The digitalisation of goods is increasing rapidly as technology advances. This post explains the importance of business model innovation to success in a digital industry using the example of the Apple App Store; how, in itself, is an example of business model innovation and how business can use this platform to reach out to their consumers.
Apple’s platform for open innovation, the App Store, released in 2008, provided a place where third party app developers can release apps for a range of purposes. Steve Jobs identified a ‘post-PC’ era during the popularisation of smartphones; in this era, the app store is at the head. It is now much easier to deploy and maintain software across an enterprise, and indeed across a globalising world of business. Some argue that it has revolutionised the concept of content discovery, business exposure and research strategies.
As commonly known, the app store is not an innovation that originated from Apple. There have been previous app stores created and implemented by other companies for the same consumption purposes. The question remains as to why Apple owns the most successful app store?
Eaton et al. (2011) suggest the competitive advantage lies in the digital ecosystem and the business model innovation. This study suggests that Apple has a clear understanding of the theory of generative paradox, a series of ‘stories’ between protagonists enriching the platform at the core of the ecosystem and the antagonists generating activity. Theory suggests that the agenda of innovation in this ecosystem is determined by each role interactively as opposed to each in isolation; in other words, Apple provides a platform for firms to innovate and distribute, maximizing generative potential, but maintain an appropriate amount of control and privacy to prevent jailbreaks, after learning from previous hacks.
The consequences of such an innovation can be seen as beneficial from a business point of view; as discovered in a research study of the deployment of an app for research purposes in the London School of Economics whereby an app was created to research the users of smartphones. Miluzzo, Lane, Lu and Campbell (2011), who conducted the study, refer to the distribution of apps via the app store as a ‘game changer’ and found that it met their aims of the research to reach a global dimension of users whilst collecting large amounts of data quickly.
In using the app store and its consumer feedback system, a strategy called ‘deploy-use-refine’ was developed and adopted in order to maximize the potential of the app and make it more consumer friendly. This suggests profit making businesses of any size can use this to access a global market of consumers, respond to their needs with ease and develop their services efficiently and appropriately. This is especially essential for businesses that provide a product which is digitalised; in other words, a product that does not end after purchase.
The advances in technology and purchasing is where the idea of the app store stems from; a place that provides a platform for companies to extend the product into the after-purchase services, which in turn allows for business model innovation for app developers, including small/medium sized companies. In a world where the emergence of digitalised goods is increasing, firms can no longer control service experiences only through the product; this is where business model innovation comes in.
Business model innovation accounts for more than first anticipated. According to Drucker’s theory, one of the areas companies should look for opportunities to be innovative is in the changes of perceptions caused by changes in the economy. This can be applied to Apple because the advancements of technology resulted in the emergence of a digital economy and therefore the need to create a digital ecosystem became important. Therefore, in a digital ecosystem where the product does not end when it enters the market (Eaton et al., 2011), business model innovation is at the core of the business, rather than product innovation. However, firms must ensure a clear knowledge of the current business model and what action is physically required for business model innovation.
About the author
Kay Hamilton is a student at Westminster Business School, in the BA Honours International Business, 2nd year. Kay aims to complete study abroad in Australia beginning this summer; then to return and complete her BA. She plans to be involved in the digital marketing industry or social media advertising after gaining experience in an internship, either in Australia or in the UK.
About the Course Business Innovation in Digital Economies (BBIM510, level 5).
Westminster Business School started in 2013 a new module, Business Innovation in Digital Economies (BBIM510, level 5). The module has been a success, and students have been very inspired to learn more on digital technologies which are used in business innovation processes. Westminster Business School wants our students to become better entrepreneurs who have more information and skills to succeed in business innovation, using digital technology for that.
In order to motivate students to get more involved, we invited them to write articles for the series Inspiring Digital Business Innovation, to be published in our Westminster Business School blog. In this series, students choose the company or innovation which has inspired them to better understand the possibilities of business innovation in the digital economy.
You can follow the series here in the blog. We hope you get inspired as well.
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