Business Model Innovation involves a structured practical approach to understanding, designing, identifying alternatives, and testing business models. It includes analyzing existing business models or developing a business model for a new startup venture, and validating business model building blocks.  Business model innovation is at the center of value creation and many leading companies and social ventures owe much of their success to the process of business model innovation.

 

 The overall process consists of four stages:

 

• Understand the current state - This step involves capturing the elements of the current business model for an existing business, or the proposed model for a new venture.  It involves mapping exactly how you currently create and generate value on a Business Model Canvas.  This also includes gaining a general understanding the target customers, technological developments, business models of industry competitors, and taking a look at past and present market and customer boundaries.

• Innovate - This activity starts with assessing the quality of your current business model and identifying areas for improvement.  Here you look for opportunities to create unique value that differentiate you from your competition.  Next ideas that pivot around different options for the various basic business model elements are generated and captured to identify new potentially viable business models. 

• Validate  - This step involves the identification of key assumptions embedded in the models generated in the previous step.  These assumptions are then tested for validation against the realities of the market place.   Based on new knowledge acquired in the process, the second step may be repeated in multiple innovate and validate cycles. The goal here is to de-risk any new business model by addressing what can call the idea or cause failure.

• Implement - This is the implementation of the output of the innovate and validate cycles and involves transformation of the business to the new business model.