Let’s face it: business models are less durable than they used to be. The basic rules of the game for creating and capturing economic value were once fixed in place for years, even decades, as companies tried to execute the same business models better than their competitors did. But now, business models are subject to rapid displacement, disruption, and, in extreme cases, outright destruction. Consider a few examples:

- Bitcoin bypasses traditional banks and clearinghouses with blockchain technology.
- Coursera and edX, among others, threaten business schools with massive open online courses (MOOCs).1
- Tencent outcompetes in Internet services through microtransactions.
- Uber sidesteps the license system that protects taxicab franchises in cities around the world.

The examples are numerous—and familiar. But what’s less familiar is how, exactly, new entrants achieve their disruptive power. What enables them to skirt constraints and exploit unseen possibilities? In short, what’s the process of business-model innovation?

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