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Waterfall or agile business model innovation

Wichtigkeit des Innovationsmanagement

Lucky to see that: When executing waterfall innovations meets demand

When developing new business models, companies often fall into the mode of the waterfall approach instead of relying on agile methods of Business Model Innovation (BMI). This decision results in innovations being pushed into the market with many resources and then only being successful with a lot of luck, rather than ensuring they are wanted by the market from the outset.

Innovation management is primarily about methodical risk reduction with kill-switch checkpoints.

The waterfall approach

The waterfall approach is one of the oldest and most well-known approaches in project and business model development. It was developed in the 1970s by Winston W. Royce. The waterfall model is based on the idea that the progress of a project is predictable and proceeds in a linear sequence. The individual phases are completed one after another, with each phase building on the results of the previous one.

The classic waterfall model consists of several main phases, including requirements analysis and definition, system design, implementation, integration and testing, and deployment and maintenance. Each phase is clearly defined and has specific goals that must be achieved before proceeding to the next phase. The waterfall approach aims to execute projects in a controlled and sequential manner.

Once a waterfall innovation starts, it is almost impossible to stop, and a risky plan based on many assumptions is executed blindly and deafly.

Although the waterfall model is clear and simple to understand in its structure, it also has its limitations. One of the main criticisms is the lack of flexibility for changes during the development process, which is the nature of any innovation project. Since each phase builds on the results of the previous one, a change in an early phase can have far-reaching impacts on later phases, leading to delays and additional costs. Moreover, there is a risk that customer needs are not fully understood or taken into account, as the waterfall model allows little room for continuous feedback and adjustments.

Agile Business Model development

In contrast to the waterfall approach, which is based on predefined requirements and a set plan, agile business model development focuses on searching for and validating a business model from the beginning that meets the actual needs and requirements of the customers. Agile methods emphasize working with hypotheses, quick learning/testing iterations, continuous customer feedback, and the ability to quickly adapt to market feedback.

In agile business model development, customers are highly likely to integrate the innovative product into their lives, as it is based on qualitative/quantitative user research data, meets their specific needs, and provides them with real added value. Development takes place in small, iterative steps, with each iteration serving to collect customer feedback and continuously validate the business model. This iterative approach allows companies to formulate and test hypotheses and respond more flexibly and quickly to false assumptions.

The waterfall approach to innovation is suitable when the innovation risk is low due to clear requirements for product development, which is rarely the case. For most projects, the business model (including the solution) must be sought, adjusted, and validated under initially great uncertainty.


The decision between the waterfall approach and agile methods in business model development depends on the corporate culture and the company's prior knowledge of the innovation project. While the waterfall approach offers "seeming" structure and control, agile business model development enables faster adaptation to initially unclear customer requirements, solution ideas, and business models.

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