building blocks for many forms of business value and serve as the basis for the firm's competitive posture. The core competencies are the combination of the firm's resources, knowledge, and skills, as shown in Figure 8-2, that create core products for the end users. These core products contribute to the competitiveness of the firm by accessing a wide variety of markets and making it difficult for competitors to imitate your products and the accompanying value perceived by the customers. Management must look for ways of improving the core competencies to create new products and new markets.

TYPES OF BUSINESS MODELS

In the 1950s, new business models came from McDonald's restaurants and Toyota. In the 1960s, the innovators were Wal-Mart and hypermarkets. The 1970s saw new business models from FedEx and Toys “R “Us; the 1980s from Blockbuster, Home Depot, Intel, and Dell Computer; the 1990s from Southwest Airlines, Netflix, eBay, Amazon.com, and Starbucks.

Today, the types of business models might depend on how technology is used. For example, entrepreneurs on the Internet have created new models that depend entirely on existing or emergent technology. Using technology, businesses can reach many customers with minimal costs.

The following examples provide an overview for various business model types that have been in discussion since the invention of term business model:

• Bait and hook business model. This involves offering a basic product at a very low cost, often at a loss (the “bait”), then charging compensatory recurring amounts for refills or associated products or services (the “hook”). Examples include: razor (bait) and blades (hook); cell phones (bait) and air time (hook); computer printers (bait) and ink cartridge refills (hook); and cameras (bait) and prints (hook).
• Bricks and clicks business model. Business model by which a company integrates both offline (bricks) and online (clicks) presences. One example of the bricks-and-clicks model is when a chain of stores allows the user to order products online but lets them pick up their order at a local store.
• Collective business model. Business system, organization, or association are typically composed of relatively large numbers of businesses, tradespersons or professionals in the same or related fields of endeavor, which pool resources, share information, or provide other benefits for their members.
• Cutting out the middleman model. The removal of intermediaries in a supply chain: cutting out the middleman. Instead of going through traditional distribution channels, which had some type of intermediate (such as a distributor, wholesaler, broker, or agent), companies may now deal with every customer directly, for example via the Internet.
• Direct sales model. Direct selling is marketing and selling products to consumers directly, away from a fixed retail location. Sales are typically made through party plan, one-to-one demonstrations, and other personal contact arrangements.
• Distribution business model various fee in, free out. The business model works by charging the first client a fee for a service, while offering that service free of charge to subsequent clients.
• Franchise business model. Franchising is the practice of using another firm's successful business model. For the franchisor, the franchise is an alternative to building ‘chain stores’ to distribute goods and avoid investment and liability over a chain. The franchisor's success is the success of the franchisees. The franchisee is said to have a greater incentive than a direct employee because he or she has a direct stake in the business.
• Sourcing business model. Sourcing business models are a systems-based approach to structuring supplier relationships. A sourcing business model is a type of business model that is applied to business relationships where more than one party needs to work with another party to be successful.
• Freemium business model. This business model works by offering basic web services, or a basic downloadable digital product, for free, while charging a premium for advanced or special features.
• Pay what you can (PWYC). This nonprofit or for-profit business model does not depend on set prices for its goods, but instead asks customers to pay what they feel the product or service is worth to them. It is often used as a promotional tactic but can also be the regular method of doing business. It is a variation on the gift economy and cross-subsidization, in that it depends on reciprocity and trust to succeed.
• “Pay what you want“ (PWYW). This is sometimes used synonymously with the previous model, but “pay what you can” is often more oriented to charity or socially oriented uses, based more on ability to pay, while “pay what you want” is often more broadly oriented to perceived value in combination with willingness and ability to pay.
• Value-added reseller model. Value-added reseller (VAR) is a model where a business makes something that is resold by other businesses but with modifications that add value to the original product or service. These modifications or additions are mostly industry specific in nature and are essential for the distribution. Businesses going for a VAR model have to develop a VAR network. It is one of the latest collaborative business models that can help in faster development cycles and is adopted by many technology companies, especially software.

Other examples of business models are:

• Auction business model
• All-in-one business model
• Chemical leasing
• Low-cost carrier business model
• Loyalty business models
• Monopolistic business model
• Multilevel marketing business model
• Network effects business model
• Online auction business model
• Online content business model
• Online media cooperative
• Premium business model
• Professional open-source model
• Pyramid scheme business model
• Servitization of products business model
• Subscription business model

BUSINESS MODELS AND STRATEGIC ALLIANCES

Companies frequently develop close relationships and strategic alliances with companies that are part of the supply chain during innovation activities such as new product development. The result is usually a win–win situation for all parties with the expectation that these relationships will continue for some time into the future. If a new incremental innovation is necessary, the impact on the relationships is usually minor. But if the company is focusing on a disruptive innovation that will result in a new business model, the relationships with the supply chain suppliers can be destroyed if the suppliers believe that the new business model will provide them with fewer benefits than before. As such, the suppliers may not wish to provide support for the disruptive innovation or new business model development if they believe it is not in their best interest.

When a company seeks to disrupt a market by introducing a new product, or responding to disruptions caused by a competitor, the company may need to replace its core competencies with new ones and likewise develop other supply chain relationships. If the company's core competencies are rigid and the company depends heavily on the core competencies of their suppliers, the company may wish to reconsider innovation activities that could result in a new business model that would destroy existing relationships. Characteristics of strategic alliances, adapted from Spekman et al. (2000) include:

• Trust. Based on established norms, values, past experiences, and reputation
• Commitment. Sharing critical and proprietary information over the long term
• Interdependence. Partnership cooperation and dependence on one another for the long term
• Cultural compatibility. Trying to align cultures that support a close working relationship
• Planning and coordination. A joint effort focusing on the future of the relationship

Most business model designs are impacted by partnerships and alliances in the supply chain. Therefore, any decision to alter a business model without considering the impact on supply chain relationships might be a mistake.

IDENTIFYING BUSINESS MODEL THREATS

There is an old adage that experienced project managers often follow; hope for the best but plan for the worst. The failure of a business model can have catastrophic consequences for a company. When developing a business model, innovators must always ask themselves, what can go wrong? Simply stated, the company must perform risk management and determine the threats to their business model. Sometimes, the threats are not apparent during the development stage. Periodically, companies must therefore reassess all possible threats in time to react appropriately.

There is no standard approach for assessing business model threats. One way to assess threats is by using Porter's five forces, namely (1) entry barriers, (2) exit barriers, (3) bargaining power of suppliers, (4) bargaining power of buyers, and (5) substitute products. As an example, some companies are highly dependent on suppliers for components and materials. We should then assess the threat of what could happen if the supplier is late, refuses to work with us, want to increase their prices and other such situations.

Another way is to continuously look for triggers or early warning indicators that can lead to discontinuities in the performance of a business model. Examples are shown in Table 8-1.

BUSINESS MODEL FAILURE

Senior management must have a vision on how they want the company to compete, now and in the future. This information must be provided to the IPMs responsible for creating or enhancing a business model. Most executives understand that they must compete through business models rather than just products and services, but they lack an understanding of how to do it. The result is usually a doomed business model.

Kaplan (2012, 40–49) identifies 10 reasons and attitudes that cause companies to fail at business model innovation:

1. CEOs don't really want a new business model.
2. Business model innovation will be the next CEO's problem.
3. Product is king—nothing else matters.
4. Information technology is only about keeping the trains moving and lowering costs.
5. Cannibalization is off the table.
6. Nowhere near enough connecting with unusual suspects.
7. Line executives hold your pay card.
8. Great idea; what's the ROI?
9. They shoot business model innovators, don't they?
10. You want to experiment in the real world; are you crazy?

There are seven common mistakes made by senior management:

1. Not realizing that good business models lead to a sustainable competitive advantage
2. Not viewing your business model through the eyes of your customers
3. Building a business model in isolation without considering how your competitors might react and potential threats
4. Building a business model in isolation without considering how you will interact with the business models of your competitors
5. Refusing to build a business model that is new to your firm regardless of whether the competitors have a similar model
6. Believing that your current business model does need to undergo continuous improvement efforts
7. Not understanding that business models are more than just products and services, and must include such items as sales and marketing activities, procurement practices, strategic partnerships, opportunities for vertical integration, and compensation practices

BUSINESS MODELS AND LAWSUITS

When we think about lawsuits involving innovation, we normally consider patent infringement regarding products and technology. Unfortunately, there can also be lawsuits on how a firm decides to implement its business model and its relationships with its clients. The success or failure of most firms is based on how they respond to competition and the strength of the competition. Companies can create superior products and services that give them a competitive advantage and still incur regulatory and litigation issues in the way that it implements its business model. As an example, consider the following regulatory and litigation issues that Intel was faced with.^1.

IMPLICATIONS AND ISSUES FOR PROJECT MANAGERS AND INNOVATION PERSONNEL

Project managers have traditionally managed innovation activities related to products and services. But now, as project managers get more actively involved in process innovation activities, they need to understand the most important process innovation, the company's business model. Some of the critical issues and challenges that may be new for some project managers include understanding the following:

• Innovation is impacted by the business model, and vice versa.
• Business model innovation may require more experimentation and prototypes than with product and services innovation.
• Significant market research and knowledge of competitors' business models is necessary.
• New skills will be required for business model development.
• Strategic alliances are important in building some business models.
• There are different types of business models.

REFERENCES

1. Abdelkafi, N., Makhotin, S., and Posselt, T. (2013). Business Model Innovations for electric mobility - What can be learned from existing Business Model Patterns?, International Journal of Innovation Management, 17 (1), 1–41.
2. Baden-Fuller, C., and Morgan, M. (2010). Business models as models. Long Range Planning, 43 (2), 156–171.
3. Beinhocker, E. D. (2007). The Origin of Wealth: The Radical Remaking of Economics and What It Means for Business and Society. Cambridge: Harvard Business School Press.
4. Collins, J. (2009). How the Mighty Fall. New York: HarperCollins.
5. Gassmann, O., Frankenberger, K., and Csik, M. (2013). Geschäftsmodelle Entwickeln: 55 Innovative Konzepte mit dem St. Galler Business Model Navigator. St. Gallen: Carl Hanser Verlag GmbH Co KG.
6. Kaplan, S. (2012). The Business Model Innovation Factory. Hoboken, NJ: John Wiley & Sons.
7. Lenfle, S. (2008). Exploration and project management. International Journal of Project Management 26 (5), 469–478.
8. Lüttgens, D., and Diener, K. (2016). Business model patterns used as a tool for creating (new) innovative business models. Journal of Business Models, 4 (3), 19–36.
9. Osterwalder, A., and Pigneur, Y. (2010). Business Model Generation: a Handbook for Visionaries, Game Changers, and Challengers. Hoboken, NJ: John Wiley & Sons.
10. Spekman, R. E., Isabella, L. A., and MacAvoy, T. C. (2000). Alliance Competence: Maximizing the Value of Your Partnerships. New York: John Wiley & Sons.
11. Van Der Pilj, P., Lokitz, J., and Solomon, L. K. (2016). Designing a Better Business: New Tools, Skills and Mindset for Strategy and Innovation, Hoboken, NJ, John Wiley & Sons.