A 5-step Process for Business Model Innovation

Having creative ideas is easy and most people and organizations are not too bad at it. But implementing these ideas and turning them into successful innovations in the market is much harder. This is the domain many companies struggle with.

This is even more so when innovations are not only about products and services only – these can be easily tested and we have many processes, tools and theories at our disposal. When we are talking about ideas and innovations that have an impact on your business and the way you do business as a whole, these “business model” innovations need a distinct process and approach.

Through my research and my work with companies around the world, I have designed a 5-step Process for Business Model Innovation.

Step 1: Setting the Stage
The first step in the business model innovation process is to clarify what your business model innovation goals are, and why you want to or need to engage in this kind of innovation. Usually the top team needs to agree on a common view before the organization can productively and effectively engage in the process and necessary activities. Setting the stage also includes agreeing on the concept and working definition of a business model to be used in the organization. Another important exercise is to describe the existing business model and establish a common view. Management usually thinks they have a common understanding of the existing business model, but such an exercise usually shows they don’t.

Step 2: Discovery
The second step in business model innovation consists of some real-world discovery of the current situation, customers, their needs, challenges, etc. In addition to customers, it also pays to look into what competition is doing, which trends have an impact on your business, and which business model innovations companies outside your industry are implementing that you can learn from. You might also want to look inside to determine what assets, resources and core competencies you have within your company that you can leverage. The main purpose of Step 2 is to seek and discover opportunities for business model innovation.

Step 3: Development and Design
Now comes the creative part! Based on the insights gained in Step 2, you develop an idea portfolio that includes ways you could innovate your business model. Ideas can come from many different places both within and outside of your company. Tools to describe the business model, customer profiles and the buying experience can be used to visualize the future state. Once you have developed many ideas, an initial evaluation and prioritization will lead to a portfolio of business model innovation ideas you can test in Step 4.

Step 4: Conversion
The fourth step in the business model innovation process is about putting your ideas into practice and turning them into innovations in the marketplace. The goal is not to fully launch the business model innovations yet, but to test your ideas within a limited scope to determine whether customers like the innovation, accept it and are willing to pay. Often it’s a good idea to test innovations in markets and business, or with products and services that don’t perform. This step is the most important, as innovations will have to be tweaked and changed. Some ideas will work, others will not; it takes some time experimenting to find the best ideas and make them fit together in a system.

Step 5: Commercialization
Step 5 is where you take the business model innovations that have been successfully tested and tweaked to make them work, and scale them up. These innovations are implemented across the whole organization using a suitable change strategy. Sometimes new business models can be implemented in the existing organization; sometimes you might need to launch a new venture.

Business Model Innovation is more important now than ever.  As with any serious organizational change, using a proven process for designing, testing and implementing  your new business model will greatly improve your chances of success.

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About Marc Sniukas

Marc Sniukas specializes in strategic renewal and business model innovation. As a consultant and executive coach, he has helped organizations around the world transform their offerings and increase their innovative thinking capabilities.

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