Business Model Innovation – A Concept between Organizational Renewal and Industry Transformation

Journal of Entrepreneurship, Management and Innovation, 11(1), 3-10

8 Pages Posted: 28 Jan 2018

See all articles by Jörg Freiling

Jörg Freiling

University of Bremen - Faculty of Business Studies and Economics

Date Written: 2015

Abstract

With the new millennium and the hype of electronic business a new movement was created that still gains momentum: business model innovations. Deeply influenced by business informatics in the early years, business models and business model innovations became a pervasive part of our business life. Particularly business model innovations opened the door for a thinking far beyond product and process innovations. By considering new ways of designing value propositions, value-added architectures and sales modes, business model innovations became an attractive option of recent innovation management and strategic management of the entrepreneurial kind as well. Especially small- and medium-sized entities (SMEs) found a new way to innovate without spending too much resources in uncertain investments.

Once successfully implemented, business model innovations on the micro level drive organizational renewal and/or help in developing new businesses. More than that, business model innovations may change the ‘rules of the game’ in markets and trigger processes of industry transformation on the macro level.

Despite the considerable power of business model innovations, not every innovative business model is a ‘home-run’. Empirical evidence suggests that sophisticated new business models promise ‘win-win’ constellations for both customers and suppliers, but face the problem of limited adoption in target markets. Insofar, the implementation goes along with numerous obstacles. Little is said about the root causes of these obstacles and the ways how to cope with these challenges.

Many of the articles of this special issue address the background of business model innovations and open the door to new debates. This illuminates the rather inter-disciplinary nature of business model innovations that deal with different kinds of novelties for both suppliers and customers. Based on Schumpeter (1934), innovations may relate to products, processes, organizational modes as well as novel purchasing and distribution modes. These novelties are often interrelated and call for an over-arching frame. If well designed, business models can be such umbrellas and are, thus, useful elements of innovation and strategic management. More than that, they push forward the notion of systemic innovation as a core challenge for both strategic decision-making and innovation.

The papers deal with both customers and suppliers, as innovation cannot be separated from adoption processes in markets. In this regard, some former background issues come to the fore in this special issue, such as the still under-researched role of emotions and the role of diversity of people (particularly in the light of different cultural backgrounds – cf. Harima and Vemuri, 2015).

Innovating business models is among the priorities of leading companies in most recent times to keep a certain balance of value creation and value capture. While business model innovations require particular capabilities to develop new industry architectures, business model innovation is a challenge that often returns to top positions of the management agenda. To change from one business model to another, however, is a different and often even more demanding challenge that is based on dynamic capabilities. By dynamic capabilities companies are able to sense and seize new business opportunities and to reconfigure the company. The bare existence of dynamic capabilities allows changing business models more proficiently and, thus, tapping the potential of new business opportunities.

However, while business model innovations have played a role in the entire economy in recent years, there are contexts where these innovative moves find a very fertile background. Without necessarily excluding other companies, particularly young firms seem to belong to these settings. Insofar, entrepreneurship and business model innovations are closely linked. One reason for this may be that incumbents are locked in their everyday business, reinforced by specific investments, and do not find enough time to go substantially beyond that. Thus, they are prone to attacks based on innovative business models of start-ups that are in need of doing something new and different to start launching their solutions in target markets. Entrepreneurship practice is full of examples where new ventures translated a basic innovation into a business model innovation to ‘make’ a market (e.g. Facebook, Amazon, Cirque du Soleil). The multitude of different ventures is hard to describe exhaustively, if it is possible at all. In this regard, it makes a difference whether the ventures are profit-oriented or non-profit ones. Papers of this special issue deal especially with this question.

On a more pragmatic level, the question arises how to visualize the real nature of business models and how to plan and implement them. In literature, there is a huge variety of understandings – like Timmers’ (1998) model of three business model components, the Morris et al. (2005) six-element approach or the nine-component ‘business model canvas’ framework of Osterwalder and Pigneur (2010). In this special issue, many articles adopted the more fine-grained business model canvas approach that already penetrated business practice to some extent.

Suggested Citation

Freiling, Jörg, Business Model Innovation – A Concept between Organizational Renewal and Industry Transformation (2015). Journal of Entrepreneurship, Management and Innovation, 11(1), 3-10. Available at SSRN: https://ssrn.com/abstract=3105239

Jörg Freiling (Contact Author)

University of Bremen - Faculty of Business Studies and Economics ( email )

Wilhelm-Herbst-Str. 5
Bremen, D-28359
Germany
++49 421 218 66870 (Phone)
++49 421 218 66902 (Fax)

HOME PAGE: http://www.lemex.uni-bremen.de

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