Transformative Business Model - Explained
What is a Transformative Business Model?
Written by Jason Gordon
Updated at May 2nd, 2022
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What is a Transformative Business Model?
The Transformative Business Model was proposed by Ladas Kavadias and Christoph Loch (2016). It outlined 6 characteristics or elements of a transformative business model.
- Providing a more personalized product or service offering that is better tailored to customers’ individual and immediate needs by utilizing technology at competitive prices.
- Replacing a linear consumption process with a closed loop, which enables a reduction on overall resource costs.
- Sharing costly assets to unlock value for both ends of a two-sided online marketplace and increasing entry barriers to the industry.
- The pricing strategy is usage-based instead of product-based. The customers tend to use the product or service as they pay only when it generates value for them.
- Building a more collaborative ecosystem with supply chain partners, making cost reductions possible by allocating business risks more appropriately.
- Making decisions that better reflect market needs and allow real-time adaptation to market changes, thus creating even greater value for customers.