Category: Business Analytics and Intelligence Copyright © 2014, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. 396 Business Model Innovation and the Balanced Scorecard INTRODUCTION Over the last decade, strategic management has emphasized the business model as a theoretical framework for formulating and implementing an innovation strategy that creates value for organi- zations. In the global economy, the competition to create value has taken on a new dimension, as business model innovation (BMI) has become a new frontier of strategy. Increasingly, multina- tional firms are focused on innovating their busi- ness models, rather than developing new products and technology, to create greater business value. If innovation is the essence of value creation, maximizing the efficacy of innovation should be a primary strategic focus of business leaders. The balanced scorecard has become a popular business analytic tool of academics and prac- titioners. Little has been done, however, to use the balanced scorecard as a business analytical framework to measure the effectiveness of BMI. Therefore, we propose a matrix that applies a set of metrics and key success factors for each of the four categories of the balanced scorecard to the four basic components of the business model. This business analytic framework will provide a means for optimizing BMI. BACKGROUND Business Model Strategy scholars have described the business model as the logic and rationale for creating eco- nomic value in an organization for the benefit of its stakeholders. For example, Casadesus-Masanell and Ricart (2010) characterized the business model as a locus of innovation, planning tool, heuristic logic, or market device. Amit and Zott (2001) defined it as the content structure and governance of transactions designed to create value by exploiting business opportunities. The business model defines the total value created in transactions from a firm’s products and services (Zott & Amit, 2010) and provides a coherent framework that takes technological characteristics and potentials as inputs and converts them through customers and markets into economic outputs. Chesbrough and Rosenbloom (2002) outlined the basic functions of the business model: 1. Articulate the value proposition, i.e. the value created for users by offering based on the technology; 2. Identify the market segment, i.e. the users to whom the technology is useful and for what purpose, and specify the revenue generation mechanisms for the firm; Stephanie Black University of Texas at San Antonio, USA Montressa Washington Case Western Reserve University, USA Howard Rasheed University of North Carolina Wilmington, USA DOI: 10.4018/978-1-4666-5202-6.ch036