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The IUP Journal of Business Strategy
Why Business Model Innovation Is the New Competitive Advantage
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The focus on business model innovation has increased to a dramatic extent over the last couple of years. This paper contradicts Porterís views about competitive advantage and highlights how business model innovation can serve as a competitive advantage. The study was purely approached from a theoretical perspective, and previous articles and papers based on competitive advantage were reviewed and analyzed in the present context. The study highlights that business model innovation can be a source of sustainable competitive advantage because for rival firms imitating an entire novel system is quite difficult compared to imitating a product or a service. The study also shows that business model innovators earn four times more returns than product and service innovators.

 
 
 

Michael Porter, a relatively unknown face at Harvard Business School during 1985, published a book, Competitive Advantage. The book highlighted that companies have to optimize their value chain in order to consistently outperform their rivals. Porter highlighted that the firm can have competitive advantage either by focusing on low cost or the differentiation strategy. The book became an instant success in academics and in industry and that is from where Michael Porter became The Michael Porter. Over the years, the basic building blocks of business model have changed and Porterís work has been put to question. Rita Gunther McGrath in her book, The End of Competitive Advantage has contended that sustainable competitive advantage in todayís turbulent business environment is no longer possible and has in fact advised firms to seek out transient advantage. Further, many other researchers have criticized Porterís idea of cost and differentiation as a competitive advantage because first, it is very difficult for a firm to calculate its own and competitorsí cost of operations, second, new products and services are easily imitated. Further, research has shown that value for money has become a preferred strategy for businesses success, and according to Porter it is being stuck in the middle of the road and an absolute guarantee of failure.

 
 
 

Business Model Innovation, Competitive Advantage