Business Model Innovation

Why is Business Model Innovation important?

Business models are the underlying secret to success for many innovative companies. Practicing business model innovation allows new and established businesses to act before competitors in a certain industry and:

• Take advantage of new technologies
• Adjust to shifting markets
• Respond to changes in customer’s needs and expectation

What is Business Model Innovation?

A business model is:

1. "A conceptual tool that expresses the business logic of a specific firm".
2. "The method by which a firm organizes and captures value."

Business Model Design: This is the very first instance of a business model that usually happens in a startup. Your business model design is the first time you are deciding what to do inside your organization.

Business Model Reconfiguration: Reconfiguration refers to any firm’s second or third or fourth or tenth business model. You are taking your current business model, and you are adding something or modifying it in some way or another.

Business Model Innovation: This would be the first business model of its kind in its industry. Innovation can happen with Business Model Design or Reconfiguration.

How can you apply this?

Business model innovation can happen in companies at any stage of their development; however, structures need to be put in place to foster business model innovation.

0. Self-Assess

Assess your organization and your goals. Are you looking to create a new business model to capture value from a product or service you have developed? Are you an established company looking to articulate your business model for the first time? Are you hoping to change your existing business model to stay ahead of new trends and technologies?

1. Choose An Appropriate Framework

Consider different Business Model Frameworks:

1. Business Model Zoo™ provides the highest level of insight to categorize your business model into one of four major categories.
2. Business Model Navigator can provide more detailed inspiration for a business model.
3. Business Model Canvas is the most detailed toolkit to determine the elements of your Business Model and communicate it.

See the Business Model Frameworks Method Card to learn how to choose a framework appropriate for your business.

2. Articulate Your Business Model

1. Using the Business Model Canvas or the Lean Canvas, write down all the elements of your business model that you have designed or changed from an existing one.
2. Put your business model into a format through which you can communicate it to your team and stakeholders. This could be in the form of a poster, pitch deck, report, or even more creative formats.

3. Test Your Business Model

1. Before you continue, start experimenting more to reduce risk. Develop prototypes and run tests that help you to verify that your Business Model will be accepted and hopefully profitable. Look at each of the components of the Business Model Canvas. Which assumptions did you make?
2. Out of those underlying assumptions, extract the most relevant one and develop a testing procedure or prototype to verify it, just as you learned in Module 3.

4. Implement Your Business Model

1. After testing your business model, reflect on what you learned. Do you need to test something else? Do you need to go back and change something in the business model you designed? Or are you ready to implement or scale up because the uncertainty and, therefore, the risk of failing is low or acceptable?
2. Go back and have another look at your minimal viable product. This MVP is the minimum set of features in a product that will compel a customer to buy the product.
3. Implementing a business model successfully is not a linear path but requires iterations and changes over and over again. Be ready to go back and make changes multiple times.

What’s Up Next?

Dive deeper into choosing a framework and explore your options in the Business Model Frameworks Method Card.