The importance of transformative business models for innovation: How to create one and why

The significance of transformative business models for innovation is becoming more important for businesses to remain competitive in diverse industries. A business model depicts how a corporation develops and distributes value to customers while simultaneously generating value for itself. The value that a business creates defines how it structures itself and with whom it will collaborate to generate business value. Creating a transformative business model is necessary for businesses to achieve revolutionary change and connect with prominent and emerging market demand. Business model innovation is vital for creating an organization that maximizes value for all stakeholders: consumers, shareholders, and workers alike. It offers several benefits, such as competitive advantage, higher returns, brand recognition, increased growth, and better productivity. Transformative business models have six recurring characteristics, including personalization, closed-loop processes, asset sharing, usage-based pricing, collaborative ecosystems, and agility. Businesses such as Uber, Netflix, Airbnb, and Spotify have created transformative business models that have revolutionized their respective industries. To determine whether a business model is transformative, businesses must define and rate their business models with the features included on the list, determine how many transformative elements they have, compare their rating with that of the competition, and reflect on what aspects they can improve to implement any required modifications.