A new report published in collaboration between the Institute for Manufacturing (IfM) and The Conference Board outlines how business model coherence is critical to unlocking value in the face of rapid digital transformation.

Titled: How to Address the Incoherence of Business Model Innovation in Digital Transformation," the report explores how alignment between business and operating models is vital for companies navigating technological disruption, particularly those integrating AI and other advanced digital tools.

Drawing on interviews and workshops with over a dozen multinational firms across sectors including manufacturing, logistics, healthcare, and finance, the report identifies five key areas where business model incoherence typically arises: decision rights, performance metrics, resource and material flows, information flow, and partner engagement. Misalignments in any of these areas, the report finds, can significantly hinder a firm’s ability to deliver value and adapt effectively.

Co-authored by Professor Chander Velu, a Senior Fellow at The Conference Board and a Professor of Innovation and Economics at the IfM, the report introduces a Business Model Coherence Scorecard, a practical framework for diagnosing misalignment and supporting strategic decisions during digital transformation. This tool helps organisations evaluate how digital technologies affect both internal processes and external business relationships – and crucially, whether they create cohesive or fragmented operations.

Aligning business models for digital success

In an era of constant disruption, especially from technologies like AI, business model coherence is becoming critical to success. When a firm’s business and operating models are aligned, it enhances agility, resource efficiency, and value delivery. This is particularly crucial for organisations undergoing digital transformation.

The report highlights a common problem: as firms evolve their operations, many encounter hidden “blockers” – forms of misalignment that hinder innovation, efficiency, and growth. The Business Model Coherence Scorecard helps organisations pinpoint these issues and guide strategic realignment.

“Business model innovation is not just about adding digital tools; it’s about ensuring that all elements of the enterprise – strategy, operations, and financial models – work in harmony,” said Professor Chander Velu. “Coherence is what makes innovation sustainable.”

Why business model coherence matters

Digital transformation inevitably causes shifts in business logic and processes. This can lead to misalignment between a firm’s existing business model and its operating model. Even companies not actively transforming face “drift” over time, as customer demands, technologies, and regulations evolve.

The Business Model Coherence Scorecard helps organisations address what the authors call the “piecemeal syndrome” – when isolated digital improvements undermine the consistency of the broader business model.

The report draws on real-world examples to illustrate how even well-intentioned innovation efforts can contribute to performance deterioration when not guided by a coherent model. One case examines a global apparel manufacturer that adopted digitally enabled print-on-demand technology, based near customer sites to deliver garments. The move aimed to reduce inventory costs for retail customers, who typically have to predict trends up to 9–12 months in advance to set production targets, resulting in excess inventory or shortages that contribute to discounted prices or lost sales.

However, the print-on-demand model did not integrate well with the existing business models of the apparel manufacturer’s large-scale customers, which were predicated on longer production turnarounds and stock inventory processes. This inadvertently caused bottlenecks given the key performance indicators (KPIs) across the customers’ stock management and payment systems. This disruption demonstrates how a seemingly efficient technological solution can fail if decision rights, performance metrics, and operational processes are not realigned accordingly.

These kinds of challenges, the report suggests, are increasingly common as organisations introduce AI, Internet of Things (IoT), and other digital capabilities into legacy structures that weren’t designed for them.

Rather than treating each business function or technology in isolation, the report advocates for an integrated management approach. Misalignments in decision-making, KPIs, resource allocation, or partner engagement are rarely isolated issues – they’re often symptoms of a wider systemic incoherence. For this reason, the Business Model Coherence Scorecard encourages leaders to evaluate alignment across all dimensions simultaneously. Only then can businesses ensure that digital transformation delivers sustainable, enterprise-wide value.

Research grounded in industry collaboration

The findings are based on extensive research, including 14 interviews and two workshops conducted between 2022 and 2024, involving firms from across Europe, North America, and Asia. Participating organisations spanned nine sectors – from manufacturing to pharmaceuticals and finance – providing a diverse set of insights into how business model incoherence manifests across different operational contexts. This breadth reinforces the applicability of the report’s recommendations across industries.

With actionable recommendations for realigning decision rights, refining performance measures, and improving flows of materials and information, it equips managers to implement structural changes with confidence. The Business Model Coherence Scorecard can also act as an early-warning system, alerting organisations to areas of drift before they impact performance.

As Professor Velu notes: “Incoherence often creeps in unnoticed–until it becomes a barrier to innovation. This framework helps firms see the whole system, not just its parts.”

To read the full report, visit: How to Address the Incoherence of Business Model Innovation in Digital Transformation

The summary report, produced in partnership with The Conference Board, can be downloaded here.

Report Authors

• Chen Ye, Doctoral candidate at the Institute for Manufacturing at the Department of Engineering, University of Cambridge.
• Charles Popper, Senior Fellow in the Innovation and Digital Transformation Institute at The Conference Board.
• Chander Velu, Senior Fellow at The Conference Board and a Professor of Innovation and Economics at the Institute for Manufacturing at the Department of Engineering, University of Cambridge.
• Fathiro Putra, Lecturer in Industrial Engineering and Engineering Management at the Faculty of Industrial Technology, Bandung Institute of Technology in Indonesia.