Value Creation and Value Capture Alignment in Business Model Innovation: A Process View on Outcome-Based Business Models

Journal of Product Innovation Management, 37(2): 158–183, 2020

DOI: 10.1111/jpim.12516

26 Pages Posted: 8 May 2020

See all articles by David Rönnberg Sjödin

David Rönnberg Sjödin

Lulea University of Technology (LTU)

Vinit Parida

Independent

Marin Jovanovic

Copenhagen Business School

Ivanka Visnjic

ESADE Business School; University of Cambridge

Date Written: December 27, 2019

Abstract

Industrial manufacturers are innovating their business models by shifting from selling products to selling outcome-based services, where the provider (manufacturer) guarantees to deliver the performance outcomes of the products and services. This form of business model innovation requires a profound yet little understood shift in how value is created, delivered, and captured. To address this research gap, our study examines two successful and four unsuccessful cases of this shift. We find that effectiveness in business model innovation hinges on the three process phases that unfold in collaboration with the customers: value proposition definition, value provision design, and value-in-use delivery. We also find that that success is determined by the alignment of specific value creation and value capture activities in each phase: identifying value creation opportunities — agreeing on value distribution in value proposition definition, designing the value offering — deciding on the profit formula in the value provision design, and finally refining value creation processes — regulating incentive structures in the value-in-use delivery. Our process model contributes to the literature and practice on business model innovation by providing a thorough understanding of how alignment of value creation and value capture processes is ensured, whilst paying special attention to their interdependence and the interactions between provider and customer.

Keywords: Business Model Innovation, Value Creation, Value Capture, Digitalization

JEL Classification: M1

Suggested Citation

Sjödin, David Rönnberg and Parida, Vinit and Jovanovic, Marin and Visnjic, Ivanka, Value Creation and Value Capture Alignment in Business Model Innovation: A Process View on Outcome-Based Business Models (December 27, 2019). Journal of Product Innovation Management, 37(2): 158–183, 2020, DOI: 10.1111/jpim.12516, Available at SSRN: https://ssrn.com/abstract=3456624

David Rönnberg Sjödin

Lulea University of Technology (LTU) ( email )

971 87 Lulea
Porson
Sweden

Vinit Parida

Independent

Marin Jovanovic (Contact Author)

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Ivanka Visnjic

ESADE Business School ( email )

Avda. de Pedralbes 60-62
Barcelona, 08034
Spain

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

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