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Our original approach to designing a business model for innovation was developed through extensive practical experience with both entrepreneurial ventures and large corporations, as well as the work of leading thought leaders in strategy and innovation. To see how our model compares with others, see What is a business model? A new approach.

Our goal was to create a very powerful framework and set of tools – a methodology - that entrepreneurs and corporate innovators can quickly learn and apply, in order, to paraphrase Peter Drucker, to both do the right things and do things right to maximize the potential and value of their innovations.      

Our innovation business model framework comprises five primary components. The central component is Economics – the value created by the innovation. The other four components – Markets, Products, Processes and People – are the critical drivers of this value. By optimizing each of these four drivers, you maximize the economics and value of your innovation.    

The process of designing a successful business model for a new technology or product begins with the following sets of questions:

Markets: How can we drive economic value through focusing on the right market, and through addressing that market in the optimal way?

• Which market offers the best opportunity for our innovation?
• Who should be our customers, and what needs should we address?
• Who will we compete with, and what are their competitive responses likely to be?
• What is the level of maturity and technology adoption in the market, and what are the implications for how we take our innovation into the market?
• What is the current value chain in the market, and how should we participate in, or change, the value chain?   

Products: How can we drive economic value through an optimal product offering that meets customer needs better than all other options?

• What is the whole solution our customers want, and how should we offer it?
• What are the core features that leverage our innovation and make a real difference to customers – and what don’t they want or need?
• What customer experience will best meet our customers’ needs?
• What pricing model will optimize the balance between value to the customer and value to the company?
• How can we position our solution as clearly better than other solutions, and how can we sustain that positioning over time?  
• How can we ensure we capture the value being created by our innovation and prevent it from being competed away?  

Processes: How can we drive economic value through the way in which we create, market and deliver our solution to our target market?

• What is the right business system or value chain for our business?
• Which approach to research and development will be optimal?
• What sales and marketing model makes best sense for our innovation?
• What is the right operational and customer service model?  
• How should we manage and support these core activities?
• Which activities and processes should we execute internally, and which should we execute through partners?  

People: How can we drive economic value through building the right team of stakeholders – management, employees, investors, partners and others?

• Who should be part of our core team of stakeholders?
• What should be our core team’s goals, vision and values?
• What should each stakeholder contribute, and how should we share rewards?
• How should our core team evolve over time?
• What extended team will drive value, and how should we build that extended team?  

Economics: How do we integrate each of the above drivers in an economic model that maximizes the growth, profitability and value of our innovation?

• What revenue model makes most sense for our business?
• What is the right cost structure?
• How can we manage gross and operating margins?
• What level of working and fixed capital investment is optimal?
• How can we maximize short and long term cashflow?
• What type of funding will drive most value?   
• How can we maximize our valuation multiple?

Through our extensive work with both independent start-ups and corporate innovation, we have developed a comprehensive body of knowledge and best practices in response to each of these questions. This depth of expertise forms the basis for all of our courses, workshops and consulting activities.