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Business Models Outside the Core: Lessons Learned from Success and Failure.

Bertels, Heidi M. J., Koen, Peter A., & Elsum Ian (2015). Business Models Outside the Core: Lessons Learned from Success and Failure. Research-Technology Management, vol. 58, no. 2, pp. 20-29.

Abstract

Leaders at incumbent firms increasingly recognize that in order to sustain growth and protect their companies from disruption, they must innovate “outside the core”—beyond the familiar markets and competencies on which the company has built its existing business. Outside-the-core innovation projects, which target new customers or non-consumers in new markets, can lead to high growth. However, they are also very risky: the odds of success for outside-the-core projects rapidly drop with each step outside the core. In a study of six outside-the-core projects using a business model perspective, we found that, contradictory to common wisdom, the likelihood of failure is not related to how many steps the project is outside the core. Instead, the risk of failure is influenced by false assumptions about the distribution channels, cost structure, unit margins, and velocity elements of the innovation, which are often carried over from the incumbent business model.

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