As the worst recession in recent history takes root worldwide, managers are doing what they always do in tough times: first they start worrying, and then they start cutting costs. This is a natural response to try and balance the books when revenues have started to dry up and credit is hard to come by, but cutting costs involves only half the equation and ignores a more strategic response that could cause less pain in the short run, and result in more gain in the long run. Namely: to use the opportunity provided by hard times to introduce serious innovation into the business, in particular to innovate the firm's business model. This begs the questions: what is a business model, and what does innovating a business model involve? Professor Jaideep Prabhu explains, using Amazon.com as an example of a successful business model innovation that shook the world.
view more