Study note on business model innovation

Study note on business model innovation

References with some extracted contents

Jaqueline Pels Tomás Andrés Kidd, (2015),"Business model innovation", International Journal of Pharmaceutical and Healthcare Marketing, Vol. 9 Iss 3 pp. 200 - 218.

"Zott et al.’s (2011) review of the literature on business models concludes that there is no agreement on what a business model is. Moreover, they observed that scholars often have adopted business model definitions that fit the purpose of their investigation, thus contributing to the fact that the business model literature is developing largely in silos";

".... three common themes have been identified and will be incorporated in the suggested framework: (1) Business models emphasize a holistic approach to explain how firms “do business” in oppose to what they do. (2) Business models are firm-centric. (3) Business models seek to explain both value creation and value capture";

".... scholars have studied business models according to the levels in which they operate. Morris et al. (2005) identify three different operating levels: economic, operational and strategic. The economic level responds to the way the business model generates profit. Within this level, some studied variables are: pricing, cost structure and revenue sources. The operational level responds to internal processes and design of infrastructure that enables the firm to create value. Within this level, some studied variables are: delivery methods, administrative processes and resource flows. Finally, the strategic level responds to the market positioning of the business and the overall direction of the firm";

"Business model innovation has been studied from different perspectives: sources of business model innovation (Chesbrough, 2003), firm performance (Demil and Lecocq, 2010), corporate transformation (Johnson et al., 2008), barriers to innovation (Chesbrough, 2010) and processes of innovation (Hayashi, 2009), amongst others. However, few papers have studied how does a business model innovate, i.e. what components of its business model are altered";

"Mitchell and Coles (2003, p. 16) argue that a business model comprises the: […] combined components of “who”, “what”, “when”, “why”, “where”, “how” and “how much” involved in providing customers and end-users with products and services. In this sense, the amount of components the firm changes determines the degree in which they innovate their business model. The degrees are business model improvement (one element changes), catch-up (matching the competitors offering), replacement (more than four core components) and, finally, innovation. They define business model innovation when a company makes business model replacements that provide product or service offerings to customers and end-users that were not previously available";

Andries, P. and K. Debackere. 2013. "Business Model Innovation: Propositions on the Appropriateness of Different Learning Approaches" Creativity and Innovation Management 22(4): 337-358.

"The management of innovation processes encompasses not only the ability to identify a good idea but also the capacity to transform it into a business model that adds value and generates revenue ..... This business model needs to translate technological opportunities into particular product or service configurations that can be offered to a chosen target market (Hamel, 2000; Chesbrough & Rosenbloom, 2002), since innovations are, by definition, only successful when a technological capability is coupled to a user need";

"When trying to develop a new business model, companies are confronted with high uncertainty, ambiguity and complexity levels, both in terms of technical and commercial activities (Anderson & Tushman, 1990)";

"By experimenting with different business opportunities, companies can gather customer and market feedback, which they can then use to adapt their initial business model (Minniti & Bygrave, 2001). With respect to such experimentation

or trial-and-error learning, the literature distinguishes between two main approaches .... One option is to make stepwise, incremental changes to the business model. A firm then starts from an initial business model and experiments with one closely related business model after the other";

"As shown by Zott, Massa and Amit (2011), there is a consensus in the literature that business models combine a broad variety of components or ‘ingredients’ (see also Osterwalder & Pigneur, 2010), reflecting the fact that value creation arises from multiple sources, including (a) transaction efficiency as a major way of reducing costs, (b) differentiation raising buyers’ utility, (c) the combination and development of a set of scarce, durable and difficult to imitate resources and capabilities, and (d) the density, centrality, size and governance of the company’s strategic networks";

Stephan Friedrich von den Eichen Joerg Freiling Kurt Matzler , (2015), "Why business model innovations fail", Journal of Business Strategy, Vol. 36 Iss 6 pp. 29 - 38.

"While many companies have tremendous capabilities and well-established processes in new product development and technology exploration, only a few are able to innovate their business model (Chesbrough, 2010). Business model innovation (BMI) matters because new ideas and technologies are commercialized through business models";

"When analyzing the failure of BMI, several barriers have to be considered and mental as well as structural-procedural aspects play a role. For instance, companies establish innovation processes and decision routines that foster product innovations, but these processes and routines may not promote BMI [business model innovation]. Cultural constraints occur. Above all, management may have “late” awareness that the BMI for which they are struggling leads to different results than expected. Hence, management starts to reject the new BMI";

"An innovative company must not define its internal and external environment too narrowly in regard to where to search. This applies particularly to BMI, as these presuppose a condition of diversified perspectives. It is useful to think of the internal and external environment as networks and move away from the outdated idea that homogeneous segments represent reality best";

Chesbrough, H. 2010. " Business Model Innovation: Opportunities and Barriers" Long Range Planning 43, Elsevier: 354-363.

"Technology by itself has no single objective value. The economic value of a technology remains latent until it is commercialized in some way via a business model. The same technology commercialized in two different ways will yield two different returns. In some instances, an innovation can successfully employ a business model already familiar to the firm, while, other times, a company will have a business model that can make use of the technology via licensing. In still other cases, though, a potential new technology may have no obvious business model, and in such cases technology managers must expand their perspectives to find an appropriate business model in order to be able to capture value from that technology"

" In previous work with my colleague Richard Rosenbloom we have suggested that a business model fulfils the following functions:.. _ Articulates the value proposition (i.e., the value created for users by an offering based on technology); _ Identifies a market segment and specify the revenue generation mechanism ...; _ Defines the structure of the value chain required to create and distribute the offering and complementary assets needed to support position in the chain; _ Details the revenue mechanism(s) by which the firm will be paid for the offering; _ Estimates the cost structure and profit potential .....; _ Describes the position of the firm within the value network linking suppliers and customers .....; and _ Formulates the competitive strategy by which the innovating firm will gain and hold advantage over rivals";

"While it was not as clear in his early work, Clayton Christensen’s concepts of ‘disruptive technology’ - and especially the later notion of ‘disruptive innovation’ - call attention to similar barriers to business model experimentation. What disrupts incumbent firms in Christensen’s story is not their inability to conceive of the disruptive technology: like Amit and Zott, he identifies the root of the tension in disruptive innovation as the conflict between the business model already established for the existing technology, and that which may be required to exploit the emerging, disruptive technology";

Desyllas, P. and M. Sako. 2013. "Profit from business model innovation: Evidence from Pay-As-You-Drive auto insurance" Research Policy 42, Elsevier: 101-116.

"The notion of business model is attracting increasing attention from academics and practitioners alike (Baden-Fuller et al., 2010; Govindarajan and Trimble, 2005; Rappa, 2004). Despite disagreement among scholars on what a business model is, there is some consensus that it describes the design of the value creation, delivery and capture mechanisms to be employed by the firm (Chesbrough, 2010; Chesbrough and Rosenbloom, 2002; Teece, 2010; Zott et al.,

2011). The choice of an appropriate business model is increasingly seen as a crucial business decision due to the post-industrial rise of the knowledge economy and digital technology";

"Although the emergent business model literature has elaborated on the mechanisms for value creation and delivery when new business models are conceived and implemented, it has left the issue of value capture relatively under-explored. This is surprising given that the adoption of a novel business model has been acknowledged as an important element of a firm’s intellectual property (Zott et al., 2011)";

"Business model innovation has its own distinctive features (see Baden-Fuller et al., 2010). Most importantly, a new business model is itself unlikely to qualify for formal IP protection. However, specific business methods underlying it may be protectable by obtaining formal IP [intellectual property] rights. This applies particularly to innovative business methods reflecting novel applications of Information and Communication Technology (ICT)";