PSS business model conceptualization and application*

The discussion about business models has gained considerable attention in the last decade. Business model frameworks have been developed in the literature as management methods helping companies to comprehend and analyse their current business logic and guide the deployment of new strategies. In response to calls for a deeper understanding of the application of a business model approach to product-service systems (PSS), this study develops a two-level hierarchical framework that (i) includes a set of components with pertinent, second-order variables to take into account when undergoing the shift from products to solutions; (ii) supports industrial companies, especially SMEs, in designing their future business model and in consistently planning the actions needed to implement it. The framework was applied and refined within real-life settings. The application to KINE – a robot solutions supplier – shows how key challenges faced by servitization firms may be thoroughly addressed through the adoption of a business model perspective.     

Demand-side strategy and business models: Putting value creation for consumers center stage

Value creation for consumers, as the conditio sine qua non for value capture, is at the heart of demand-side strategy research and is a core element of almost any business model. In this paper, we discuss the unique ideas that demand-side strategy and business model research jointly contribute to the strategy literature, and we elaborate on the potential for cross-fertilization between both areas of study. We argue that both the demand-side perspective and the business model concept could jointly promote a better understanding of strategy-making by mutually relying on the distinctive insights from each stream; specifically, while research on demand-side strategy can help business model scholars gain a more robust and granular understanding of effective value propositions, business models can serve as a “bridging concept” that links the shared ideas of both areas of study to resource-based streams of strategy research.     

Strategies for business model innovation: How firms reel in migrating value

This paper brings together firm-level research on business models and industry-level research on value migration to examine patterns of business model innovation. We draw on qualitative data from 14 cases and 68 interviews in the computer and telecommunications industries to demonstrate how business model innovation is sensitive to industry-wide forces of value migration. Based on our analysis we conclude that when value is rapidly migrating across industries and between firms, proactively substituting key elements of the primary business model provides a better fit with the new value landscape than launching secondary business models in parallel. We suggest four underlying mechanisms that link business model innovation, value migration and subsequent outcomes. Unpacking business model innovation allows us to discuss contingencies for the main business model strategies, specifically in terms of limitations to—and opportunities of—changing the primary business model and the practice of parallel business models.     

Institutional forces and the written business plan

In this study, we examined factors that led nascent organizations to write business plans, following 396 nascent entrepreneurs during a two-year period. We examined both the production and the outcomes of written business plans produced in nascent organizations. Our findings show that institutional variables, such as coercion and mimetic forces, are important predictors influencing the propensity of new organizations to write business plans. Our results are contrary to rationalist predictions of planning-performance, and are more in line with institutional predictions. Interestingly there was no evidence to support positive outcomes, in terms of profitability, for those nascent organizations that produced business plans during a two-year initial period. We discuss the implications for institutional theory and studies of nascent businesses, as well as for the literature on business planning.     

Founding family effects on business group growth: Longitudinal evidence from Turkey (1925–2012)

Drawing from the family business perspective, this study provides insights into how the heterogeneity arising from founding family structures explains why particular business groups grow extensively, while others faced with similar external market conditions do not, and how the effects of founding family structure change over time. We test our hypotheses by using a unique, hand-collected, and extensive panel dataset which contains information of the full demographic history of founding families and all public and private companies founded/acquired or divested over the 1925–2012 period for 51 business groups in Turkey. Consistent with our hypotheses, our findings show that family size is a major positive determinant of the number of affiliated firms and the group scope. This effect is more strongly driven by sons compared to daughters. Business groups also grow more extensively when the first-born child is male. These family effects are stronger in the early developmental period of the business groups.     

Leadership and business model innovation in late internationalizing SMEs

Drawing on the distinction between small-scale and large-scale business model innovation, and between directive and empowering leadership, we examine how CEOs in SMEs lead business model innovation during the process of internationalization. Building on eight cases of Japanese manufacturing SMEs, we develop a theoretical framework pointing to two different patterns in the articulation between CEO leadership style and business model innovation. We show that small-scale business model innovation led by directive leadership results in a timelier foreign market entry. However, in order to increase international sales, large-scale business model innovation is required. This is facilitated by an empowering leadership style of the CEO.     

Configuring a new business model through conceptual combination: The rise of the Huffington Post

How a successful business model (BM) is designed is a key question in the business model innovation (BMI) literature. Delving on the shared concept of BM as a configuration of components and interdependencies, we take a cognitive perspective to study the conceptual combination as a central process in BMI. We investigate the complexity of conceiving a new BM configuration, through a longitudinal study of the emergence of “The Huffington Post” which combined newspaper and blog in a disruptive and successful BM. With our research we theoretically frame the dynamic interplay between the three cognitive mechanisms of conceptual combination and the system of interdependent components of an emerging BM. Our findings unveil how the overall process unfolds and specifically delves into the dynamic iteration of composing and experimenting with the new configuration until the overall coherence is reached. Hence, we advance the literature by showing how the conceptual combination of a new BM is a complex effort and comprises some iterative cycles, vital to reach a coherent configuration which could secure a superior performance.     

Inclusive innovation and the role of technological capability-building: The social business Grameen Danone Foods Limited in Bangladesh

This article examines how a least developed country-based social business first creates operational capabilities (OCs) and then, over time, builds innovative capabilities (ICs) to fulfil a social need, be self-sustainable and achieve inclusive innovation. This relationship is examined in Bangladesh's Grameen Danone Foods Limited (GDFL) by integrating the technological capability and inclusive innovation theoretical frameworks and by using data gathered through extensive fieldwork. Broadly, our findings show how GDFL built and accumulated basic and intermediate ICs to undertake innovative activities in all areas of operation. Specifically, our findings scrutinize the process in which a social business develops and organizes its resources to initially build OCs and engage in the creation of ICs through various learning mechanisms to deliver inclusive innovation. From this process, we also observe a set of unpredicted positive spillovers to the community, which expands the inclusiveness effect. The findings also suggest that having a social orientation, triggers the use of different resources from within and outside the firm to achieve inclusive innovation. We conclude by discussing the study's implications for scholars, policy-makers and managers of multinational's social businesses. We also highlight future research areas, and crucially those related to key emerging conceptual limitations of inclusive innovation and development.     

Bridging strategic planning and business model management – A formal control framework to manage business model portfolios and dynamics

Despite the increasing interest in the intersection between strategic planning and business model management, research and practice struggle to integrate the two activities. By applying a rationalist view and drawing on the formal control theory, we develop an integrated management framework that provides a conceptual model of how to achieve consistency between the relevant goal and the planning levels. Therefore, we decompose the complex organizational activities into the level strategy, business model portfolio, tactics, and operations. For each level, we specify the formal activities and objectives and elaborate how the levels determine each other. Furthermore, we explain how higher and lower level formal control loops ensure alignment and that the appropriate level of the organization responds to changes in the environment. Finally, we discuss how these formal control mechanisms allow for proficient management of the dynamics inherent in strategy and business model management.     

Linking business models with technological innovation performance through organizational learning

This study examines how business models affect technological innovation performance through the mediating role of organizational learning. Using hierarchical regression analysis with data from 173 Chinese manufacturing firms embedded in global manufacturing networks, this study shows that both efficiency-centered and novelty-centered business models affect organizational learning. The results also demonstrate that organizational learning fully mediates the relationship between efficiency-centered business models and technological innovation performance and partially mediates the relationship between novelty-centered business models and technological innovation performance. This study provides new insights into the influence of business models on technological innovation performance by showing the indirect influence of business models. This study may help managers better understand the influence of business models on technological innovation performance.     

An actor-network perspective on business models: How ‘Being Responsible’ led to incremental but pervasive change

Business models have been studied as organizational value logics, which manifest in the states of cognition, artefacts, and activities. There is no conceptual perspective integrating all three of these states yet. In response, this paper develops a conceptual scaffold of an actor-network perspective: Value logics become programs of action as they are embodied in human actors’ cognition and inscribed into artefacts, forming actor networks that enact business model activity systems. An in depth case study of The Company (anonymized) and of its corporate responsibility initiative ‘Being Responsible’ illustrates the empirical application of this perspective. An analysis of 104 interviews with 72 individuals shows how The Company's business model was enacted by a network of human and nonhuman actors. The Being-Responsible artefact engaged in translation through which it enrolled business model actors to enact a responsibility logic in addition to their commercial logic. This changed the business model incrementally, but pervasively. The paper contributes (1) an integration of existing theory on business model logics manifesting cognition, artefacts, and activities in an actor-network perspective, (2) an extension of research on artefacts, exploring their agency when not explicitly related to the business model; and (3) the development of substantive theory that explains incremental, pervasive business model change through distributed processes of translation. The translation perspective also holds promise for explaining the dynamics of business model creation, maintenance, and radical business model change.     

Sustainability by Example: MBAs Experience the Value of an Environmental Business Plan

The World Resources Institute's Environmental Enterprise Corps (EEC) offers MBA students consulting opportunities with environmental entrepreneurs in Latin America. The program works toward environmental sustainability from several directions. Not only do the student teams help these entrepreneurs move closer to attracting investment, but students gain experience addressing real business issues and see the successes of businesses based on improving the environment. Investors gain confidence in these enterprises and potential entrepreneurs gain encouragement to include environmental considerations into core business strategy. The students finish the projects with personal experience in sound businesses that focus on both environmental and financial returns.The University of Michigan Business School participated in an EEC ecotourism project in Peru. The students researched key customer markets and ways to reach them. As the entrepreneur implements recommendations, the students have the satisfaction of knowing how their research benefited not only a company, but also an ecosystem and local community.     

Of those who plan: A meta-analysis of the relationship between human capital and business planning

Business planning is a popular managerial practice, especially in the SME context. Yet, literature presents diverging perspectives regarding business planning and the role it fulfills for the individuals leading these organizations. To advance research, we focus on evidence regarding factors that determine whether and how individuals engage in business planning. Drawing on human capital concepts and the theory of planned behavior, we scrutinize how education and different prominent work experience types influence business planning behaviors. We use meta-analysis to aggregate data on 8095 observations leading SMEs from 31 independent data sets. We find critical differences in planning behaviors relating to human capital types, as well as to whether individuals engage in substantive planning processes or the specific preparation of a formal business plan. Implications of our findings for research on business planning are discussed.     

Safe Climate, Sound Business

Increasingly, global environmental trends such as climate change are impacting human and ecological health and the ability of business to operate. Business needs to act now to limit greenhouse gases and prepare for changes already underway. Business can play a significant part in providing solutions that are profitable for society and business. A select group of leadership companies are already demonstrating this.The best strategy for business to prepare for a future with more pressing environmental problems and stricter regulations is to be bold and proactive. Partnerships with external organizations are key to helping companies succeed at creating value through sustainable development strategies. The World Resources Institute's Safe Climate, Sound Business Initiative seeks to engage corporate partners in actively developing and implementing solutions to climate change. Through projects such as the Greenhouse Gas Protocol Initiative and the Green Power Market Development Group, companies are improving profitability even as they lead the trend towards sustainability and address climate change.     

Business models and organization design

Despite a voluminous literature, business model research continues to be plagued with problems. Those problems hinder theory development and make it difficult for managers to use research findings in their decision-making. In our article, we seek to make three contributions. First, we clarify the theoretical foundations of the business model concept and relate them to the five elements of a business model: customers, value propositions, product/service offerings, value creation mechanisms, and value appropriation mechanisms. A clear definition of a business model enables theory to develop systematically and provides coherent guidance to managers. Second, we suggest that value configuration is a contingency variable that should be included in future theorizing and model building. Each of the elements of a business model is affected by a firm's value configuration depending on whether the firm is a value chain, value shop, or value network. Third, we link business models to organization design. We show how organization design is affected by value configuration and how new collaborative organizational forms enable open and agile business models. We derive the implications of our analysis for future research and management practice.     

Business models and dynamic capabilities

Business models, dynamic capabilities, and strategy are interdependent. The strength of a firm's dynamic capabilities help shape its proficiency at business model design. Through its effect on organization design, a business model influences the firm's dynamic capabilities and places bounds on the feasibility of particular strategies. While these relationships are understood at a theoretical level, there is a need for future empirical work to flesh out the details. In particular, studies that provide a better understanding of business model innovation, implementation, and change will also shed light on important aspects of dynamic capabilities.     

Beyond the purely commercial business model: Organizational value logics and the heterogeneity of sustainability business models

The business model has been conceived as a commercial logic of value proposition, creation, exchange and capture. However, its underlying conceptual structure of an organizational value logic holds promise also for application beyond a purely commercial context, for partially commercial and even noncommercial organizations. This paper unlocks this potential by conceptualizing homogeneous and heterogeneous organizational value logics shaped by a variety of institutional logics. Homogeneous value logics are dominantly shaped by individual institutional logics, such as the value logic of businesses shaped by an institutional logic of the commercial market, or that of a churches shaped by an institutional logic of religion. Heterogeneous value logics, however, are co-shaped by two or more institutional logics. The application of these concepts is exemplified in the context of sustainability business models, which are built on a heterogeneous value logic that combines elements from commercial, sustainability, welfare and government logics. The paper contributes to the business model discussion by extending it to partially commercial and noncommercial organizations; by creating a conceptual space between value logics and institutional logics; and by proposing the meta-logic of value proposition, creation, exchange and capture, a novel analytical tool for the study of organizations shaped by plural institutional logics.     

The role of absorptive capacity and innovation strategy in the design of industry 4.0 business Models - A comparison between SMEs and large enterprises

Technological innovations often lead to redesigns in the business models of established companies, requiring them to incorporate new external knowledge into internal activities. Against this background, this study integrates the concepts of business model design, absorptive capacity, and innovation strategy into a novel research model, which analyzes the redesign of established business models in response to the emergence of Industry 4.0. Industry 4.0, also known as the Industrial Internet of Things, constitutes a contemporary research context that is highly relevant for corporate practice but scarcely regarded in management literature until now. The article contains an analysis of data from 221 German industrial enterprises, conducted through structural equation modeling, with separate data for small and medium-sized enterprises (SMEs) and large enterprises. First, the results indicate that the acquisition, assimilation, transformation, and exploitation of knowledge from the environment enable companies to engage in both exploratory and exploitative innovation strategies. Furthermore, the paper includes an evaluation of the role of exploratory and exploitative innovation strategies that reflects in efficiency-centered and novelty-centered business model designs. The distinct characteristics differentiating SMEs from large enterprises are also explained. The implications of absorptive capacity on innovation strategies, which influence the redesign of extant business models, are discussed from a research and managerial perspective.     

Internationalization, innovation and entrepreneurship: business models for new technology-based firms

New technology-based firms, particularly those that develop their business around a new technological platform, are likely to be impacted by globalization, in terms of both pace of innovation and pressure of competition. For these firms, strategic decisions and growth processes are characterized by a deep inter-relationship amongst the processes of internationalization, innovation and entrepreneurship; processes which have tended to be examined independently in distinct bodies of literature. In practice strategic decisions concern each of these processes and address issues such as organizational boundaries, location of the operational activities, what activities to focus on and selection of value partners. The business model by which firms operate needs also to accommodate the spatial dimensions indicated by globalization; and the emergence of global technology markets. Little is known to date about the extent to which business models accommodate or are adapted to internationalization, innovation and entrepreneurship. This paper presents a review of the business model literature from which a generic business model framework is derived, identifying and introducing the main elements of these processes as the firms?? focus, modus and locus. This contribution makes a clear distinction between the business model and the strategy concepts and highlights the relevance of location decisions??not considered by extant business model literature to date. While our discussion draws on the high technology new venture as our primary example, we believe our business model conceptualization has general applicability.