SMEs and new ventures need business model sophistication

Business models are a current hot topic, and their design has become a key to performance. In fact, business model design is often associated with innovation. Many firms, though, fail to realize the full potential of their current business model simply because they are not aware of it. Nevertheless, Google succeeded in realizing its business model's full potential by offering its main service, Internet search, completely for free while capturing value from secondary opportunities such as Google AdWords. Especially for new ventures and SMEs, capturing value from secondary opportunities or business model sophistication is of critical importance toward increasing the pool of resources at hand and giving momentum to the firm's development. But what are these opportunities, and where can they be found? Based on various examples including Google, Ryanair, the Super Girl Contest on Hunan TV, and Spreadshirt, this article develops a framework that introduces five business model sophistication strategies: (1) uncover additional functions of your product, (2) identify strategic benefits for third parties, (3) take advantage of economies of scope, (4) utilize cross-selling opportunities, and (5) involve users and the crowd. All five strategies place a strong emphasis on stakeholder commitment.