A business model is a framework for creating value by organizing available resources and activities to address a user need. As such, each product or service requires a business model in order to be commercialized. A business model can be embedded in a hierarchical or inverted firm. We start analyzing business models by exploring value configurations, an overall model of the value creation logic of the firm. A business model is a more detailed description of the structure of activities and transactions that enables the firm to deliver its products and services. It includes the description of the value created in the form of a value proposition, whom the firm targets to offer the value – the target market – and how it creates value – the implementation of the delivery in terms of key assets, activities, and partnerships. The value proposition and the target market together inform the company’s revenue mechanism that defines who is willing to pay for what aspects of the service under the current or expected competitive conditions. The key assets, activities, and partnerships inform the company’s cost structure, and, in particular, how much it costs to deliver the value proposition to the target market. Finally, these analyses allow the firm to assess whether and how to scale the business.

The two design stages of The Innovation Pyramid work together to ensure that a complete and detailed design is crafted before any implementation is attempted. The second design stage focuses on Solution Formulation. Before any solution is crafted, the general group directly suffering from the root problem is segmented and a target adopter segment identified. The target adopter segment is described psychographically--based on common unmet or under-met needs, wants and/or desires – versus demographically. Personification of this group segment allows the innovation designer to fully appreciated how the adopter will interact with their innovation. Just as the root problem was gradually honed in on, so too is its solution. A general approach to resolving the target adopter's issue that the designing organization is willing and able to pursue is first identified. A detailed solution is then crafted which has attributes or features that align with the adopter's specific needs, wants and/or desires. This alignment of solution features with adopter needs is at the heart of the innovation's value proposition. The entire pathway through this second stage of design, Solution Formulation, requires multiple, iterative, non-linear steps.