Unlocking Business Model Innovation

J (Jaco) Smit

Research output: Types of ThesisDoctoral ThesisInternal

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The modern mobile phone has more processing power than the super-computer which put Apollo 11 on the moon (Kaksu, 2014). A staggering fact about the information age in which we are firmly embedded. In the current reality, consumers have an increasingly vast number of choices, yielding progressively less satisfaction, and firms are overwhelmed with an ever expanding list of strategic choices, yielding progressively less value (Prahalad & Ramaswamy, 2004). Ever more, firms are forced to turn to innovative ways of doing business in order to satisfy customers and remain competitive. Consistent innovation is rapidly turning into an essential factor in every successful business; in fact, it has been developing toward this for quite some time (Magretta, 2002; Coles & Mitchell, 2003; Chapman, 2006). Companies need to innovate to stay current and remain competitive. When one speaks of innovation; images of new, technologically advanced or novel solutions for everyday needs are conjured up. While this is an entirely valid representation, it does not encompass the concept of innovation as a whole. Commercial focus thus far has been primarily on technological innovation, hence the association (Chesbrough, 2007; Moss Kanter, 2006). However, in the new age, having the most technologically advanced and up-to-date product offerings no longer suffices to satisfy growing consumer desires. Organizations have to split their focus to include business model innovation in the new business sphere (Chesbrough, 2007; Moser et al., 2007; Chapman, 2006; Chapman & Pohle, 2006; Boulton et al., 2000). The majority of extant research revolves around investigating the elements of a business model; what a business model consists of; and what exactly is implied by the term business model innovation (Morris et al., 2005; Coles & Mitchell, 2004; Tikkanen et al., 2005; Chesbrough, 2007). Research up to this point gave the dynamism of business model innovation relatively little consideration and essentially examined a rather static end-state, as opposed to the process leading to business model innovation, in focusing on its elemental composition. Research of late is moving more in the direction of process orientation (e.g. Sosna, Trevinyo-Rodriguez & Velamuri, 2010), starting to explicate the complexities involved in making business model innovation happen. Being in the early stages, this research is still quite practical in nature and lacks a certain degree of theoretical depth (Sosna et al., 2010; Rasmussen & Foss, 2014). The call for more research into the drivers and mechanisms of business model innovation still rings out (Morris et al., 2005; Chesbrough, 2007; Amit & Zott, 2008; Sosna et al. 2010; Rasmussen & Foss, 2014). It is this call I hoped to answer in writing this dissertation. In the domain of business models, it is my opinion that the crux of success lies in the totality of business model innovation. It is as much about the end-state business model as it is about the path to implementation, and that in the most holistic sense: the model, the people, and the environment. I tried to mirror this perspective in the choices made in writing this dissertation, attempting to pull apart the process and look through the keyhole at the inner workings of business model innovation. Each chapter is another step closer to capturing the totality mentioned but also further away from the business model itself. Starting close to current thinking with a theoretical exploration of the business model innovation process, and ending with a new perspective, in an empirical investigation of the effect of the process on arguably the most fundamental part of an organisation, its people. Business Model Innovation: Team Networks and Leadership – Chapter 2 extends current literature, which provides insight into what contributes to BMI success, and how; by providing more insight into the why (Whetten, 1989) of BMI. We use leadership and network literature as the theoretical backdrop to explore BMI in the context of two stages, a concept stage and a development stage, with different requirements and characteristics in each. We believe we offer a novel theoretical approach by conceptualizing BMI as a behavioural process: a team-based, path-dependent process emphasizing the roles of team networks, leadership, and how these interact at various stages to influence performance. Moreover, we engage in ‘multidisciplinary theory building’ by integrating two major contemporary theoretical lenses, social networks and leadership, to explain a currently “under-theorized” strategic issue. We offer new theory on the links between social network theory and social psychology, to conceptualise how a team’s internal processes interact with its external processes to affect BMI outcomes. We argued that BMI has distinct characteristics, with typically more uncertainty, complexity, and interdependence, than more conventional types of innovation, such as product and process innovation. Nevertheless, the validity of our model, using leadership, external networks of teams, and their interactions, and how this varies in terms of their influence on performance from one stage to the next, may be explored for other settings as well. An Organizational Process Model for Resource Constrained Settings: The Case of MJunction – Chapter 3 addresses an intriguing puzzle for management researchers (George et al., 2012): what explains success in low-cost business models? What organizational factors contribute to it, and why (i.e., theoretical logic; Whetten, 1989)? Our longitudinal, qualitative study of MJunction in a resource-constrained setting (the emerging IT industry in India) suggested new multi-level, multi-stage organizational process theory. External exploration and external exploitation, led to experiences, insights, and objects (e.g., IT-platform) that were quickly cobbled together to a new business model, which was improved through trial-and error (“bricolage”) in the local market. This process was supported by transformational leadership at the firm level and BU-level in the concept stage; operation-oriented leadership at the development stage, and participative leadership at the launch stage, making the organization as a whole very profitable quite quickly. This created munificent conditions to move to the next (mature) stage, with firm-level, formal processes for exploration (in an incubator) and exploitation (horizontal and vertical knowledge-sharing mechanisms), supported by firm-level leadership in more of a mentoring capacity. Low-cost business models have attracted considerable interest in research (George at al., 2012) and practice (Radjou et al., 2012; Prahalad & Hart, 2006), and we hope our new conceptualization will inspire future research and theory in this domain. Grassroots Business Model Innovation: Changing the Identity of a Government Institution – We initiated this study to explore the dynamics of BMI; what we were confronted with was identity change across levels and the role BMI played in facilitating said identity change. This paper therefore explores the development of identity across levels and the dynamic mechanisms involved in the process. It offers a new perspective on identity enactment across multiple levels and the mechanisms involved, unique insights into the BMI process and its effect on organizational members, and a view on visions which goes beyond the current literature. We build a set of testable proposition based on the analysis of story of the Energy Factory. Having set off on the journey with the intention of further uncovering the inner workings of BMI set against the backdrop of a ‘blank canvas’, i.e. a government agency which before did not have a business model by virtue of their mandate in society. We uncovered a larger theme centred on the part a business model, and more importantly the innovation of a business model, can play in the identity of an organisation. We elaborate on the theory by Ashforth, Rogers and Corley (2011) by exploring the construction of identities empirically and by offering insight into the specific mechanisms to which they refer as “the enactment of a given construction and the ensuing sensemaking” (Ashforth et al., 2011). In addition, we provide a starting point for further research into the dynamics of BMI, the part BMI plays in the process of identity change, and also the part identity plays in BMI. We encourage future research to continue pursuing this avenue in different settings and with different methods, extending BMI literature beyond mere composition and process and further into the behavioural domain. Concluding Remark – I set out to take a look through the keyhole at the inner workings of business model innovation in this dissertation. In my research I discovered that business model innovation is a phenomenon not conducive to being classified into any one framework or theory. We must use other scientific theories and domains to contextualise business model innovation and so make sense of this interesting, albeit practical, process. At the start of this journey, I wanted to answer the question: What drives business model innovation to success? I believe I have, at least partly, answered this question in my discovery that business model innovation is a fluid concept driven mainly by people and behaviours, which in turn also augments said behaviour, driving other processes (one of which could potentially be more business model innovation). I have highlighted the importance of leadership in driving this process as well as its outcomes, e.g. learning, identity change. I hope I have piqued the interest of others to follow up on the findings of this dissertation and shine a light on the many remaining mysteries inherent in business model innovation.
Original languageEnglish
Awarding Institution
  • Erasmus University Rotterdam
  • Barkema, Supervisor
Award date21 Oct 2016
Place of PublicationRotterdam
Print ISBNs9789058924575
Publication statusPublished - 21 Oct 2016

Research programs

  • RSM S&E


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