Business Model Innovation: From Understanding the Process to Tracking the Change

Sergejs Groskovs (2016)

This doctoral dissertation (PhD thesis) builds a conceptual understanding of the process of business model innovation in established firms and proceeds to address the question of how changes in the business model can be tracked. In the pragmatist scientific tradition, each of the four papers included is warranted by a practical problem and aims to offer useful guidance to managers. The first paper reviews the classic and more recent literature and conceptualizes a process of business model innovation. The problem it aims to tackle is how to innovate the firm’s business model in response to changes in the business environment and what to be aware of in the process. The business model innovation process is argued to consist of two iterative cycles: search and change. The paper further identifies the forces that can influence the successful outcome of each of the cycles. For business model search, these drivers include the ability to understand the environment, the presence of entrepreneurial people, the commitment of senior management, and the dedication of resources and funding. For business model change, some of the critical factors are the commitment of the firm’s senior management, the involvement of the firm’s middle management and employees, the change implementation process, and the introduction of new technology. The second paper develops a technique to capture business model changes from public sources and to facilitate further analysis of these data. The paper addresses the researcher’s practical problem of how to collect secondary data on changes in a firm’s business model and proposes certain approaches to enable the analytical process. This paper responds to the scarcity of methodological guidance for qualitative data analysis in the business models literature and in case studies in general. The paper further provides a review of contemporary approaches to studying business model change and argues for the sufficiency of secondary data to study patterns of business model change in public firms. The technique can also be of use in iv generating valuable insights for practical strategy planning by offering a way to track strategic moves and longer-term development trajectories of competition, industry peers and acquisition targets. The third paper identifies three strategic directions of business model change that management can consider when planning for growth. The case study of a rapidly growing new technology-based firm in a mature industry demonstrates that a firm can follow one of the three trajectories: (i) enhancing the core business model, (ii) “unlocking the nucleus” inside the core business model, or (iii) expanding beyond the core business model. The first trajectory assumes adding complementary activities to provide complete customer experience. The second trajectory means commercializing the already conducted activities as separate products for new markets. The third trajectory stands for adding unrelated activities resulting in new products for new markets thus turning the firm into a multi-industry conglomerate. The second trajectory is quite a potent option which opens opportunities for new revenues while not departing very far from the current business activities. The fourth paper takes a deep-dive into the corporate annual strategic management cycle. By adopting a design science approach during a year-long field study in a multi-subsidiary firm in the dynamic ICT industry, it develops a new process of revising KPIs (key performance indicators), including the indicators related to business model change. The paper also proposes a general guide for such process design. The decision-making process about which metrics to track, affects what management focuses on during the year. The rather streamlined process outlined in the paper is capable of facilitating swift responses to environmental changes in local markets by establishing new KPIs on an ongoing basis together with the business units on the ground, and thus is of key importance to strategic management of the firm.

Publisher: Aarhus University, Department of Management

Business Models