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Business Model Strategy and Innovation for ACCA SBL

Updated 11 October 2026 · Fact-checked

A business model explains how an organisation creates, delivers and captures value. Innovation changes it. In SBL you choose a lens: business model canvas, open innovation, disruptive innovation or blue ocean. You then apply it to the case, judge the option and recommend, with reasons and risks.

Understand Business Model Strategy and Innovation

A business model is the logic of how an organisation makes money and delivers value. It answers three questions: who are the customers, what value do we offer them, and how do we earn a return from doing so. Two firms in the same industry can have very different business models.

The business model canvas (Osterwalder and Pigneur) breaks the model into nine blocks: customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships and cost structure. Use it as a checklist. It shows which block the case wants to change, and what else must change with it.

Open innovation (Chesbrough) means a firm uses external ideas and routes to market as well as internal ones. It works through licensing in and out, joint ventures, partnerships, crowdsourcing and buying start-ups. Closed innovation keeps R&D inside the firm and controls all of it. Open innovation can be faster and cheaper. The risks are loss of control, leakage of intellectual property and dependence on partners.

Disruptive innovation (Christensen) describes how a new entrant starts with a simpler, cheaper product that serves overlooked or low-end customers. Incumbents ignore it because their best customers want more. The entrant improves over time and then takes the mainstream market. Do not call every new technology disruptive. It is disruptive only if it follows this pattern. Incumbents can respond by setting up a separate unit, acquiring the entrant or adapting the model.

Blue ocean strategy (Kim and Mauborgne) says firms should create uncontested market space instead of fighting in crowded "red oceans". The tools are the strategy canvas and the four actions framework: eliminate, reduce, raise and create. The aim is value innovation, which pursues differentiation and low cost together.

Key rules to remember

Business model canvas blocks: Customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, cost structure; Nine blocks. Pick the blocks the case changes rather than listing all nine.
Four actions framework (blue ocean): Eliminate – Reduce – Raise – Create; Which factors the industry takes for granted should go, fall below, rise above the industry standard, or be newly offered.
Value innovation: Value innovation = differentiation + low cost, pursued together; This breaks the usual trade-off between value and cost.
Disruptive innovation pattern: Low-end or new-market entry → performance improves → mainstream customers switch; Check the case follows this path before using the label.
Open vs closed innovation: Open = internal and external ideas and routes to market; Closed = internal only; Weigh speed and cost against control and IP risk.

How to solve Business Model Strategy and Innovation questions

Use this method for any question on business models, innovation, disruption or blue ocean.

1Read the requirement and note the verb: explain, evaluate, advise or recommend.
2Pick the model the case points to. Look for clues: new entrant with a cheap product (disruption), crowded market (blue ocean), partners and outside ideas (open innovation), unclear value or revenue (canvas).
3Define the model in one or two lines, then apply it straight away to the facts in the case.
4Use case data: names, figures, customer groups and quotes. Show what the organisation does now and what it could change.
5Evaluate the option. Cover benefits, risks, cost, capability and fit with strategy and stakeholders. Use suitability, acceptability and feasibility if asked to assess options.
6Give a clear recommendation with reasons and next steps. Add risks and how to manage them.
7Write in the requested format and tone. Keep the professional skills marks in mind: analysis, scepticism, commercial acumen and communication.

Quickest way: Model, case, judge

When to use it: Use when time is short and the question asks for a quick explanation or a short evaluation.

Name the model and give a one-line definition.
Link two or three case facts to it.
State one benefit and one risk.
Finish with a one-line recommendation.

Common mistakes in Business Model Strategy and Innovation

Reciting the theory without applying it to the case.
Students feel safe writing what they learned.
Fix: After each definition, add a sentence that starts with the case organisation's name and uses its facts.
Calling any new technology disruptive.
The word is used loosely in the news.
Fix: Test the case against Christensen's pattern: a simpler or cheaper offer, an overlooked segment, then improvement and mainstream switching. If it does not fit, say it is sustaining or radical innovation.
Treating blue ocean as just a new product.
Students forget value innovation and the strategy canvas.
Fix: Show which factors are eliminated, reduced, raised and created, and how cost and differentiation improve together.
Presenting open innovation as all benefit.
It sounds modern and collaborative.
Fix: Always cover risks: IP leakage, loss of control, partner dependence and sharing of rewards.
Listing all nine canvas blocks with no focus.
Students want to show they know the model.
Fix: Choose the blocks the scenario changes and explain how they link, for example a new channel affecting cost structure.
Stopping at analysis with no recommendation.
Time runs out or students fear being wrong.
Fix: Reserve time for a clear, justified recommendation with risks and next steps.

Worked examples

Example 1

A long-established camera maker sells high-specification products to professionals. A start-up offers a basic, cheap camera to hobbyists and is improving its quality each year. The board says the start-up is not a threat. Evaluate this view using disruptive innovation theory and advise the board.

Show the solution

Define: disruptive innovation is where an entrant starts with a simpler, cheaper offer for overlooked or new customers, then improves and takes the mainstream.
Apply: the start-up serves hobbyists the maker ignores, its product is basic and cheap, and quality is improving each year. This matches the pattern.
Evaluate the board's view: it is risky. Incumbents often ignore low-end entrants because their best customers want more features. Rising quality means the gap may close.
Respond: options include a separate unit with a low-cost model, acquiring or partnering with the start-up, or moving up-market to defend the professional segment. Each needs investment and may cannibalise existing sales.
Recommend: monitor the start-up's quality and customer growth, and set up a small separate unit to test a low-cost model before the threat reaches the core market.

Answer: The board's view is too confident. The start-up fits the disruptive pattern, so the board should respond now, most sensibly through a separate low-cost unit while defending the professional segment.

Example 2

A hotel chain competes on price in a crowded city market. Management is told to use blue ocean thinking. Explain how the four actions framework could be applied and give one risk.

Show the solution

Define: blue ocean strategy seeks uncontested market space through value innovation, using eliminate, reduce, raise and create.
Eliminate: factors the industry takes for granted that customers do not value, such as a full-service restaurant and a large reception desk.
Reduce: factors that can fall below the industry standard, such as room size and staff numbers per guest.
Raise: factors to lift above the standard, such as sleep quality, location and speed of check-in.
Create: factors the industry has never offered, such as app-based check-in and keyless entry, or a membership scheme for frequent travellers.
Link to value innovation: the cuts lower cost, while the raised and created factors differentiate. Both happen together.
Risk: competitors may copy the concept quickly, and customers may not accept fewer services. Test on a pilot site first.

Answer: Cut or lower low-value features, raise and create factors customers value, and fund this from the cost saved. This aims for value innovation. The main risk is imitation and customer rejection, so pilot first.

Exam tips

Match the model to the clue in the case. A cheap entrant points to disruption, a crowded market to blue ocean, and partners to open innovation.
Apply every model to named facts. Marks go to the application and the judgement, not to the definition.
Always give risks and a recommendation. Professional skills marks reward commercial awareness and a clear conclusion.
Link business model change to other strategy tools, such as capability, stakeholders and the evaluation of options by suitability, acceptability and feasibility.
Use the format asked for, such as a report or briefing note, and keep the tone suitable for the reader.

Practice questions from Strategic choices

Business Model Strategy and Innovation in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Business Model Strategy and Innovation: frequently asked questions

What is the difference between blue ocean strategy and disruptive innovation?

Blue ocean strategy is a deliberate move to create new market space by combining differentiation and low cost. Disruptive innovation describes how a simple, cheap entrant grows and overtakes an incumbent. Blue ocean is a proactive approach, while disruption is a pattern that you spot and respond to.

How do I use the business model canvas in SBL?

Use it to analyse how an organisation creates and captures value. Focus on the blocks the case changes, and show how they affect each other. Then evaluate whether the new model is suitable, acceptable and feasible.

What is open innovation compared with closed innovation?

Open innovation uses outside ideas, partners and routes to market together with internal R&D. Closed innovation keeps development inside the firm. Open can be faster and cheaper but risks IP leakage and loss of control.

Is every new technology a disruptive innovation?

No. It is disruptive only if it follows Christensen's pattern of entering at the low end or a new market and then moving upward. Many new technologies simply improve existing products for existing customers.