Business model innovation refers to the deliberate change in how a company creates, delivers, and monetizes value. Unlike product innovation, which improves an existing offering, business model innovation changes the fundamental logic of the business. Historically, many of the most impactful disruptions have come not from new technologies but from new business models.
A classic example is the shift from one-time sales to subscription models: Adobe sold software licenses as individual products for years before switching to a cloud subscription in 2013. The product remained essentially the same, but the business model changed fundamentally in how value was created, how customer relationships worked, and how revenue was structured. Similarly, Rolls-Royce with its Power-by-the-Hour model did not innovate engine manufacturing but rather monetization: customers pay per flight hour instead of purchasing the engine itself.
The term was significantly shaped by Alexander Osterwalder and the BMI Lab at the University of St. Gallen. The critical insight is that business model innovation cannot happen in isolation within a single department — it affects the entire value creation logic and must accordingly be anchored at the leadership level.
