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In today’s dynamic and fast-paced environment, business model innovation represents one of the most compelling opportunities for value creation and value capture.

Business Models provide firms with the opportunity to create competitive advantage, differentiate themselves from competitors and disrupt existing markets. By way of example, many of the world’s most valuable companies such as Facebook, Google, Amazon, Airbnb have embraced multisided platforms as a form of Business Model innovation. In the insurance industry, it might be said that Hiscox, a Lloyd’s Managing Agent, innovated its Business Model when it launched its B2C retail business.


What is a Business Model? In Business models: A challenging agenda the authors propose Business Models can be seen as a set of cognitive configurations, distinct from the real economic activity of firms. In defining Business Models in this way, the authors emphasise the importance of connecting traditional value chain descriptors with how customers are identified and satisfied and secondly, how the firm captures (monetises) value.

By adopting this stripped-down characterisation that focuses on causal links, both inside and outside the firm, rather than a complete description of what the firm actually does, CROs are able to define Business Model configurations and evaluate the merits of different Strategic Options.

In a series of short Articles, we will examine Business Model innovation along the following dimensions:

1) Evaluating your current Business Model

2) Concepts, tools and frameworks

3) Business Model innovation and selection

4) Business Model implementation

Evaluating your business model

The first step is to correctly identify and define your core business model and its strategic positioning relative to competitors.

In Business models: A challenging agenda the authors propose Business Models are a special example of a configuration that can be defined by considering a set of cause-effect relationships that exist between customers, the firm and money:

  1. Identifying customers: the firm’s targeted user and customer groups, including the situation where it creates new customers
  2. Customer engagement: the value proposition (value creation) from each of the customer’s perspective
  3. Monetisation: a key part of value capture, including the provision of complementary assets (associated products or services)
  4. Value chain and linkages: the mechanisms used to deliver the product or service to the customer

Final comment

By identifying the causal links that exist between a set of characteristics, CROs can assist firms in understanding opportunities for value creation and value capture.

The distinction between one sided, where customers pay for the services received and multi-sided platforms, where another group of customers pay for services when the core offering is provided for free, may have important implications for the insurance industry.

In particular, we are beginning to see a number of Business Model innovations, whereby innovative firms are seeking to create or re(combine) different contexts (industry intersection points) and technologies (emerging technologies) to fulfil customers wants and needs and generate scalable revenue streams.

Reciproco provides knowledge integration across risk, solvency and strategy, including digital transformation, leading complex and unique projects in regulated sectors. Helping senior executives and management teams focus on strategic challenges to create a competitive advantage.

Darren Munday is the founder and Managing Director of Reciproco. An experienced executive with over 20 years’ global experience with multinational companies, including Chief Risk Officer reporting to the Board.

Darren is an Honorary Visiting Fellow of the Digital Leadership Research Centre, Cass Business School where he also holds an Executive MBA.  Darren is a Certified Fellow of the Institute of Risk Management (CFIRM) and Chartered Insurance Risk Manager (ACII) of the Chartered Insurance Institute.

All rights reserved. Unauthorised use and/or duplication of this material without express written authorisation from Darren Munday is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Darren Munday with appropriate and specific direction to the original author and content.