The Business Model Innovation Cycle: From Environmental Framing to Implementation

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by: Alexander Osterwalder

The Business Model Innovation Cycle (beta version) contains 4 phases: Environmental Framing > Business Model Innovation > Organizational Design > Business Model Innovation > Environmental Re-Framing…

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1. Environmental Framing

The first step to business model innovation is building a multi-disciplinary “business model innovation team” with people from business, process, technology, customer segments, design, R&D, HR…

Get the team to understand the business model environment (Social, Legal, Competitive and Technological Landscape). Then frame the business model design space.

2. Business Model Innovation

Within this design space the team can start generating different business model prototypes. Our metamodel has 9 business model building blocks that can help describe business models. This can serve as a basis for iterative business model design thinking and innovation.

The team and a number of designated executives can then select one or several of the business model prototypes for implementation and testing (in Web2.0 software the buzzward is the so-called beta 😉 If several business models are selected I call this a business model portfolio that can be like in the financial world (portfolio management with risks, returns and investments…

3. Organizational Designs

After that, based on the business model portfolio the company should reflect on how to best translate the models into business units and business processes. I call this the organizational design. At the same time the underlying Information Systems are designed to support the implementation of the selected business models (e.g. e-business systems, balanced scorecards, data mining, etc.).

Then the right people have to be brought in to implement the design, the business processes and the supporting technologies.

4. Business Model Implementation

Now comes the sleeves-up-part of transforming models (business model, organizational model, process model, information systems model) into reality. After securing the external (e.g. venture capital) or internal (e.g. budgets) financial funding the business has to be built and run. Based on our experience with organizations this is the most challenging (and often neglected) part.

But the process doesn’t end here! Business model innovation is a continuous and iterative process that ends with a business model (portfolio) evaluation and re-starts with the framing of the changing business environment – even for successful business models…

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