Academy of Management Annals

A CRITICAL ASSESSMENT OF BUSINESS MODEL RESEARCH

Journal: Academy of Management Annals

Manuscript ID ANNALS-2014-0072.R4

Document Type: Article

INNOVATION, TECHNOLOGY, Managerial < COGNITION,

Keywords:
ENTREPRENEURSHIP, INFORMATION TECHNOLOGY, SUSTAINABILITY
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7 A CRITICAL ASSESSMENT OF BUSINESS MODEL RESEARCH
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by
12 Lorenzo Massa
13 Christopher Tucci
14 Allan Afuah
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20 Abstract
21 Ever since the Internet boom of the mid-1990s, firms have been experimenting with new ways of
22 doing business and achieving their goals, which has led to a branching of the scholarly literature
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on business models. Three interpretations of the meaning and function of “business models”
25 have emerged from the management literature: (1) business models as attributes of real firms, (2)
26 business models as cognitive/linguistic schemas, and (3) business models as formal conceptual
27 representations of how a business functions. Relatedly, a provocative debate about the
28 relationship between business models and strategy has fascinated many scholars. We offer a
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critical review of this now vast business model literature with the goal of organizing the
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31 literature and achieving greater understanding of the larger picture in this increasingly important
32 research area. In addition to complementing and extending prior reviews, we also aim at a
33 second and more important contribution: We aim at identifying the reasons behind the apparent
34 lack of agreement in the interpretation of business models, and the relationship between business
35 models and strategy. Whether strategy scholars consider business model research a new field
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37 may be due to the fact that the business model perspective may be challenging the assumptions
38 of traditional theories of value creation and capture by focusing on value creation on the demand
39 side and supply side, rather than focusing on value creation on the supply side only as these
40 theories have done. We conclude by discussing how the business model perspective can
41 contribute to research in different fields, offering future research directions.
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47 Keywords: business models; business model innovation; strategy; value creation and capture;
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Introduction
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6 Over the last five years of Strategic Management Society conferences, Academy of
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8 Management Annual Meetings, and DRUID conferences, business model research has been an
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area of lively discussion and inquiry, with panels and symposia witnessing the shift and progress
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13 of dozens of research paradigms. Yet at each of these large conferences, at least one panel,
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15 symposium, or debate has centered, not on these developing research streams, but on the very
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18 definition of the business model itself. In rooms filled to capacity with some of the most
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20 recognized scholars in the field, participants debate endlessly on what a business model actually
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22 “is,” rehashing the same arguments year after year while still disagreeing on whether the term
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25 stands alone or is simply synonymous with “strategy.” Surely, research into complex
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27 management and strategic topics cannot achieve meaningful progress until scholars agree on how
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to position and interpret their own individual works in the field. Toward that end, we critically
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32 review the last two decades of business model literature. We argue that terminology has not kept
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34 pace with new ways of doing business and with how to describe business models, allowing the
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37 field to branch into different camps.
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39 So what is a business model? At a very general and intuitive level, a business model is a
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41 description of an organization and how that organization functions in achieving its goals (e.g.,
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44 profitability, growth, social impact,…). However, beyond this intuitive level, there is a lack of
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46 agreement among scholars on more operational definitions of a business model (Zott et al., 2011;
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48 Klang et al., 2014; Wirtz et al., 2016), which we will discuss extensively below.
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51 Indeed, over the last two decades, the business model has become an increasingly
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53 important concept, particularly in the fields of technology and innovation management (Massa &
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Tucci, 2014; Tripsas & Gavetti, 2000), strategy (e.g., Casadesus-Masanell & Zhu, 2013; Teece,
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2010) and, more recently, environmental sustainability (London & Hart, 2004; Schaltegger,
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6 Lüdeke-Freund, & Hansen, 2012) and social entrepreneurship (e.g., Seelos & Mair, 2007).
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8 Somewhat reflective of this diversity of fields, the definitions of a business model have ranged
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from “stories that explain how enterprises work” (Magretta, 2002, p.4) to “a system of
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13 interdependent activities that transcends the focal firm and spans its boundaries” (Zott & Amit,
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15 2010, p. 216) and to “a business model articulates the logic, the data and other evidence that
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18 support a value proposition for the customer, and a viable structure of revenues and costs for the
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20 enterprise delivering that value” (Teece, 2010, p. 179). The concept has helped scholars and
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22 managers articulate and explore intellectually interesting questions in diverse fields.
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25 There have been some criticisms of the business model as a concept by some scholars
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27 (e.g., Doganova & Eyquem-Renault, 2009; Porter, 2001; Shafer et al., 2005). For example,
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according to Porter (2001), “the definition of a business model is murky at best. Most often, it
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32 seems to refer to a loose conception of how a company does business and generates revenue,
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34 [...]” (p.73) serving as “an invitation for faulty thinking and self delusion” (Porter, 2001, p.73).
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37 Despite such passionate criticisms, the existence of which we explain below, a consensus has
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39 been emerging on the importance of business models for management practice, theory, and
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41 policy (e.g., Klang et al., 2014; Demil, Lecoq, Ricart & Zott, 2015; Wirtz et al., 2016). There are
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44 several arguments scholars and practitioners have given to defend the business model as a
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46 concept.
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48 First, business models appear to have become important for competitiveness, constitute a
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51 strategic priority for managers in diverse industries, and may be a source of above normal returns
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53 (Chesbrough, 2007a, 2007b; IBM, 2006; Ireland, Hitt, Camp, & Sexton, 2001; Johnson,
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Christensen, & Kagermann, 2008). Additionally, anecdotal examples of extraordinarily
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profitable business models are not uncommon. Witness Google, which rode a paid-listing
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6 advertising business model to prosperity (Afuah, 2014) and Xerox, which chose to lease its
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8 Xerox 914 copier rather than sell it, enabling the firm to become one of the most profitable
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companies at the time (Chesbrough & Rosenbloom, 2002). These successful ways that certain
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13 organizations achieved their goals attracted managerial and scholarly attention.
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15 Second, business models may represent a new dimension of innovation that complements
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18 traditional ones such as product, process, and organizational innovation, thus broadening the
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20 boundaries of innovation-related phenomena and, accordingly, theories of innovation
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22 (Casadesus-Masanell & Zhu, 2013; Massa & Tucci, 2014). For example, platform businesses and
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25 related business models often do not necessarily focus on the creation of a tangible product sold
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27 through a traditional sales channel (i.e., a more “traditional” business model) (Cennamo &
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Santalo, 2013). Rather they enable value, by curating and governing social and economic
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32 interactions (Choudary, 2015). This additional way of thinking about what can be innovated has
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34 also raised practitioner and scholarly interest.
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37 Third, larger forces at the macro level, such as Internet technology and globalization, are
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39 blurring the distinction between industries, lowering barriers to entry, and potentially leading to
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41 more intensive rivalry (Gambardella & Torrisi, 1998; Gambardella & McGahan, 2010; Hacklin,
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44 Marxt & Fahrni, 2009), forcing companies to rethink and redesign how they are achieving their
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46 goals (profitability, growth, social impact. . .). This convergence phenomenon adds urgency to
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48 managers in incumbent firms understanding business model reconfiguration in their firms, in
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51 addition to entrepreneurs understanding the design of new business models to take advantage of
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53 new opportunities (Kim & Min, 2015; Massa & Tucci, 2014; Osiyevskyy & Dewald, 2015).
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Fourth, scholars and managers interested in social and environmental value creation—in
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addition to economic value creation—are increasingly utilizing the business model concept (e.g.,
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6 Dohrmann, Raith & Siebold, 2015; Jenkins et al., 2011; Michelini & Fiorentino, 2012).
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8 Opportunities exist to design business models able to realign organizations' search for profits
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with innovations that also benefit the environment and society, including initiatives in contexts
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13 of deep poverty and low income markets (Lovins, Lovins & Hawkens, 1999; Seelos & Mair,
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15 2007; Lüdeke-Freund, Bocken, Brent, Massa & Musango, 2016).
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18 The above arguments have attracted the attention of many scholars. Zott, Amit and Massa
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20 (2011) examined the evolution of the use of the term “business model” and found that, starting
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22 from the mid 1990s, there was an explosion of articles about business models, including
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25 scientific works published in peer-reviewed journals. Our longitudinal analysis of the number of
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27 articles published that include the term “business model” reveals that such a trend continued
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through 2015 and beyond (Figure 1). As a consequence there is a vast—albeit fragmented—body
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32 of literature now published on business models.
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37 FIGURE 1 ABOUT HERE
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41 We critically review this body of work with the goals of organizing the literature and
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44 achieving greater understanding of the larger picture in this increasingly important research area.
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46 In addition to complementing and extending prior reviews (e.g., Zott et al. 2011; Klang et al.,
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48 2014; Wirtz et al., 2016), we also aim at a second and more important contribution: We aim at
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51 identifying the reasons behind the apparent lack of agreement in the interpretation of business
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53 models, and the relationship between business models and strategy. Our assessment of the
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literature suggests that the four arguments outlined above have led to a proliferation of
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experimentation by organizations in how they achieve their goals. These experiments have been
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6 studied from a variety of angles while the basic terminology has not kept up with these
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8 experiments. The branching of the literature over the years can be divided into three basic
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interpretations of what a business model is: (1) as an attribute of a firm; (2) as a cognitive or
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13 linguistic schema; and (3) as a formal conceptual representation describing the activities of a
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15 firm.
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18 In addition, the business model concept may be challenging assumptions of traditional
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20 theories of value creation and value capture, two terms that are often used to describe business
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22 models. Traditional theories—which were developed well before the above four arguments /
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25 trends became evident—assume away (or did not acknowledge) value creation in the demand
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27 side of the demand and supply equation, focusing on the supply side and limiting competitive
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advantage to a single source. That is, according to traditional theories of strategy, such as the
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32 resource-based view of the firm or the positioning view, value creation is a supply-side
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34 phenomenon in which value is created exclusively by producers, not by customers; and
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37 competitive advantage is single-sourced—resource-based only or activities-based only (Barney,
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39 1991; Peteraf, 1993; Porter, 1980, 1985, 1996). Contrast this with the perspective building on the
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41 business model concept where value creation is both a supply-side and demand-side
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44 phenomenon—where value is created not only by producers, but also by customers and other
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46 members of their value creation ecosystems. Additionally, in this perspective, competitive
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48 advantage can be multi-sourced—that is, competitive advantage can be resource-based and
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51 activities-based, in the supply side and/or demand side.
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53 Thus, in this article we not only propose reasons why cumulative knowledge in the field
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is difficult, we also take the provocative position that business model research does have some
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unique characteristics that distinguish it from traditional perspectives in strategy research. In that
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6 sense, we both complement and extend prior reviews. Zott et al (2011) document the historical
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8 emergence of the construct, walking the reader through its emergence and diffusion. In doing so,
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they identify research “silos” or lines of inquiry based on the phenomena of interest to the
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13 various researchers, e.g., e-business, strategic issues, and innovation / technology management.
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15 They identify—despite the conceptual differences among researchers in different silos—some
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18 emerging themes that they suggest might constitute a common ground across various
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20 conceptualizations on the business model, notably the business model as a new unit of analysis,
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22 centered on activities, emphasizing value creation, and offering a systemic view on
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25 organizations. Our review complements Zott et al. by explicitly bringing the construct validity
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27 problem related to different understandings of the word “model” to the surface. We also shed
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light on the relation between business model and strategy research by pointing to the value
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32 creation and capture dimensions and by more explicitly linking the business model to the
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34 emergent literature on the demand-side of strategy. These aspects also help understand how this
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37 review complements other recent reviews on the business model. Wirtz et al. (2015) is very
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39 much in the spirit of Zott et al. (2011), emphasizing the historical development of the field in
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41 different literature streams and looking for classification methods along the lines of the most
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44 popular research topics and methods, e.g., 79% conceptual articles. Klang et al. emphasizes
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46 semiotics (“signs and symbols used in social life”) and syntactics (“the relations among multiple
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48 signs”) in trying to explain why scholars criticize the concept of a business model. They point
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51 out sources of criticism, such as armchair theorizing, which they call “Temptation of not leaving
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53 the drawing board,” or adapting business models to local contexts, which they call “pride of
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observation.” In contrast, we are focusing in the first part of our paper on the construct validity
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issue of interpretations of the term, and the second part on the business model / strategy debate.
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6 We begin this paper with an assessment of the different interpretations of business
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8 models based on three main groups of works based on the definition and function of a business
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model that have evolved simultaneously over the decades. We then examine the fundamental
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13 question: What relationship, if any, is there between business models and strategy? It is our
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15 contention that the business model concept adds value to the “traditional” strategy literature by
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18 expanding the meaning of “value creation” (to include entirely new markets for / with users and
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20 members of their ecosystems) and “value capture” (to include monetization), and by relaxing
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22 assumptions that often went unchallenged when those theories were developed. Finally, we
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25 examine the use of the concept of business models in research in fields as diverse as strategic
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27 management and environmental sustainability, and suggest future research directions.
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32 Interpretations of Business Models
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35 A sampling of some of the most cited and most frequently used definitions of business
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37 models is shown in Table 1. The diversity of definitions reflects—in part—the fact that scholars
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39 have studied business models employing different subject matter lenses and, in doing that, they
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42 have offered different, sometimes conflicting, interpretations of what the term business model
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44 means and is used for. To arrive at Table 1, as discussed in our online methodological appendix,
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46 we started with 2754 articles about business models and analyzed in detail 216 articles published
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49 between 1995 and 2016 in leading management and practitioner outlets in which the term
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51 “business model” appeared in the title, abstract, or keywords, and who treated the business
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model in a non-trivial way. With two coders, we examined the definitions adopted by the authors
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the literature into three main groups, which we are calling interpretations of the function of the
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6 business model, or interpretations for short. In Tables 1-3, we emphasize the most recently
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8 published 40 articles, plus three “classics” (see online methodological appendix for more
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details).
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13 Our three major interpretations are: (1) Business models as attributes of real firms having a
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15 direct real impact on business operations, (2) business models as cognitive/linguistic schema and
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18 (3) business models as formal conceptual representations/descriptions of how an organization
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20 functions. Arguably, these are conceptually distinct interpretations of the role of the business
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22 model, which point to different phenomena, respectively (1) how firms do business; (2) how the
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25 way firms do business is interpreted by organizational members; and (3) how (1) and (2) could
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27 be represented by means of formal conceptualizations, such as symbolic, mathematical, or
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graphical depictions. We now explore each interpretation.
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34 Business models are attributes of real firms
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37 In this interpretation, a business model is seen as an empirical phenomenon or attribute of
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39 real firms (Table 1). These attributes are determined by empirically—as opposed to
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41 conceptually—classifying real world manifestations of organizations as a function of their
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44 measured similarity on observed variables. This classification effort has frequently supported the
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46 identification of business model archetypes, and the introduction of terms such as razor-and-
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48 blade, advertising, subscription, freemium, barter, brokerage, disintermediation, platform,
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51 crowdsourcing, pay-as-you-go, and so on to describe business models (Casadesus-Masanell &
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53 Zhu, 2010; Johnson, 2010; McGrath, 2010; Rappa, 2001).
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TABLE 1 ABOUT HERE
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8 In trying to understand and articulate these attributes of real firms, some scholars have
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suggested that there are two major parts to each business model: The set of activities that the
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13 firm performs, and the outcomes of performing these activities (Casadesus-Masanell & Ricart,
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15 2010; Casadesus-Masanell & Zhu, 2010). The set of activities that a firm chooses to perform,
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18 when it performs them, how it performs them, who performs them, and the resources/capabilities
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20 that it chooses to use determine the outcome (e.g., Afuah, 2004; Amit & Zott, 2001). That
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22 outcome is usually the value created and/or captured (Casadesus-Masanell & Ricart, 2010;
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25 Casadesus-Masanell & Zhu, 2010; Markides, 2013). As shown in Table 1, definitions of business
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27 models in the “business model as attribute of real firm” interpretation range from a “set of
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activities, as well as the resources and capabilities to perform them—either within the firm, or
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32 beyond it through cooperation with partners, suppliers or customers,” (Zott & Amit, 2010: 217)
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34 to the “firm’s underlying core logic and strategic choices for creating and capturing value within
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37 a value network,” (Dahan et al., 2010: 328 building on Shafer, Smith & Linder, 2005).
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39 In the research that subscribes to this interpretation of business models, large-sample
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41 empirical studies typically ascribe to a positivistic stance and test hypotheses related to business
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44 model variables that are measured at the level of firms (primarily), markets, or even society.
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46 Research has included efforts to empirically test hypotheses about the role of business models in
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48 explaining differences in firm performance as well as inductive approaches to understand the
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51 sources of value creation inherent in innovative business models. For example, in an inductive
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53 study, Amit and Zott (2001) identify four potential sources of value creation in e-business:
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efficiency, complementarities, lock-in, and novelty. Focusing on electronic markets as a research
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context, Zott and Amit (2007) find that business models that embed novelty elements in their
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6 configurations (sets of activities) perform better than those that did not. This relationship was
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8 stable across different environmental regimes. Weill, Malone and Apel (2011) analyze the
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performance of different business models in U.S. markets over a 12-year period from 1997 to
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13 2009, and find that that business models based on innovation and intellectual property tend to
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15 outperform other business models. Qualitative empirical studies also subscribe to a view of the
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18 business model as a real attribute of firms. For example, Sosna, Trevinyo-Rodríguez and
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20 Velamuri (2010) studied Kiluva Group, a Spanish family-owned dietary products business.
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23 They conducted interviews with both internal and external stakeholders, collected company
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25 documents, records, and newspaper articles and documented the role of experimentation and
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trial-and-error learning in changing an existing business model, which was conceptualized as
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30 changing an attribute of the organization.
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32 Other studies have been concerned with the impact of novel ways of organizing business
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35 activities on the dynamics of industries, and built on the early notion of disruptive
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37 technologies/innovation (Christensen, 1997). For example, Johnson (2010)—also quoted by
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39 Martins and colleagues—notes that “of the 26 companies that have been founded since 1984 and
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42 entered the Fortune 500 list from 1997 to 2007, a majority owed their success to business model
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44 innovations that either transformed existing industries or created new ones” (Martins, Rindova &
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46 Greenbaum 2015). Demil and colleagues (2015) add that in addition to changing industry
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49 dynamics, novel business models may have a profound impact on and, indeed, change “the way
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51 people live, work, consume, interact with each other” (p. 2) and refer to examples such as
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Airbnb, Apple, eBay, Facebook, Google, or the Grameen Bank. In other words, the business
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model is associated with the organization (attribute of Airbnb, for example), which then has an
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6 impact on society.
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8 The literature that subscribes to the “business models as attributes of real firms”
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interpretation has also sought to shed light on the role of business models in competitive
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13 dynamics and (superior) performance. For example, Casadesus-Masanell and Zhu (2010) analyze
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15 the competitive interactions between a high-quality incumbent facing a low quality ad-sponsored
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18 competitor, and show that the optimal response to an ad-sponsored (free or cheap for users,
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20 charge advertisers) rival often entails business model reconfiguration. They suggest that when
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22 there is an ad-sponsored entrant, the incumbent should consider competing through a
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25 subscription-based (pay for unlimited service) or ad-sponsored model rather than a mixed or dual
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27 model due to cannibalization and endogenous vertical differentiation concerns. Relatedly, Brea-
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Solis, Casadesus-Masanell & Grifell-Tatje’ (2015) develop an analytical framework based on the
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32 economics of business performance to provide quantitative insights into the link between a
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34 firm’s business model choices and the building of competitive advantage. Their key insight is
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37 that, while the choice of a particular business model is important to explain competitive
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39 advantage, it is the particular implementation of a business model (i.e., the degree of key choices
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41 such as relative emphasis on customer service or new technology even keeping the same
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44 business model) that explains performance. Aspara, Hietanen, & Tikkanen (2010) empirically
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46 analyze the differences in average profitable growth across firms that differ in their strategic
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48 orientations and find that firms that have a strong strategic emphasis on business model
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51 innovation, as well as a strong emphasis on replication, exhibit a higher average value of
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53 profitable growth than firms that do not strategically emphasize either dimensions. In all of these
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cases, the business model is considered to be an attribute of the firm itself.
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Scholars who subscribe to this interpretation of a business model as an attribute of a real firm
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6 have also devoted considerable attention to the issue of competing with two business models
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8 simultaneously (e.g., Markides, 2013). They note that many incumbent firms respond to the
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emergence of a disruptive business model by adding a new business model to their existing business
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13 model rather than completely replacing their old one. For example, most airline companies
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15 responded to entrants in the low-cost, point-to-point segment of the airline market by adopting such
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18 techniques, often under a new brand name. Companies in fast-moving consumer goods did the same
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20 in response to the entrance of low-cost private label competitors.
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22 While the idea of competing with dual business models seems attractive to both managers and
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25 scholars, it raises several strategic issues and challenges. For example, a fundamental strategy
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27 challenge related to managing two business models in the same market is that the two models (and
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underlying value chains) could conflict with one another (Markides & Charitou, 2004; Porter, 1996).
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32 Conflicts could be of various types, the most obvious one being the risk of jeopardizing the existing
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34 business (Velu & Stiles, 2013). For example, by trying to sell on the Internet, a brokerage firm may
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37 alienate its existing distributors (e.g., brokers), creating channel conflict. This was one of the earliest
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39 observations about e-commerce channels and was used to explain the difference between Dell’s and
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41 Compaq’s business models (Afuah & Tucci, 2002).
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44 The presence of conflicts of different types means that managers within the existing
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46 organization will often find that the new business model will grow at those same managers’ expense.
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48 As a function of two fundamental contingencies, namely the nature of the conflicts between the
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51 established business and the innovation (the new business model) on one hand, and the similarity
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53 between the two business models on the other, Markides and Charitou (2004) have suggested four
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possible strategies: Separation, Integration, Phased Separation, and Phased Integration. Markides and
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Oyon (2010) take the analysis one step further by analyzing whether the incumbent should attempt to
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6 copy the business model of the “disruptor” and suggest that on average that is not a successful
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8 strategy; rather, the second business model should attempt to “disrupt the disruptor” (p. 27). We will
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discuss the relationship between business models and strategy in a separate section further below as
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13 it is a highly important topic. For now, it is enough to know that in the above work, the dual business
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15 models are both considered to be attributes of the companies in question.
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18 Continuing with this theme, Kim and Min (2015) analyze the performance of store-based
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20 retailers that added online retailing as a new business model, and find that the presence of
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22 complementary assets between the existing and the new business model may lead to increased
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25 performance when the new business model is added early as part of the main business; however,
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27 if there are conflicting assets, incumbents should add the new business model as a separate,
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autonomous business.
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32 Overall, in this interpretation, there is general agreement that business models—as
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34 attributes of real firms—involve performing value-adding activities to create and/or capture
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37 value. However, there is little agreement on which activities are important in business models
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39 and therefore should be performed, who performs the activities, how they are performed, when
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41 they are performed, where (at what level), and what resources are needed to perform them. Then
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44 there is the inconsistency about the outcome of performing these activities. While some scholars
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46 see the outcome of performing business model activities as being value created and captured,
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48 others see it as value creation only or value captured only. Then there is the issue of how
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51 different scholars define value created and captured (Lepak, Smith & Taylor, 2007). Finally, and
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53 importantly, there is the issue of whether business models as attributes of real firms are any
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different from the strategies of these firms. As mentioned above, we will discuss this in a
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6 separate section below. First, let us continue with the second of the three interpretations.
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The Business Model as a Cognitive/Linguistic Schema
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13 The idea behind the interpretation of business models as cognitive/linguistic schemas
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15 (Table 2) is that managers do not hold real systems—e.g., real activities for creating and
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18 capturing value, organizational structures, potential outcomes, and so on—in their minds when
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20 making decisions. Rather, managers hold images of real systems—such as real business
21
22 models—that are shaped by managers’ own cognitive frames (Chesbrough & Rosenbloom, 2002;
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25 March & Simon, 1958; Tripsas & Gavetti, 2000). Thus, much of the research that sees the
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27 business model as a cognitive/linguistic schema is concerned with how business models are
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interpreted by organizational members, and their role and manifestation in social (inter)-action,
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32 including organization-level sense-making (Ring & Rands, 1989), environmental scanning and
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34 sensing opportunities (Teece, 2007), and the cognitive antecedents of business model design and
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37 innovation (Amit & Zott, 2015; Martins et al., 2015; Normann & Ramirez, 1993; Tikkanen,
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39 Lamberg, Parvinen & Kallunki; 2005). In this sense, the business model can be considered a
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41 dominant logic—a current thinking pattern or established belief or cognitive schema held by
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44 managers in organizations (Bettis & Prahalad, 1995; Prahalad & Bettis, 1986).
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46 ------------------------------------------------------------
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48 TABLE 2 ABOUT HERE
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51 ------------------------------------------------------------
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53 Martins et al. (2015) provide a comprehensive definition of business models as cognitive
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schema, and conceptualized them as “cognitive structures that consists of concepts and relations
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among them that organize managerial understanding about the design of activities and exchanges
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6 that reflect the critical interdependencies and value creation relations in their firms’ exchange
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8 networks” (p. 105). In their interpretation, business models are schemas that organize managerial
9
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understanding of the design of firms’ value creating activity systems.
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13 This definition is highly consistent with Zott et al.’s (2011) account of the properties which
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15 constitute the common ground of the various conceptualizations of business models that have
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18 been provided, and characterizing the construct “as a new unit of analysis, as a system-level
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20 concept, centered on activities, and focusing on value” (p.19). Other authors have suggested that
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22 cognitive representations of the business models are used by managers to solve challenges
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25 related to making sense of, as well as explore, opportunities for value creation and capture
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27 (Baden-Fuller & Haefliger, 2013; Baden-Fuller & Mangematin, 2013; Loock & Hacklin, 2015).
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Two classic examples illustrate this interpretation of business models as
30
31
32 cognitive/linguistic schema. The first is Tripsas and Gavetti’s (2000) account of why Polaroid—
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34 a successful chemicals-based photography firm—failed in the face of digital photography. They
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37 argue that because Polaroid management’s cognitive frames were embedded in the firm’s very
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39 profitable razor-and-blade business model for creating and capturing value in the chemical
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41 photography era (cheap cameras, expensive film), the firm’s managers had a very difficult time
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44 making decisions that were favorable to the newer business models dictated by the newer and
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46 disruptive digital photography technologies (expensive cameras, no need for film). Images of the
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48 razor-and-blade business model in managers’ heads contributed to their failure to adopt new and
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51 more relevant business models (Benner & Tripsas, 2012; Tripsas, 2009; Tripsas & Gavetti,
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53 2000).
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The second example of business models as cognitive linguistic schema is Chesbrough and
4
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6 Rosenbloom’s (2002) study of Xerox Corporation and its Palo Alto Research Center (PARC).
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8 They studied 35 technology spin-offs that commercialized technology emanating from PARC
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over a period of 20 years, and noted that Xerox’s management consistently and implicitly
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13 evaluated the technical and economic potential of spin-off companies from PARC through its
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15 well-established business models that had worked well for mechanical copiers. Technical
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18 inventions from PARC that did not fit Xerox’s core logic of doing business tended to be
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20 perceived as less promising, and were eventually rejected or underfunded. In many cases,
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22 however, these same inventions became success stories when their relative inventors and
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25 contributors attempted to exploit their market potential independently of Xerox. Chesbrough and
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27 Rosembloom (2002)—like Tripsas and Gavetti (2000)—suggested that, over time, organizational
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members develop cognitive representations or images of their business models and adopt them,
30
31
32 for example, in evaluating new business opportunities.
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34 The idea that managers hold images of real systems—not the real systems themselves—has
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37 a long tradition in management research, spanning theories of organizations (Eggers & Kaplan,
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39 2009, 2013; March & Simon, 1958; Morgan, 1986), organizations as “interpretation systems”
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41 (Daft & Weick, 1984), organizational learning (Senge, 1990), strategy (Bettis & Prahalad, 1995;
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44 Prahalad & Bettis, 1986) as well as more general theories concerning cognition and industry
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46 belief systems (e.g., Porac, Ventresca & Mishina, 2002). Organizations are extraordinarily
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48 complex systems—in the sense of sharing characteristics typical of Level Eight on Boulding’s
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51 (1956) 9-level scale of complexity (Anderson, 1999)—operating in similarly complex
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53 environments (e.g., see Daft & Weick, 1984). As a result, managers are confronted with the
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strategic imperative of understanding both their environment as well as their organization and its
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6 identity in relationship to the external world (Gioia, Schultz & Corley, 2000).
7
8 Building on the rich tradition of students of cognition in organizations (see Eggers &
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Kaplan, 2013, for a review), and the early business model insights from Tripsas and Gavetti
12
13 (2000) and Chesbrough and Rosenbloom (2002), other scholars have suggested that
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15 organizational members (also) create mental models of their and others’ business models (e.g.,
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18 Baden-Fuller & Morgan, 2010; Baden-Fuller & Haefliger, 2013; Loock & Hacklin, 2015;
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20 Martins et al., 2015).
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22 Overall, according to the proponents of the cognitive schema interpretation, the business
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25 model is seen as an implicit mental schema (rather than having a material manifestation as a
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27 property of firms or a formal conceptual representation), a cognitive structure that operates as a
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focusing device, making decision making of boundedly-rational decision makers facing
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32 conditions of imperfect information and cognitive complexity more efficient (e.g. see; Doz &
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34 Kosonen, 2010; Prahalad & Bettis, 1986; Walsh, 1995). Thus one function of schemas is to
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37 improve decision-making efficiency by simplifying and filtering information and stimuli. Loock
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39 and Hacklin (2015) have proposed that this is achieved by configuring “simple rules” into a
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41 coherent structure that would inform value creation and capture.
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44 However, the same schema could become a source of inertia, an aspect that has been
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46 variously emphasized by cognition research in strategy (e.g., see Ocasio, 2011; Porac &
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48 Tschang, 2013) as well as by business models scholars (e.g., see Chesbrough, 2010; Tripsas &
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51 Gavetti, 2000). Schemas tend to be self-reinforcing because the simplification they allow occurs
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53 automatically, guiding decision makers to ignore discrepant (but perhaps relevant) information
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and data gaps (which tend to be filled with typical information) in favor of more familiar or
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readily available information (e.g., see Gioia, 1986). More recently Martins et al. (2015) suggest
4
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6 that business model schemas could be employed to also create images of future business models.
7
8 They offer a theory of firm level cognitive processes for business model design and
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reconfiguration, and emphasize the role of two mechanisms—analogical reasoning and
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13 conceptual combination—which individuals use to make sense of novelty and design new
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15 artifacts.
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18 This insight suggests that schemas are, to some extent, malleable cognitive devices that
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20 could be recombined and used as instruments in imaginative and generative thinking supporting
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22 the proactive depiction of new, novel, and innovative business models. In other words, mental
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25 modeling could also refer to “this capacity [...] rooted in the ability to imagine—to depict in the
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27 mind—both real world and imaginary situations, and to make inferences about future states of
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29
these situations based on current understandings, with and in the absence of physical
30
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32 instantiations of the things being reasoned about” (Nersessian, 2008, p. 91). In other words,
33
34 business models in this interpretation are not fixed attributes of the firm, but instead reside in
35
36
37 managers’ heads. Without knowing or grasping all of the activities the firm itself is engaged in,
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39 what is in the head of managers can be changed first and foremost through an ideation or
40
41 imagination process.
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44 A challenge in the research that interprets business models as cognitive schema is the
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46 choice of how to approach the unit of analysis. Reducing business models to mental models only
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48 held by an individual can be misleading. Although individuals hold mental models, these models
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51 are often rooted in the collective—in the shared beliefs and models of other members of their
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53 organizations (Kaplan, 2011; Martin et al., 1983; Martin, 1992; Walsh, 1995; Weick et al.,
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2005). How do organizational members, collectively, create a shared, albeit implicit,
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understanding of their business model and how do they communicate it internally as well as
4
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6 externally? The answer may lie in considering not only the cognitive dimension (collective and
7
8 individual) but also the linguistic one (communicating within the organization). A surface
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manifestation of cognitive schema (what others see) is represented by narratives and linguistic
12
13 schema of the business models, as we will discuss next.
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15 Organizations are permeated with narratives, some of which are business model-related
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17
18 (e.g, Magretta, 2002). According to Magretta (2002) business models “are, at heart, stories –
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20 stories that explain how enterprises work. A good business model answers Peter Drucker’s age-
21
22 old questions: Who is the customer? And what does the customer value? It also answers the
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25 fundamental questions every manager must ask: How do we make money in this business? What
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27 is the underlying economic logic that explains how we can deliver value to customers at an
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29
appropriate cost?” (Magretta, 2002; p. 4). Narratives and linguistic schemas—like mental models
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31
32 and metaphors (e.g., see Morgan, 1986)—are used by individuals to infuse ambiguous situations
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34 with meaning (Brown, 2000). However they also have an important role in coordinating and
35
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37 facilitating social action within and outside the organization. Narratives create shared
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39 understanding and allow organizational members to communicate their business models both
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41 inside and outside the organization. Internally, narrative dynamics operate to drive the
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43
44 development of the firm’s social order, rules, organizational structure, hierarchy, and meaning-
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46 making. Downing (2005) discusses the role of narratives in the coproduction of organizations
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48 and identities. George and Bock (2011) offer an excellent discussion of the role of narratives of
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51 the business models in entrepreneurial action and provide empirical evidence of their use and
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53 value.
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Perkman & Spicer (2010) suggest that because of their forward looking character, business
4
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6 model narratives play an important role in inducing expectations among interested constituents
7
8 about how a business’ future might play out. Narratives of the business model can be constructed
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by managers and entrepreneurs and used not only to simplify cognition, but also as a
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13 communication device that could allow achieving various goals, such as persuading external
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15 audiences, creating a sense of legitimacy around the venture (for example by drawing analogies
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18 between a venture’s business model and the business model of a successful firm: “We want to be
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20 the Uber of…”) or guiding social action (for example by focusing attention on what to consider
21
22 in decision making and instructing on how to operate). Doganova and Eyquem-Renault (2009)
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24
25 suggest that business model narratives can work as boundary objects capable of providing a
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27 solution to the coordination challenges of innovation, in particular when agency is distributed
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29
across heterogeneous actors, such as in innovation projects that are more open.
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32
33
34 Business Models as Formal Conceptual Representations/Descriptions
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37 Situated in between the two anchor points of the interpretation of business models as
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39 attributes of real entities and the interpretation of business models as cognitive and linguistic
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41 schemas (i.e., narratives) is the interpretation of business models as formal conceptual
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44 representations (Table 3). Here, we explicitly use the adjective formal to stress their difference
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46 from cognitive and linguistic schema. While they are both models, in the sense of simplifications
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48 of a real system (see below), they differ in that the former are implicit, not detailed, often
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51 unspoken or transmitted at a high level, while the latter are explicit, written down in pictorial,
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53 mathematical, or symbolic form.
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TABLE 3 ABOUT HERE
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6 ------------------------------------------------------------
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8 The interpretation of business models as formal conceptual representations could be traced
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back to some of the early writings on business models. For example, Osterwalder, Pigneur and
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13 Tucci (2005), in referring to the place for business models within the Information Systems
14
15 literature, suggested that a business model is a “blueprint of how a company does business. It is
16
17
18 the translation of strategic issues, such as strategic positioning and strategic goals into a
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20 conceptual model that explicitly states how the business functions” (p. 3, emphasis added).
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22 Conceptual models, in turn, are the result of the “activity of formally describing some aspects of
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24
25 the physical and social world around us for the purposes of understanding and communication’’
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27 (Myopulos, 1992, p. 2, emphasis added). When a research study attempts to describe a model
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29
using detailed descriptions of some aspects of the organization’s activities, we would classify
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32 that as a formal conceptual representation. Several definitions of the business model in Table 3
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34 indeed point to the descriptive nature of business models, implicitly stressing their manifestation
35
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37 as formal conceptual representations of how the firm is proposing to achieve its goals.
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39 Why would scholars or even managers use formal conceptualizations (models) to represent
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41 business models? One of the main reasons is the complexity of the phenomenon. While the
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44 complexity of representing how firms do business may be a factor that influences all three
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46 interpretations of business models and inability to come to a common understanding of the
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48 literature, the use of formal conceptual representations is especially conducive for trying to make
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51 sense of the complexity of business models by highlighting the most important elements for use
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53 by managers and scholars (Burton & Obel, 1995; Sterman, 2000). Formal conceptual
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representations can be used to articulate, challenge, transfer, and recombine the tacit knowledge
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at the background of implicitly understood cognitive schema, heuristics, narratives and other
4
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6 organizationally embedded manifestations of business models. In this sense, Chesbrough (2010)
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8 has suggested that formal and conceptual models may allow escaping dominant logic traps by
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raising awareness of one’s own assumptions and/or challenging them.
12
13 One way to understand formal conceptual representations (models) is as simplifications of
14
15 something. Generally speaking, formal conceptual representations are employed because doing
16
17
18 so makes dealing with real systems and phenomena simpler. In general terms, to create a
19
20 conceptual representation (model) is to abstract and simplify what is (considered to be)
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22 “unnecessary” and “minor” in favor of what is (considered to be) core, with the goal of
23
24
25 improving tractability, understanding, as well as our ability to measure, predict and
26
27 communicate. This view of conceptual representations (models) as simplifications suggests that,
28
29
at least in theory, there could be different possible representations of the same thing, depending
30
31
32 on aspects such as what is assumed away, what is formally described, and how it is described
33
34 (e.g., visually vs. verbally).
35
36
37 Consider the example of a geographical map (a slightly more complex example would be a
38
39 model of, say, the weather or a cell). A geographical map could itself be considered a simplified
40
41 representation of something, in this case, a given geographical region. However, maps of the
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43
44 same region exist at different scales (e.g., 1:10,000 vs. 1:50,000), report different information
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46 (e.g., political borders, fire risks), and with different styles of communication (e.g., adopting
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48 different color codes, or symbols whose meaning is captured in the legend). A similar situation
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51 may transpire with formal conceptual representations of the business model: there could be
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53 differences in level of abstraction (the “scale” of the representation), in content (i.e., what is
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formally described/represented and what is omitted) and, theoretically, in semantics (the signs,
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symbols, text, as well as other codes that are adopted and their meaning, although in our review
4
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6 we did not find much evidence of this distinction). Let us examine each of these in turn.
7
8 First, the way a firm does business could be represented at varying degrees of depth
9
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11
depending on the level of abstraction or scale chosen (Massa and Tucci, 2014; Massa, Tucci &
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13 Viscusi, forthcoming). Closer to the level of the firm is a description of the business model as a
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15 system of interdependent activities (Amit & Zott, 2001), as a system of interdependent choices
16
17
18 and their consequences (Casadesus-Masanell & Ricart, 2010), or the fundamental processes run
19
20 in a business (e.g., the “business process viewpoint” as described in Gordjin and Akkermans,
21
22 2003, and in general in the fields of requirements engineering or information systems).
23
24
25 At higher levels of abstraction are situated so-called meta-models of business models,
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27 which are representations of the business model obtained by enumerating and clarifying its
28
29
essential components. A popular example among managers and practitioners is the Business
30
31
32 Model Canvas (Osterwalder, 2004; Osterwalder & Pigneur, 2010). The Business Model Canvas
33
34 offers a scaled-down representation of a “generic” business model assumed to be valid for
35
36
37 describing many firms, that enumerates and illustrates what the authors consider to be the critical
38
39 components of a business model (Osterwalder & Pigneur, 2010). Earlier work also models
40
41 business models by focusing on the critical components of a business model (Afuah & Tucci,
42
43
44 2000; Afuah, 2004). Johnson, Christensen, and Kagermann (2008), later proposed a
45
46 representation of the business model based on four components, and more recently, Gassmann,
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48 Frankenberger and Csik (2014) propose four dimensions to represent a business model: Who,
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50
51 which refers to the targeted customer group, What, referring to the value proposition, How,
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53 referring to the activities and capabilities employed to create the value proposition and, finally,
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Value, or an explicit explanation of how money is made in the business, including how revenues
4
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6 are collected and how costs are generated.
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8 Second, content may also vary. For example, researchers interested in sustainability have
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10
11
tended to include in their formal representations of the business model information relative to
12
13 environmental value creation and seen the environment and local communities as key
14
15 stakeholders (e.g., Bocken et al., 2014). These components have typically been ignored by
16
17
18 scholars asking different research questions for which modeling environmental impact is not
19
20 critical. It is not true scholars in different fields were only studying firms not having any
21
22 environmental impact (or impact on local communities). Every firm has environmental impact
23
24
25 whether it is explicitly acknowledged or not. Rather, environmental impact may be omitted in a
26
27 representation of the business model if it is believed that it does not represent a core element.
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29
Morris, Schindenhutte and Allen (2005) have cross-compared 19 perspectives on business
30
31
32 model components, including early work focusing on electronic commerce (e.g., Mahadevan
33
34 2000) and work in requirements engineering (e.g., Gordjin & Akkermans, 2003) noticing that
35
36
37 “the perspectives are notable both for their similarities and differences” (p.727). They further
38
39 highlight that “the number of components mentioned varies from four to eight. A total of 24
40
41 different items are mentioned as possible components, with 15 receiving multiple mentions. The
42
43
44 most frequently cited are the firm’s value offering (11), economic model (10), customer
45
46 interface/relationship (8), partner network/ roles (7), internal infrastructure/connected activities
47
48 (6), and target markets (5). Some items overlap, such as customer relationships and the firm’s
49
50
51 partner network or the firm’s revenue sources, products, and value offering” (p.727).
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53 Wirtz et al. (2016) reviewed 681 articles mentioning the business model and—consistent
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with, for example, Morris et al. (2005), Osterwalder et al. (2005), Shafer et al. (2005), Zott et al.
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(2011), and Klang et al. (2014)—stress the heterogeneity of the content of business models
4
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6 across the literature as manifested by disagreement on its constituent elements. For example,
7
8 Wirtz et al. (2016, p. 42), write that “The most agreement among the authors regarding the
9
10
11
components is found with market offerings and resources. There seems to be a strong consensus
12
13 about the importance of those components. There is little or no agreement with regards to the
14
15 areas of strategy, revenue and procurement.“ Descriptions of different components represent
16
17
18 formal conceptual representations of firms’ business models.
19
20 For the third category, semantics, in this case, the set of constructs, symbols and the rules
21
22 for combining them (see Wand & Weber, 2002), Gordjin and Akkermans (2003) provide a
23
24
25 modeling language that they refer to as the “e3-value ontology.” This language helps model how
26
27 economic value is created and exchanged within a network of actors. The “e3-value ontology”
28
29
and more broadly the domain of conceptual modeling techniques, suggests that formal modeling
30
31
32 should also be concerned with semantics, even if to-date there has been less work in the area
33
34 related to business models.
35
36
37 Overall, the literature in business models as formal conceptual representations suggests the
38
39 following: (1) there have been many attempts to offer simplified representations of the business
40
41 model by pointing to its fundamental components, and (2) there is a lack of agreement on what
42
43
44 the critical components are. Even when scholars mention conceptually similar components, they
45
46 do not employ the same terminology.
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48
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51 Summary and implications of the three interpretations
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53 These three interpretations of the role and function of the business model point to the
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importance of construct validity in business model research (Bagozi & Philips, 1991). As noted
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above, scholars have adopted the same term, the business model, in referring to: (1) attributes of
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6 real firms variously influencing their performance in markets; (2) cognitive schemas (and
7
8 linguistic schemas as observable manifestations), and (3) formal (scaled-down) conceptual
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representations of organizational activities. In our view, this fact represents a major source of
12
13 confusion. These interpretations of the business model are rarely discussed, and possibly not
14
15 even completely recognized. Few papers explicitly mention the issue, and fewer still set clear
16
17
18 boundaries for their study by explicitly stating which interpretation(s) is assumed. The three
19
20 interpretations point to phenomena that are distinct from each other in terms of units of analysis
21
22 and presumed function of the business model. As Tables 1-3 show, the appropriate units of
23
24
25 analysis are, respectively, (1) the organizations themselves and their network of exchange
26
27 partners; (2) individual and collective minds and discourse; and (3) the model itself and the
28
29
subject of modeling. Functions range from (1) having an impact on organizational performance,
30
31
32 to (2) shaping opportunity recognition and shared identity, to (3) isolating focal elements of an
33
34 organization’s activities and possibly their dynamics. Thus, more explicitly considering the
35
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37 differences across the three interpretations also has the potential to inform scholars how to start
38
39 building appropriate theoretical foundations business model research as a function of which
40
41 interpretation is assumed.
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44 One way of solving the construct validity issue would simply be to more explicitly
45
46 acknowledge the existence of the three interpretations and make the effort of explaining which
47
48 view of the business model is assumed in each study, perhaps adopting different terms that
49
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51 would support disambiguation, such as business models as attributes, business models as
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53 cognitive schema and business models as formal conceptual representations. This could also
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represent an opportunity for starting to investigate the nature of the relationship between the
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three interpretations and the different meanings of the word “model” (for example, a model
4
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6 being understood as (1) the core logic with which an organization achieves its goals, (2) the
7
8 dominant logic capturing how a firm is believed to operate, and (3) as a scaled-down simplified
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formal conceptual representation, respectively).
12
13
14
15 To conclude this section, not only do scholars not always share the same interpretation of
16
17
18 the term business models (as seen above), but even those attempting to create formal
19
20 conceptualizations (models) disagree on how to represent them when it comes to business
21
22 models. This lack of agreement and understanding is an essential part of the relationship between
23
24
25 business models and strategy to which we now turn.
26
27
28
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30 The Relationship Between Business Models and Strategy: The Debate
31
32 The fascinating debate about the relationship between business models and strategy has
33
34
35 been characterized by two main positions. On the one hand, skeptics suggest that business model
36
37 research is just “old wine in a new bottle,” fundamentally moving under a new umbrella term,
38
39 questions and concerns—and perhaps even insights—that have historically been the cornerstones
40
41
42 of research in strategy, thus adding very little to our knowledge (e.g., see Porter, 2001). Business
43
44 model research adds nothing to our understanding of strategy, and no new theories, beyond
45
46 established ones such as the positioning view or the resource-based view (RBV) need to be
47
48
49 developed to explore business model questions. The general conclusion by those sharing this
50
51 perspective is that business model research should be abandoned, or at the very least, that
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54
researchers should stop referring to it as a separate literature stream.
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56 On the other hand, supporters of the business model as a separate field do acknowledge an
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overlap with strategy but also suggest that business models and strategy are distinct constructs,
4
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6 warranting attention both in isolation as well as jointly (Zott & Amit, 2008). Their general position is
7
8 that the business model allows asking (and hopefully answering) new research questions that have
9
10
11
historically been overlooked by what many would consider “more normal theorizing in strategy”
12
13 (Priem, 2007). According to this view, research on the business model has the potential to shed light
14
15 on important issues that have remained relatively unexplored, adding to existing knowledge (Amit &
16
17
18 Zott, 2013; McGrath, 2010; Teece, 2010). Who is right? While we will eventually come down on the
19
20 side of business model research adding value across multiple fields, including strategy, let us explore
21
22 both sides (which we call “perspectives” below) in this debate.
23
24
25
26
27 Business Models are Strategy in “New Bottles”
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29
Our first line of inquiry is the research stream supporting the argument that business models
30
31
32 are new bottles used to peddle strategy concepts. This research stream has been characterized by
33
34 efforts to shed light on the role of business models in explaining value captured relative to
35
36
37 competition—a staple of strategy research. For example, Casadesus-Masanell & Ricart (2007, 2010),
38
39 who see the business model through a strategy lens, suggest that firms compete through business
40
41 models. Other studies sharing a paradigmatically similar perspective on value capture have focused
42
43
44 on the role of the business models in explaining the sustainability of first-mover advantages in
45
46 relationship to the business models adopted by late entrants (Markides & Sosa, 2013; Casadesus-
47
48 Masanell & Zhu, 2013), the dynamics associated with competing through business models
49
50
51 (Casadesus-Masanell & Ricart, 2007) or those related to adopting more than one business model
52
53 simultaneously (Markides & Charitou, 2004; Markides, 2013).
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What is common among these studies is the emphasis on the business model as a means to
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compete, whether in existing markets or in emerging ones. This perspective tends to ignore the
4
5
6 mechanisms and dynamics through which value is created in the first place. Value is often assumed
7
8 to be exogenous (e.g., the size of the market is given). The managerial task, and the role of the
9
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business model, is reduced to a focus on capturing a part of that value relative to the competition.
12
13 McGrath (2010) suggests that this perspective may resonate well with traditional strategy ideas—in
14
15 particular those influenced by the positioning school or the capability view—for an additional
16
17
18 reason: a static perspective on strategy and markets.
19
20 The positioning school has long proposed that what firms need to do to succeed is to
21 find a truly differentiated and defensible position within an industry and execute
22 relentlessly against that position. The capability school argues instead that advantage
23
24
stems from having difficult-to-copy resources that are often built up over long periods
25 of time. The dilemma is that neither of these perspectives give management much
26 latitude for action. Having selected a position in an industry, it is hard to pluck a firm
27 out and move it to some other position; similarly, after a firm has spent time and effort
28 assembling a compelling resource endowment, order of magnitude shifts are quite
29
difficult (McGrath, 2010, p.248).
30
31
32
33 That is, even when there is some focus on value created for the customer, in this perspective,
34
35 all that companies have to do is to create incrementally more value than the competition (e.g., see
36
37
38 Normann & Ramirez, 1993, 1994). The essence of capturing value relative to rivals is to have a
39
40 competitive advantage. Competitive advantage rests on uniqueness. According to Porter (1996) “a
41
42
43
company can outperform its rivals only if it can establish a difference that it can preserve. It must
44
45 deliver greater value to the customer or create comparable value at lower cost, or do both.” (p.62).
46
47 According to Teece (2010), this perspective further assumes that “if value is delivered, customers
48
49
50 will always pay for it.” (p.172). There is no need to worry about the creation of radically new,
51
52 paradigmatically different value (value is already existent in markets, as aggregate demand), nor
53
54 about convincing customers to pay for it. The fundamental problem is that of defending against
55
56
57 competitors and crafting the right business model is one way to do that.
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The conceptual overlap with the mainstream strategic management field is evident not only in
4
5
6 the focus on competition but also in the convergence on embracing activity systems (Zott & Amit,
7
8 2010; Porter, 1996) and the use of activity systems to explain the foundations of competitive
9
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11
advantage. Casadesus-Masanell and Ricart (2010) have pointed to the set of interdependent choices
12
13 to explain business models, while Zott and Amit (2010) have more explicitly advocated activity
14
15 systems. The relationship between managerial choices and bundles of activities is clear in that, to be
16
17
18 implemented, choices require the firm to perform certain activities. This view is conceptually similar
19
20 with the activity-system view in strategy. In the words of Porter,
21
22 ultimately, all the differences between companies in cost or price derive from the
23
24
hundreds of activities required to create, produce, sell, and deliver their products and
25 services. […] Cost is generated in performing activities. Similarly, differentiation
26 arises from both the choice of activities and how they are performed. Activities, then,
27 are the basic unit of competitive advantage. Overall companies’ advantage or
28 disadvantage results from all a company’s activities, not only a few (1996, p.62).
29
30
31 The activity system view suggests that in the same way in which activities can be
32
33 configured to achieve cost leadership or differentiation, a business model—or more specifically,
34
35 the architectural logic of its activity system (Zott & Amit, 2010)—can be designed around
36
37
38 efficiency or novelty design themes (Zott & Amit, 2007, 2008). These considerations highlight
39
40 the possibility of the existence of a strong conceptual overlap between cost leadership and
41
42
43
efficiency on one hand, and differentiation and novelty on the other; both pairs represent value
44
45 capture mechanisms and both point to activity systems. In this sense, business models—or at
46
47 least this particular perspective on it—and strategy—or at least a theory of it—may share a
48
49
50 similar perspective on value capture, so similar that the business model may appear to be
51
52 superfluous.
53
54 And yet, even in this case, things may not be that straightforward. As an example, compare
55
56
57 the low-cost carriers Southwest Airlines and Ryanair. While they appear to manifest similar
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activity system architectures—both of them revolving around efficiency design (cost
4
5
6 leadership)—many people would note that there are considerable differences in their sources of
7
8 revenues (for example, Ryanair’s revenue sharing agreements with concessions at minor airports
9
10
11
if the number of passengers exceed a target). This, and similar considerations, raise some
12
13 important questions: how and where are revenues collected? Would asking (and answering)
14
15 questions such as these help better understand how companies do or could capture value above
16
17
18 their costs? Our review reveals that questions such as these have been at the center of a second
19
20 perspective on business models—one that sees business models as a separate field.
21
22
23
24
25 Business Models as a Separate Field from Strategy
26
27 This second perspective has progressively emerged out of two related considerations. First,
28
29
scholars have slowly started to accept that it is far from clear that if value is delivered to customers,
30
31
32 customers will pay for it. According to Teece (2010), this is evident if one looks at “Internet
33
34 companies, where the creation of revenue streams is often most perplexing because of customer
35
36
37 expectations that basic services should be free. Figuring out how to earn revenues (i.e., capture
38
39 value) from the provision of information to users/customers is a key (but not the only) element of
40
41 business model design in the information sector” (p.172). And yet, traditional strategy research has
42
43
44 not tackled these issues in a serious way.
45
46 In contrast, business model scholars have looked to the business model in trying to answer
47
48 questions about how to capture value from customers (i.e., “monetize” value), which is how to craft
49
50
51 one or multiple revenue streams. For example, Chesbrough and Rosenbloom (2002) have suggested
52
53 that innovative technologies and ideas, per se, have no economic value, but only latent value. It is the
54
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function of the business model to realize part of that value by connecting these technologies and
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ideas to the realization of economic output in markets. In some instances, earning revenues remains
4
5
6 complex. The online news industry, for example, has not yet found a dominant business model to
7
8 earn revenues (Cozzolino & Giarratana, 2014). In 2015, Whatsapp, the provider of a very successful
9
10
11
messenger service for smartphones, declared it would pivot its business model and move away from
12
13 trying to monetize by means of micropayments (0.89 USD a year). While during the old industrial
14
15 economy, the essence of having a business model may well have been “finding a customer,” today
16
17
18 getting paid for creating value—even in the absence of market externalities—seems to be less than
19
20 trivial.
21
22 Second, scholars realized that companies such as Nespresso, Ikea, and Southwest Airlines—
23
24
25 just to mention some recurrent iconic and very successful cases—did not simply focus on capturing a
26
27 part of some exogenously given value. They rather reinvented value (Normann & Ramirez, 1993),
28
29
often beyond traditional market boundaries, creating new markets where none existed before (Kim &
30
31
32 Mauborgne, 2005). These phenomena raise questions that are difficult to answer within the
33
34 boundaries of mainstream strategy ideas and theories. How is value reinvented—that is, what do
35
36
37 firms do when they reinvent value? More broadly, how is value created in the first place (Priem,
38
39 2007)?
40
41 In essence, in this second perspective, business models and strategy are different in at least
42
43
44 three fundamental ways. First, in business model research, value creation comes first—the business
45
46 model starts by creating value for the customer or user, or even multiple exchange partners or
47
48 stakeholders (e.g., see Tantalo & Priem, 2014), and “constructs the model around delivering that
49
50
51 value” (Chesbrough & Rosenbloom, 2002, p. 535). Capturing value is typically understood as
52
53 finding out how to earn revenues (monetization), or perhaps profits or what Lepak, Smith and Taylor
54
55
56
(2007) referred to as exchange value. There may be some attention to competition, but emphasis
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upon value captured and economic sustainability is much stronger in the realm of strategy (Demil et
4
5
6 al., 2015).
7
8 A second difference between business models and strategy according to this perspective lies in
9
10
11
the centrality of value created for the customer or even all the firm’s exchange partners (Amit &
12
13 Zott, 2001) versus creation of value for shareholders. Customers and complementors can create value
14
15 themselves—a fact often ignored in supply-side-oriented strategy theories. For one thing, customers
16
17
18 and complementors can create value simply by participating, as in multi-sided networks or platforms
19
20 (Cennamo & Santalo, 2013; Parker & Van Alstyne, 2006). The more members that there are on each
21
22 side, the more valuable that the network becomes to the members on the other side(s). For the other,
23
24
25 customers and complementors can also create value when they, rather than manufacturers or
26
27 platform owners, innovate (Bogers, Afuah & Bastian, 2010; von Hippel, 2005).
28
29
A third difference between business models and strategy in this perspective lies in the state of
30
31
32 knowledge held by the firm, its customers, and third parties. The business model construct
33
34 consciously assumes that this knowledge is cognitively limited and biased. “The initial business
35
36
37 model is more of a proto-strategy, an initial hypothesis for how to deliver value to the customer, than
38
39 it is a fully elaborated and defined plan of action. It results less from carefully calculated choices
40
41 from a diverse menu of well understood alternatives and more from a process of sequential
42
43
44 adaptation to new information and possibilities” (Chesbrough & Rosenbloom, 2002, p. 550).
45
46 Experimentation, rather than positioning or controlling critical resources becomes critical (McGrath,
47
48 2010).
49
50
51
52
53 In this case, proponents of the business model perspective argue that studying business models
54
55
56
may introduce nuances that have escaped traditional strategy analysis. For example, Zott and Amit
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(2007, 2008) have suggested that by virtue of its unit of analysis, which is nested between the firm
4
5
6 and the network, comprising both (Zott et al., 2011), the business model may broaden the traditional
7
8 boundaries of mainstream theories of value creation and capture (Dyer & Singh, 1998; Gulati,
9
10
11
Nohria & Zaheer, 2000; Normann, 2001). The business model emphasizes the importance of
12
13 network plays and mechanisms such as complementarity and lock-in effects in fully explaining
14
15 superior performance. However, these arguments are not usually convincing enough for strategy
16
17
18 purists.
19
20
21
22 We think this is a potentially fruitful line of inquiry that has the potential to enrich traditional
23
24
25 theorizing in strategy, which, we argue, has been characterized by an overemphasis on value capture
26
27 that may have come at the expense of theorizing on value creation. This sentiment is shared by other
28
29
scholars who do not necessarily focus on the business model even if they often refer to it. For
30
31
32 example, Adner and Kapoor (2010), working on business ecosystems, have suggested that strategy
33
34 research “has tended to assume away the question of how value is created in the first place” (p. 309).
35
36
37 Similarly, Nickerson, Silverman, and Zenger (2007) note that, “the vast majority of strategy research
38
39 had focused on value capture and underemphasized the challenges of crafting organizations and
40
41 strategies that continuously create value” (p. 211).
42
43
44 Richard Priem and colleagues (Priem, 2007, Priem & Butler, 2001; Priem, Butler & Li, 2013)
45
46 have published a number of influential papers introducing and, subsequently, elaborating a demand-
47
48 side perspective on strategy and the notion of Consumer Benefit Experienced (CBE) view of
49
50
51 strategy. Whether these sub-streams—for example, research in ecosystems, the demand-side
52
53 perspective in strategy, and the business model—will progressively converge and give birth to a new
54
55
56
line of inquiry in and of itself and whether the latter, the business model, will play a central or a
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peripheral role in helping theorizing on value creation is difficult to predict. At least for the moment,
4
5
6 employing the business model construct may represent a fruitful avenue to better understand value
7
8 creation over and above what is normally studied in the mainstream of strategic management.
9
10
11
12
13 Why the Disagreements about the Relationship Between Business Models and
14
15 Strategy?
16
17 These disagreements about the relationship between business models and strategy raise
18
19 an interesting question: What is behind these inconsistencies? In what follows, we argue that
20
21
22 these disagreements and differences are rooted in the fact that business models may be
23
24 challenging the assumptions of traditional theories of value creation and value capture. These
25
26
27
theories assume away value creation in the demand side, seeing value creation as a supply-side
28
29 phenomenon in which value is created solely by producers (Priem, 2007)—a point of view that
30
31 contrasts with the business model perspective in which value can also be created on the demand
32
33
34 side by customers and other members of their ecosystems. Thus, value creation and capture
35
36 arguments that are rooted in these traditional theories are not always going to be consistent with
37
38 those rooted in the business model perspective. What are these assumptions that assume away
39
40
41 demand-side value creation? How do they underpin the disagreements in the relationship
42
43 between business models and strategy?
44
45
46
47
48 Assumptions Being Challenged by Business Models
49
50
51 The research that theorizes about value creation and capture has been dominated by two
52
53 theoretical perspectives: The positioning view and the resource-based view (RBV). These two
54
55 traditional theories of value creation and capture make four assumptions—often implicitly—that
56
57
58 are being challenged by business models research: (1) Firms and their customers have perfect
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information, (2) firms and their customers have unlimited cognitive abilities and act
4
5
6 independently, (3) there are no externalities, and (4) competitive advantage is single-sourced,
7
8 either position-based only or resource-based only, but not both (Table 4). Let us briefly discuss
9
10
11
each.
12
13 ------------------------------------------------------------
14
15
16
TABLE 4 ABOUT HERE
17
18 ------------------------------------------------------------
19
20 Firms and customers have perfect information. In contrast to the positioning view and
21
22
23 RBV theorizing (e.g., Barney, 1991; Foss & Knudsen, 2003; Peteraf, 1993; Porter, 1980, 1996),
24
25 business model research often recognizes the fact that firms and their customers do not have
26
27 perfect information. This is consistent with the idea that firms and their customers often have
28
29
30 information gaps that they would like to fill, or work around, when making decisions about
31
32 products and their needs (Simon, 1955; 1987). For example, during the dot.com boom, it was not
33
34
always clear what customers wanted, how to deliver it, or which groups of customers, if any,
35
36
37 would pay for the value delivered. Thus, many business models are designed to deal with these
38
39 information gaps and their ramifications (Pauwels & Weiss, 2008). For example, customers often
40
41
42
do not have enough information about products and the trustworthiness of the firms that offer the
43
44 products, and vice versa. Thus, online auction business models may incorporate rating systems in
45
46 which sellers and buyers rate each other to build ratings that can serve as signals of
47
48
49 trustworthiness (Johnson, 2010). Customers are effectively creating value by contributing to
50
51 building the rating systems that reduce information asymmetries, thereby increasing the value
52
53 that customers perceive. Or a smartphone company may decide to use a platform crowdsourcing
54
55
56 business model to develop the apps that customers want (Johnson, 2010). That is, rather than
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develop the apps internally or contract their development to designated developers, the
4
5
6 smartphone company may decide to outsource app development—in the form of an open call—
7
8 to anyone anywhere in the world that wants to self-select and develop the apps with no ex ante
9
10
11
contract (Afuah & Tucci, 2012; Jeppesen & Lakhani, 2010; Poetz & Schreier, 2012; Saebi &
12
13 Foss, 2015; Viscusi & Tucci, 2016). Again, value is being created by someone other than the
14
15 producer.
16
17
18 Firms and their customers have unlimited cognitive abilities. In contrast to the
19
20 positioning view and RBV (Barney, 1991; Foss & Foss, 2005; Peteraf, 1993; Porter, 1985,
21
22 1996), business model research often assumes that firms and their customers are cognitively
23
24
25 limited. When buying a product, a customer with unlimited cognitive ability can, for example,
26
27 determine the net present value of all future benefits that will accrue to the customer from buying
28
29
the product (Priem, 2007). Thus, whether a customer purchases or leases a product should not
30
31
32 matter since the customer is cognitively endowed enough to determine, ex ante, what future
33
34 benefits will be and how to discount them to the present. However, when customers are
35
36
37 cognitively limited, they simply do not have the foresight to, for example, accurately determine
38
39 the net present value of future benefits from buying a product today (Simon, 1955; 1987). That
40
41 means cognitively limited customers may prefer leasing a product rather than purchasing it,
42
43
44 making a lease business model more profitable for the producer than a purchase one. That was
45
46 the case with Xerox when it decided to lease its Xerox 914 copier rather than offer it for
47
48 purchase.
49
50
51 No externalities. The third assumption made by traditional theories (RBV and the
52
53 positioning view) that is being challenged by business model research is that there are no
54
55
56
externalities—that is, these theories assume that interactions between a focal firm and a customer
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do not impose any benefits or costs on a third party. This assumption does not hold with products
4
5
6 or services that exhibit network effects. When a user buys a product that exhibits network
7
8 effects, it is increasing the value that other users perceive in the product—it is creating value on
9
10
11
the demand side. Many business models in the digital era are rooted in products/services or
12
13 technologies that exhibit network effects. For example, in a platform business model, the owner
14
15 of the platform charges the price-sensitive but important side little or nothing while charging the
16
17
18 less price-sensitive side a higher price (Cennamo & Santalo, 2013; Parker & Van Alstyne, 2006).
19
20 The so-called advertising business model used by Google, Facebook, and numerous others
21
22 exploits network effects.
23
24
25 Competitive advantage is single-sourced and supply-side only. The fourth assumption
26
27 that is made in traditional theories of value creation and capture is that competitive advantage is
28
29
rooted in a single source—in resources only, or a system of activities only, but not both. The
30
31
32 positioning view hypothesizes that a firm’s competitive advantage comes from having a system
33
34 of activities that is difficult to imitate, and not from a single core competence or resource (Porter,
35
36
37 1996; Rivkin, 2000; Rivkin & Siggelkow, 2003). RBV, in turn, hypothesizes that competitive
38
39 advantage comes from having valuable, rare, inimitable and non-substitutable resources (Amit
40
41
42 & Schoemaker, 1993; Barney, 1991; Mahoney & Pandian, 1992; Peteraf, 1993; Sirmon, Hitt &
43
44 Ireland, 2007). In business model research, competitive advantage can be from both resources
45
46 and systems of activities, on both the demand side and supply side. The business model
47
48
49 perspective would suggest that Google’s competitive advantage lies not just in its intellectual
50
51 property (including the look-and-feel of its web pages), but also in the system of activities that it
52
53
54
performs to deliver value to its large networks of searchers, advertisers, and app developers
55
56 (Afuah, 2014).
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4
5
6 Overall, the assumptions of traditional theories have restricted value creation to the
7
8 supply side where value is created exclusively by producers. In contrast, business model research
9
10
11
often implicitly relaxes these assumptions so that value is created not only by producers, but also
12
13 by customers and other members of their value-creation ecosystems. Additionally, competitive
14
15 advantage in the business model perspective can rest not only in the demand and supply sides,
16
17
18 but it can also be resource-based and position-based within each of these sides.
19
20 So how does the fact that business models challenge the assumptions of traditional
21
22 theories of value creation and capture explain scholarly disagreement about the relationship
23
24
25 between strategy and business models? On the one hand, because many value creation activities
26
27 in the business model perspective can be derived from traditional strategy theories of value
28
29
creation and capture by relaxing their rather restrictive assumptions, some scholars may see
30
31
32 business models as a natural extension of strategy. After all, Barney (1991) and Peteraf (1993)
33
34 relaxed the homogeneity of resources assumption of perfect competition to weave the logic for
35
36
37 their RBV theory, while Michael Porter’s positioning view—especially the five forces part of
38
39 it—was rooted in relaxing select assumptions of the perfect competition model of economics,
40
41 including the no entry or exit barriers, large number of firms and buyers, firms and buyers being
42
43
44 price takers, and product homogeneity assumptions. Witness also the relaxation of perfect
45
46 competition’s ultra rationality assumption as a foundation for transaction cost economics (TCE)
47
48 (Williamson, 1985, 2002), and the emergence of the information economics field from relaxing
49
50
51 the perfect information assumption of perfect competition (Akerlof, 1970; Spence, 1973; Stigler,
52
53 1961).
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On the other hand, business model scholars who focus their research primarily on value
4
5
6 creation and capture on the demand side, and neglect the research that theorized about value
7
8 creation before the dot.com boom and the popularity of business models, are likely to miss out
9
10
11
on the link between the assumptions of traditional theories of value creation and business
12
13 models. They are likely to miss out on the fact that the business model perspective can be
14
15 obtained by relaxing the assumptions of traditional strategy theories of value creation and
16
17
18 capture. Effectively, business model scholars who neglect earlier value creation and capture
19
20 research are likely to think of business models as a new field, rather than an extension of
21
22 strategy.
23
24
25
26
27 Future Research Directions
28
29
30 In this section, we examine how the core business model idea has helped or could help
31
32 scholars explore meaningful questions in four fields: Strategic management, technology and
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34
35 innovation management, strategic corporate entrepreneurship, and sustainability. In each case,
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37 we examine some of the central research questions about value creation and capture in the field
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39 before the concept of business models was introduced to the field, how the concept has helped
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42 scholars explore these questions in an effort to move the field forward, and future research
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44 directions.
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49 Strategic Management
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51 A central question in strategic management has been: What determines performance
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differences between firms—that is, what makes some firms more profitable than others, and how
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56 sustainable is such an advantage (e.g., Besanko et al., 2009; Miller & Cardinal, 1994; Rumelt &
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Teece, 1994)? Some of the earliest research that explored this question focused on the role of
4
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6 value capture, not value creation, and featured both the positioning view and RBV in explaining
7
8 performance differences (Barney, 1991; Porter, 1980). Following criticism by other scholars
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(e.g., Nickerson et al., 2007; Priem & Buttler, 2001; Teece, Pisano & Shuen, 1997), proponents
12
13 of the positioning view and RBV added more value creation elements to their earlier models
14
15 (Barney, 2001; Peteraf & Barney, 2003; Porter, 1980, 1985, 1996). Importantly, as we saw
16
17
18 earlier, the value creation efforts that led to superior performance in these models were supply
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20 side—that is, the producer with the system of activities or resources was the sole creator of the
21
22 value that enabled it to outperform its rivals.
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25 Effectively, competitive advantage from network effects and other demand-side factors
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27 was assumed away by these theories. That was until the advent of business models that
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29
emphasized value creation on the demand side and multi sources of competitive advantage.
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32 Adopting the business model perspective meant performance differences could be explained not
33
34 only by value creation and capture in the supply side but also value creation and capture in the
35
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37 demand side. It also meant that competitive advantage could have multiple sources—it could be
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39 both resource-based and/or activities-based, in both the demand and supply slides.
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41 Future strategic management research questions could now include: How much more
42
43
44 does the business model perspective explain performance differences than traditional theories of
45
46 value creation and capture? How much more does a firm’s ecosystem matter in explaining why
47
48 some firms perform better than others? For example, it has been argued that firm performance
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51 depends on both firm-specific factors—such as valuable rare resources and difficult-to-imitate
52
53 systems of activities—and industry-specific factors (Besanko et al., 2009; McGahan & Porter,
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1997). Does industry matter even more (or less) in the business model perspective, now that
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value creation is both supply-side and demand-side? Which competitive advantages are more
4
5
6 sustainable: Those that are rooted in the supply side or those in the demand side?
7
8
9
10
11
Technology and Innovation Management
12
13 A central question in technology and innovation management (TIM) has been: Why are
14
15 some firms more successful at technological innovation than others? Some of the earliest
16
17
18 influential research to explore this question focused on how the use of new knowledge—
19
20 especially technological knowledge—to offer customers new products that they want, could
21
22 influence the success of a firm in meeting its goals (see Brown & Eisenhardt, 1995 for a review;
23
24
25 Allen, 1984; Cardinal, 2001; Henderson & Clark, 1990; King & Tucci, 2002; Tushman &
26
27 Anderson, 1990). That research also demonstrated that customers and suppliers, not just
28
29
producers, could also innovate—invent new products or services that producers could not
30
31
32 (Bogers et al., 2010; von Hippel, 2005). In any case, these early research endeavors were silent
33
34 about the role of value capture in the face of technological innovation. That was until Teece’s
35
36
37 (1986) argument that valuable tightly-held complementary assets can be critical to capturing
38
39 value from technological innovation, and therefore to competitive advantage.
40
41 The advent of business model research added a new dimension to capturing value from
42
43
44 technological innovation, beyond the use of complementary assets. Witness Netflix’s use of a
45
46 subscription business model to capture value from its Internet-based video rental services
47
48 (Afuah, 2014). The idea that a simple business model innovation—such as using a subscription
49
50
51 model rather than a pay-and-take-along model—could be the difference between a thriving
52
53 movie rental business and a languishing one is fascinating. As this example illustrates, the
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business model perspective opens up opportunities for exploring interesting questions in
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technology and innovation management. Rather than focusing on the impact of technological
4
5
6 innovation on the producer alone, in consonance with traditional theories of value creation and
7
8 capture, scholars can now explore the impact of technological innovation on the whole value
9
10
11
creation and capture ecosystem. For example, rather than focusing on whether a technological
12
13 innovation is radical, incremental, architectural or competence-destroying to the producer
14
15 (Henderson & Clark, 1990; Tushman & Anderson, 1986), scholars can also explore the impact of
16
17
18 the technological innovation on the ecosystem that includes both the demand-side and supply
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20 side actors (Afuah, 2000; Afuah & Bahram, 1995).
21
22 This approach can enable scholars to more effectively explore basic questions such as:
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24
25 When and why are business model innovations likely to be more profitable than the
26
27 technological innovations that they complement (IBM, 2006)? For example, does the
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29
profitability advantage of a business model innovation over a complementary technological
30
31
32 innovation depend on the type of technological innovation—on whether the technological
33
34 innovation is incremental, architectural, modular, radical, competence-enhancing or competence
35
36
37 destroying (Henderson & Clark, 1990; Tushman & Anderson, 1986)? Relating to the three
38
39 interpretations, are certain cognitive / linguistic schema more likely to allow managers to
40
41 overcome radical technological change? How can formal modeling be used to inform
42
43
44 technological decisions leading to business model reconfiguration?
45
46
47
48 Strategic Corporate Entrepreneurship
49
50
51 Strategic entrepreneurship can be broadly defined as the domain of studies emerging from the
52
53 confluence of strategic management and entrepreneurship research, in which the focus is on creating
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55
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new demand where none exists—in so-called “blue oceans” (Kim & Mauborgne, 2005; Demil et al.,
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2015)—rather than battling for existing demand in the same existing industries (Hitt & Ireland, 2000;
4
5
6 McGrath & McMillan, 2000; Thompson & MacMillan, 2010). This new demand is generated
7
8 through the discovery of new opportunities, the creation of the opportunities, or the exploitation of
9
10
11
existing ones in new ways (e.g., Alvarez & Barney, 2007; Ireland, Hitt, Camp, & Sexton 2001; Shah
12
13 & Tripsas, 2007; Shane & Venkataraman, 2000). Thus, a core research question in the area is: How
14
15 does one create new demand where none exists yet, and attain one’s goals?
16
17
18 Scholars interested in strategic entrepreneurship have pointed to the business model to
19
20 explain how companies create value in the first place (Priem, 2007). Research that draws on
21
22 traditional theories of value creation would suggest that the entrepreneur is the sole creator of this
23
24
25 new demand where none exists. However, as discussed above, the business model perspective
26
27 suggests that new demand can also be created by customers and members of their ecosystems. The
28
29
reasons why scholars have pointed to the business model is that to reinvent value for customers (a
30
31
32 more radical and potentially promising act than incrementally adding to the value already offered to
33
34 customers under existing offerings (cf. Normann and Ramirez, 1998; Hamel, 2001) firms should re-
35
36
37 think their business models and/or create new ones.
38
39 This raises even more interesting questions. Which opportunities are more likely to create
40
41 new demand where none presently exists: Those where only the entrepreneur is the sole creator of
42
43
44 value or those where customers and members of their ecosystems are co-creators? When is an
45
46 entrepreneur or incumbent more likely to exploit opportunities in the demand side compared to those
47
48 in the supply side? How do cognitive schema and narratives of entrepreneurs vs. intrapreneurs help
49
50
51 them craft demand-side business models? When are incumbents more likely to be a problem for
52
53 entrepreneurs: When the opportunities being exploited are in the demand side or supply side? What
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are the dynamics of entrepreneurs’ business model reactions to incumbent countermoves?
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6 Sustainability
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8 A central question in sustainability research has been: How can organizations create value in
9
10
11
environmental, social, AND economic terms? Sustainability does not necessarily refer to sustainable
12
13 competitive advantage or similar concepts from the strategy lexicon. Rather it broadly refers to the
14
15 integration of social and environmental concerns in firms’ strategy, operations, and business models,
16
17
18 and the incorporation of a balance among economic, social, and environmental value creation so as
19
20 to contribute to sustainable development (see Nidumolu, Prahalad & Rangaswami, 2009; World
21
22 Business Council for Sustainable Development, 2012; United Nations Industrial Development
23
24
25 Organization, 2013). At the organizational level, the vision of sustainable development has led to
26
27 concepts such as sustainability management, corporate sustainability (Dyllick & Hockerts, 2002;
28
29
Schaltegger & Burritt, 2005), sustainability innovation and sustainable entrepreneurship (Schaltegger
30
31
32 & Wagner, 2011), social business (Yunus, Moingeon, & Lehmann-Ortega, 2010) and, more recently,
33
34 the notion of shared value (Porter & Kramer, 2011).
35
36
37 In a recent extensive report based on a systematic review of business models for sustainability,
38
39 Lüdeke-Freund, Bocken, Brent, Massa, and Musango (2016) note that business models for
40
41 sustainability differ from traditional ones in at least three fundamental ways. First they assume a
42
43
44 view of business as an engine of societal progress. In other words, the concept of sustainability
45
46 recognizes that societal contributions of companies are not limited to paying taxes, creating
47
48 employment, or devising useful products (all of which fall within the paradigm of neoclassical
49
50
51 economic theory and related lines of inquiry). Business also has the potential, resources, and
52
53 capabilities to develop innovative solutions that turn environmental and social issues (read:
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problems) into market opportunities. Second they include a broader notion of value—from primarily
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economic to also social and environmental. The general idea is that the sustainability paradigm
4
5
6 offers an extended interpretation of value creation resembling a triple bottom line approach
7
8 integrating people, planet, and profit (Elkington, 1998). Third, they undertake and offer a multi-
9
10
11
stakeholder, system-level perspective on value creation—from one predominantly centered on
12
13 customers and shareholders extended to embrace more of the firm’s stakeholders.
14
15 Future research in business models for sustainability may revolve around challenging some of
16
17
18 the assumptions behind the more classical discussions of business models, such as measuring value
19
20 creation for all stakeholders, and distribution of benefits (value capture) from the organization’s
21
22 work, including demand-side value creation / capture and shared value. Other questions may include
23
24
25 How are formal models / components different when modeling business with a sustainability lens?
26
27 What narratives are used to communicate sustainable business models throughout large organizations
28
29
and which components of a business model are reinforced by sustainable business model narratives?
30
31
32 How can formal models be used to model the dynamics of industry transformation toward higher
33
34 levels of sustainability when instigated by new business models in one firm or one sector?
35
36
37
38
39
40
41 SUMMARY AND CONCLUSIONS
42
43
44 In this paper, we have argued that technological and other trends have led to organizations
45
46 experimenting with new ways of achieving their goals. New business models that were unheard
47
48 of, or very rare, decades ago are a great source of wealth and opportunity in today’s economy,
49
50
51 but keeping a consistent understanding among scholars studying this topic has proved
52
53 challenging. The very term “business model” itself along with its often-used descriptors “value
54
55
56
creation” and “value capture” have morphed in meaning over the years, causing confusion in the
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literature. One confusion is based on essentially three major interpretations of the term “business
4
5
6 model:” as an attribute of a real organization, a cognitive / linguistic schema, or a formal
7
8 conceptual representation of an organization’s activities. Another disagreement is based on
9
10
11
whether scholars recognize that “value creation” and “value capture” have also broadened, which
12
13 would recognize the validity or importance of the business model perspective.
14
15 As discussed above, one way of solving the construct validity problem associated with the
16
17
18 three interpretations is to more explicitly acknowledge the existence of these interpretations and
19
20 explain which interpretation is assumed in each study. Assumptions should also be made more
21
22 explicit: Formally representing a business model involves several decisions related to the scale,
23
24
25 content and semantics adopted, and evaluating and comparing different formal representations
26
27 requires that the assumptions and the rationale behind those decisions be explicitly stated. This is
28
29
rarely the case in business model papers. Almost no paper among the ones we reviewed (with
30
31
32 rare exceptions such as Casadesus-Masanell and Ricart, 2010) proposes a clear elucidation of the
33
34 assumptions and rationale behind the simplifications made. Conceptualization of the business
35
36
37 model appears to be similar (the subject matter remains the firm and its ways of doing business
38
39 independently of the choices made in representing it) and yet different, but the sources of
40
41 difference are not formally discussed (and, perhaps, very difficult to recognize). Even readers of
42
43
44 the business model literature that accept the existence of several possible ways of representing
45
46 business models are left without the information necessary to understand the relative merits of
47
48 each formal model and/or to “agree to disagree.”
49
50
51 Continuing on with the broadening of the meaning of value creation and capture, until the
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53 dot.com boom of the mid-1990s, when many scholars were introduced to business models, many
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theoretically interesting questions about value creation and capture were rooted—often
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implicitly—in RBV or the positioning view of strategic management (Barney & Arikan, 2001).
4
5
6 These two dominant theoretical perspectives assumed away demand-side value creation while
7
8 insisting that competitive advantage was single-sourced—that is, competitive advantage was
9
10
11
either resource-based only (Amit & Schoemaker, 1993; Barney, 1991; Mahoney & Pandian,
12
13 1992; Peteraf, 1993) or activities-based only (Porter, 1996; Rivkin, 2000) but not both, and
14
15 largely supply-side driven.
16
17
18 In the real world of business models, the assumptions of these traditional theories often
19
20 do not hold. For example, in the Internet boom, network effects were critical to doing business,
21
22 and delivering value to customers was no guarantee that one would get paid for it. That is, value
23
24
25 creation and capture on the demand side were critical to doing business in the face of the
26
27 Internet, and monetization of value could not be taken for granted. Effectively, in business model
28
29
research, the assumptions of these traditional theories are often relaxed to accommodate the
30
31
32 realities of business that have changed. One result of these differences in assumptions has been
33
34 the different opinions about the relationship between business models and strategy, as we
35
36
37 explored above in the heated debate about the relationship between business models and strategy.
38
39 We conclude this paper with a simple question from that debate. Are business models a
40
41 new field distinct from strategy? We have argued that in the business model perspective,
42
43
44 exploring questions that involve value creation has meant relaxing—often implicitly—some of
45
46 the assumptions of traditional strategic management theories, much the same as different
47
48 theoretical perspectives have been obtained by relaxing the perfect competition model of
49
50
51 neoclassical economics. Thus, to the extent that, in relaxing the assumptions of a theoretical
52
53 perspective, one can create a new field, the business model perspective is a new field because it
54
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can be derived from traditional theoretical perspectives. And to the extent that such relaxation
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only extends the breadth of the strategy field, business models research is an extension of
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6 strategy, not a new field. In any case, there is a lot to gained by pursuing value creation and
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8 capture from both a supply side and demand side, and pursuing competitive as both resource-
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based and activities-based from both a demand and supply side.
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Table 1: Recent exemplar works interpreting business models as attributes of real firms
4
5
6
7 Attribute of a real firm interpretation of business models
8 • Unit of analysis: firm and/or ecosystem/network of a firm
9 • Sample keywords: Description, firm level, firm performance, firm’s logic, how a firm makes money
10 Authors (Year) Definition Function
11 Birkinshaw & Goddard, 2009 "[refers to] how a company makes Making money
12 money" (p. 81)
13 “The framework of a “business model”
14 might provide a structured way for
15 - Maps the purpose of a company;
sustainable business thinking by mapping
16 - maps the opportunities for value
Bocken, Rana & Short, 2015 the purpose, opportunities for value
17 creation across the network;
creation across the network, and value
- maps value creation in companies.
18 capture (how to generate revenue) in
19 companies.” (p.67)
20 “Sustainable business models (SBM)
- Shows the value proposition;
21 incorporate a triple bottom line approach
Bocken, Short, Rana & Evans, - allows for value creation and
22 and consider a wide range of stakeholder
2014 delivery;
23 interests, including environment and
- allows value capture.
24 society.” (p.42)
25 "The business model is a set of committed
26 choices that lays the groundwork for the
27 competitive interactions that will occur
- Lays the groundwork for the
28 between the incumbent and the ad-
competitive interactions that will
29 Casadesus-Masanell & Zhu, sponsored entrant down the line". (p.3)
occur between the incumbent and
30 2010 "The choice of the particular business
the ad-sponsored entrant;
31 model with which to compete
- Reveals the firm strategy.
32 corresponds, in our development, to the
33 choice of a particular profit function".
34 (p.5)
35 - Articulates the value proposition;
36 - identifies a market segment;
37 - specifies the revenue generation
38 mechanism;
39 - defines the structure of the value
40 chain;
Business model defined by function (see
41 Chesbrough, 2010 - estimates the cost structure and
next column)
42 profit potential;
43 - describes the position of the firm
44 within the value network linking
45 suppliers and customers;
46 - formulates the competitive
47 strategy.
48 - Generates and delivers economic
49 value, [as well as] social value;
“…a representation of a firm’s underlying
50 - illustrates the mechanisms whereby
Dahan, Doh, Oetzel & Yaziji, core logic and strategic choices for
51 the firm intends to deliver value to
2010 creating and capturing value within a
52 the target public;
value network”. (p.328)
53 - illustrates how the necessary costs
54 and revenues will be structured.
55 “A business model is an organization’s Generates profit [if] the firm has
56 Gambardella & McGahan, approach to generating revenue at a developed activities and
57 2010 reasonable cost, and incorporates accumulated resources that drive a
58 assumptions about how it will both create wedge between operating costs and
59
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3 and capture value”. (p.263) revenues.
4 “A business model describes the logic of
5 how a business creates and delivers value - Describes the logic;
6 Hienerth, Keinz & Lettl, 2011
to users and converts payments received - Describes how firms make money.
7 into profits”. (p.346)
8 Established corporations [respond to
9 “A business model distinguishes a
new disruptive BMs] by adopting
10 Markides & Oyon, 2010 company/unit according to its strategy,
new BMs along their established
11 culture and processes”. (p.7)
ones.
12 - Articulates the value proposition;
13 - identifies a market segment;
14 - defines the structure of the value
15 chain within the firm required to
16 “The business model is […] the platform
create and distribute the offering;
17 which connects resources, processes and
- estimates the cost structure and
18 the supply of a service which results in
profit potential of producing the
19 the fact that the company is profitable in
offering, given the value proposition
20 the long term. This definition emphasizes
Nielsen & Lund, 2014 and value chain structure chosen;
21 the need to focus on understanding the
- describes the position of the firm
22 connections and the interrelations of the
within the value network linking
23 business and its operations so that the
suppliers and customers, including
24 core of a business model description is the
identification of potential
25 connections that create value.” (p.9)
complementors and competitors;
26 - formulates the competitive strategy
27 by which the innovating firm will
28 gain and hold advantage over rivals.
29 Roome, Louche, 2016 “Business models refer to the way firms the business model links the working
30 do business, creating and capturing value inside the firm to outside elements
31 within a value network (Shafer et al., including the customer side and how
32 2005)” (P. 126) value is then captured and monetized
33 “A business model describes how a
34 Inform regulatory frameworks by
San Román, Momber, Abbad & product or service is provided, including
35 taking firm business models into
Miralles, 2011 perceived value creation of a certain
36 consideration.
product for a final customer”. (p.6364)
37 “… A business model includes all aspects Includes all aspects of a company’s
38 Sinfield, Calder, McConnell & of a company’s approach to developing a approach to developing a profitable
39 Colson, 2012 profitable offering and delivering it to its offering and delivering it to its target
40 target customers.” (p.87) customers.
41 “…The design by which an organization
42 converts a given set of strategic choices -
43 about markets, customers, value
44 propositions - into value, and uses a It allows an organization to create
Smith, Binns & Tushman, 2010
45 particular organizational architecture - of and capture this value.
46 people, competencies, processes, culture
47 and measurement systems - in order to
48 create and capture this value”. (p.450)
49 A fundamental tool for analyzing
50 “The types of assets a company sells and many important strategic decisions,
51 Weill, Malone & Apel, 2010 the rights it grants customers to use those … for analyzing how a company is
52 assets”. (p.17) managed and the resulting firm
53 performance.
54 “A business model [is a] set of activities, - Depicts the content, structure, and
55 as well as the resources and capabilities to governance of transactions designed
Zott & Amit, 2010
56 perform them - either within the firm, or so as to create value;
57 beyond it through cooperation with - fulfills customers’ needs and
58
59
60
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3 partners, suppliers or customers”. (p.217) creates customer surplus while
4 “[It depicts] the content, structure, and generating a profit for the focal firm
5 governance of transactions designed so as and its partners;
6 to create value through the exploitation of - lays the foundations for the focal
7 business opportunities”. (p.219) firm’s value capture;
8 - co-determines the focal firm’s
9 bargaining power.
10 Note: Some sample publications may illustrate more than one interpretation of business models. Where that is the case, we have
11 listed the publication under the most relevant interpretation. For example, we listed Chesbrough and Rosenbloom (2002) under
12 the business model as cognitive/linguistic schema interpretation even though the paper illustrates the two other interpretations.
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
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Table 2: Recent exemplar works interpreting business models as cognitive / linguistic schemas
4
5
6
7 Cognitive/linguistic schema interpretation of business models
8 Unit of analysis: Individual and collective minds and discourse
9 Sample keywords: Heuristic, cognitive, mental model, dominant logic, story, narrative
10 Author (Year) Definition Function
11 - It specifies the logic of how the
“We view the business unit-level business
12 unit in question functions and
model as the business unit managers’
13 creates value;
perceived logic of how the unit in
14 - connects both its market
Aspara, Lamberg, Laukia, question functions and creates value, in
15 environment and the corporation;
Tikkanen, 2013 connection with both its market
16 - specifies how the machine works;
environment, and within the corporation
17 - produces revenue and/or costs to
(i.e., with its other business units).”
18 the corporation or to other business
(p.460)
19 units.
20 Baden-Fuller & Morgan, 2010 “Business Models as models” (p.156) - Provides means to describe and
21 classify businesses;
22 - operate as sites for scientific
23 investigation;
24 - act as recipes for creative
25 managers.
26 Chesbrough & Rosenbloom, “The heuristic logic that connects - Articulate the value proposition;
27 2002 technical potential with the realization of - Identify a market segment;
28 economic value” (p. 529). - Define the structure of the value
29 chain;
30 - Estimate the cost structure and
31 profit potential;
32 - Describe the position of the firm
33 within the value network;
34 - Formulate the competitive strategy.
35 Doganova, Eyquem-Renault, Some authors define the business model The business model works as both a
36 2009 broadly as a description of a company’s calculative and a narrative device. It
37 logic of value creation (Ghaziani and allows entrepreneurs to explore a
38 Ventresca, 2005). It “spells out how market and to bring their innovation
39 company makes money by specifying – a new product, a new venture and
40 where it is positioned in the value chain” the network that supports it – into
41 (Chesbrough and Rosenbloom, 2002, p. existence.
42 533) and “depicts the design of
43 transaction content, structure and
44 governance so as to create value through
45 the exploitation of business opportunities”
46 (Amit and Zott, 2001, pp. 494–495) (p.
47 1560)
48 Objectively [business models] are sets of
49 structured and interdependent operational
50 relationships between a firm and its
“Business models stand as cognitive
51 customers, suppliers, complementors,
structures providing a theory of how
52 partners and other stakeholders, and
to set boundaries to the firm of how
53 Doz & Kosonen, 2010 among its internal units and departments
to create value, and how to organize
54 (functions, staff, operating units, etc.). …
its internal structure and
But, for the firm’s management, business
55 governance.” (p. 371)
models also function as a subjective
56
representation of these mechanisms,
57
delineating how it believes the firm
58
59
60
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3 relates to its environment.” (p. 370)
4 Magretta, 2002 “Stories that explain how enterprises Narratives to help understand who
5 work. A good business model answers the customer is, what the customer
6 Peter Drucker’s age-old questions: Who is values, how money is made, and the
7 the customer? And what does the underlying economic logic for value
8 customer value? It also answers the delivery.
9 fundamental questions every manager
10 must ask: How do we make money in this
11 business? What is the underlying
12 economic logic that explains how we can
13 deliver value to customers at an
14 appropriate cost?” (p. 4)
15 Martins, 2015 “The designed system of activities A reflection of managerial mental
16 through which a firm creates and captures models or schemas concerning
17 value.” (p. 99) interdependent organizational
18 activities.
19 - Aid for top management decision-
20 “A business model summarizes the making;
21 Velu & Stiles, 2013 architecture and logic of a business.” - enables change in both the
22 (p.443) cognitive and economic aspects of a
23 business.
24 Note: Some sample publications may illustrate more than one interpretation of business models. Where that is the case, we have
25 listed the publication under the most relevant interpretation. For example, we listed Chesbrough and Rosenbloom (2002) under
26 the business model as cognitive/linguistic schema interpretation even though the paper illustrates the two other interpretations.
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
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Table 3: Recent exemplar works interpreting business models as formal conceptual
4
5 representations
6
7
8 Formal conceptual representation interpretation of business models
9 Unit of analysis: The conceptual representation itself, which may or may not focus on a firm
10 Sample keywords: Components, elements, architecture, system, business logic
11 Author (Year) Definition Function
12 Abdelkafi & Täuscher, 2016 A reinforcing feedback loop between the Represents the firm's money-earning
13 created value to the customers, the value logic in a transition to sustainability.
14 captured by the firm, and the value to the
15 natural environment.
16 Baden-Fuller & Haefliger, “We define the business model as a - Represents a tool for management
17 2013 system that solves the problem of - It solves the problem of identifying
18 identifying who is (or are) the who is (or are) the customer(s),
19 customer(s), engaging with their needs, engaging with their needs, delivering
20 delivering satisfaction, and monetizing satisfaction, and monetizing the
21 the value. The framework depicts the value;
22 business model system as a model - provides the basis for
23 containing cause and effect relationships, classification;
24 and it provides a basis for classification”. - mediates the link between
25 (p.419) technology and firm performance.
26 The BM is defined by its components:
27
28 “We distinguish the following elements of
- Specifies how a new venture can
29 a generic business model concept:
become profitable;
30 a. Value proposition: what value is
- shows what value is embedded in
31 embedded in the product/ service offered
the product/service offered by the
32 by the firm;
firm;
33 b. Supply chain: how are upstream
- explains how are upstream
34 relationships with suppliers structured and
relationships with suppliers
35 Boons & Lüdeke-Freund, 2013 managed;
structured and managed;
36 c. Customer interface: how are
- describes how are downstream
37 downstream relationships with customers
relationships with customers
38 structured and managed;
structured and managed;
39 d. Financial model: costs and benefits
- provides costs and benefits from a),
40 from a), b) and c) and their distribution
b) and c) and their distribution
41 across business model stakeholders. In
across business model stakeholders.
42 this context, a business model is used as a
43 plan which specifies how a new venture
44 can become profitable.” (p.10)
45 Casadesus-Masanell & Ricart, “Business Model refers to the logic of the - Articulates the value proposition;
46 2010 firm, the way it operates and how it - identifies a market segment;
47 creates value for its stakeholders”. (p.196) - defines the structure of the value
48 “A firm’s business model is a reflection chain;
49 of its realized strategy”. (p.205) - estimates the cost structure and
50 profit potential;
51 - describes the position of the firm
52 within the value network;
53 - formulates the competitive
54 strategy.
55 “The concept refers to the description of - Enables description and
56 the articulation between different business classification;
Demil & Lecocq, 2010
57 model components or ‘building blocks’ to - synthesizes a way of creating value
58 produce a proposition that can generate in a business: it helps to describe
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3 value for consumers and thus for the how an organization functions and
4 organization”. (p.227) generates revenues;
5 - is a tool to address change and
6 focus on innovation, either in the
7 organization, or in the business
8 model itself.
9 - Illustrates the production/delivery
10 system (how to deliver products or
11 “A business model is composed of two
services to the target customers);
12 Itami & Nishino, 2010 elements, a business system and a profit
- reflects the firm’s intention about
13 model.” (p. 364)
how it will make a profit in its given
14 business.
15 “Two core components constitute a
16 business model. The first is the basic ‘unit
17 of business’, which is the building block
18 of any strategy, because it refers to what
19 Offers strategists a fresh way to
customers pay for. The second are process
20 consider their options in uncertain,
McGrath, 2010 or operational advantages, which yield
21 fast-moving and unpredictable
performance benefits when more adroit
22 environments.
deployment of resources leads a firm to
23 enjoy superior efficiency or effectiveness
24 on the key variables that influence its
25 profitability”. (pag.249)
26 Osterwalder, Pigneur & Tucci,
27 2005 “A business model is a conceptual tool Helps identify
28 that contains a set of elements and their - Customer value;
29 relationships and allows expressing the - financial consequences;
30 business logic of a specific firm. It is a - revenue stream;
31 description of the value a company offers - customer segment(s);
32 to one or several segments of customers - value creation;
33 and of the architecture of the firm and its - partners network.
34 network of partners for creating,
35 marketing, and delivering this value and
36 relationship capital, in order to generate
37 profitable and sustainable revenue
38 streams.” (p. 10)
39
40 - Provides a framework for
41 management to allocate resources in
42 order to gain competitive advantage
43 and appropriate rents;
44 - ensures a logical and internally
“Business models have traditionally been
45 consistent approach to the growth of
Provance, Donnelly & viewed as constructions of the internal
46 an entrepreneurial venture;
Carayannis, 2011 values, strategies, and resources of
47 - defines the architecture through
organizations”. (p. 5630)
48 which key variables – or resources
49 and capabilities – will be combined;
50 - demonstrates the economic appeal
51 of an entrepreneurial venture;
52 - guides ongoing operations.
53 “Business models describe the design or Explains the design or architecture
54 Reim, Parida & Ortqvist, 2015 architecture of the value creation, delivery of the company's mechanisms to
55 and capture mechanisms”. (p.65) create, deliver, and capture value.
56 Sainio & Marjakoski, 2009 N/A Describes how the firm works as a
57 system
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60
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3 Schaltegger, Hansen, Ludeke- “A business model for sustainability helps The business model describes the
4 Freunde, 2016 describing, analyzing, managing and design or architecture of the value
5 communicating (i) a company's creation, delivery and capture
6 sustainable value proposition to its mechanisms employed.
7 customers, and all other stakeholders, (ii)
8 how it creates and delivers this value, (iii)
9 and how it captures economic value while
10 maintaining or regenerating natural,
11 social, and economic capital beyond its
12 organizational boundaries “(p. 6)
13 - Outlines the business logic
14 “A business model articulates the logic,
required to earn a profit;
15 the data, and other evidence that support a
- defines the way the enterprise
16 value proposition for the customer, and a
‘goes to market’;
17 viable structure of revenues and costs for
- reflects management’s hypothesis
18 Teece, 2010 the enterprise delivering that value. ... It’s
about what customers want, how
19 about the benefit the enterprise will
they want it and what they will pay,
20 deliver to customers, how it will organize
and how an enterprise can organize
21 to do so, and how it will capture a portion
to best meet customer needs, and get
22 of the value that it delivers”. (p.179)
paid well for doing so.
23 Upward, Jones, 2016 “A description of how a business defines It provides a description of the logic
24 and achieves success over time” (p. 98) for an organization's existence: who
25 does it for, to and with; what does it
26 now and in the future; how, where,
27 and with what does it do it; and how
28 it defines and measures its success
29 Wells, 2016 “A business model can be defined as Description of how a firm interacts
30 having three constituting elements: the with its ecosystem.
31 value network and product/service
32 offering that defines how the business is
33 articulated with other businesses and
34 internally (i.e. how value is created); the
35 value proposition that defines how
36 products and/or services are presented to
37 consumers in exchange for money (i.e.
38 how value is captured); and the context of
39 regulations, incentives, prices,
40 government policy and so on (i.e. how
41 value is situated within the wider
42 socioeconomic framework).” (p. 37)
43 “A business model reflects the operational - Reflects the operational and output
44 and output system of a company, and as system of a company;
Wirtz, Schilke & Ullrich, 2010
45 such captures the way the firm functions - Captures the way the firm
46 and creates value”. (p.274) functions and creates value
47 “We suggest that a business model has
Offers a consistent and integrated
48 Yunus, Moingeon & Lehmann- three components: a value proposition, a
picture of a company and the way it
49 Ortega, 2010 value constellation, a profit equation.”
generates revenues and profits.
50 (p.311)
51 Note: Some sample publications may illustrate more than one interpretation of business models. Where that is the case, we have
52 listed the publication under the most relevant interpretation. For example, we listed Chesbrough and Rosenbloom (2002) under
the business model as cognitive/linguistic schema interpretation even though the paper illustrates the two other interpretations.
53
54
55
56
57
58
59
60
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Table 4: Traditional theories vs. business models
4
5
6
7 Traditional theories Business models
8 (RBV and Positioning view)
9
Behavioral assumptions
10
11
12
Perfect information Assumed Not necessarily assumed
13
14
Unlimited cognitive abilities Assumed Not necessarily assumed
15 No externalities Assumed Not necessarily assumed
16
17 Single source of competitive Assumed Not necessarily assumed
18 advantage
19
20
21 Value creation and capture
22 assumptions
23 Can be demand side and/or
24 Value creation Supply-side only supply side
25
26
27 Value capture Supply-side Can be demand side and/or
28 supply side (monetization)
29 Sources of competitive Resource-based or activities- Can be resource-based and/or
30 advantage based on the supply side only activities-based on the demand
31
and/or supply sides
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
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5 FIGURES
6
7 Figure 1: Growth in Business Model Research (number of articles published per year)
8
9
10
11
12 1200
13
14
15 1000
16
17 800
18
19
20 600 Academic papers
21
All papers
22 400
23
24
25 200
26
27
0
28
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
29 2015
30
31
32
33
34
35
36
37
38
39
40
41
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APPENDIX: METHODOLOGY
4
5
6 This appendix discusses the methods adopted at various stages in preparing this manuscript, i.e.,
7
8 the methods used in identifying and analyzing the relevant papers, in preparing tables, and in
9
10
11
general in making sense of the literature.
12
13
14
15
16
Identification of relevant literature
17
18
19 In conducting this review, we first of all looked to collect the relevant papers and
20
21 created a large database of articles to consider. Using the Scopus1 database as a starting point, we
22
23
24
searched for articles in the social sciences subject areas containing the term “business model” in
25
26 their title, abstract or keywords, focusing on the years 2010 – 2015, thus extending Zott et al.’s
27
28 (2011) review of the literature published between 1975 and 2010. Our first search yielded 2754
29
30
31 results, of which 390 for 2010, 375 for 2011, 440 for 2012, 520 for 2013, 535 for 2014, and 492
32
33 for 2015, plus two articles already online but yet to be published in 2016. Because the business
34
35 model construct is still an emerging one, interesting insights could be found in outlets other than
36
37
38 those traditionally considered by a management readership. Therefore, we decided to read all the
39
40 abstracts to identify potentially interesting outlets to include in our list of “leading” academic and
41
42
43
practitioner journals. On the basis of this initial scan, we decided to restrict our research to the
44
45 following leading academic and practitioner-oriented management journals in the area of
46
47 management. Our list includes: Academy of Management Journal (AMJ), Academy of
48
49
50 Management Review (AMR), Administrative Science Quarterly (ASQ), Journal of Management
51
52 (JOM), Journal of Management Studies (JMS), Management Science (MS), MIS Quarterly,
53
54 Organization Science (OS), Strategic Entrepreneurship Journal (SEJ), Strategic Management
55
56
1
57 Scopus, a bibliographic database a covering nearly 22,000 titles from over 5,000 publishers, of which 20,000 are
58 peer-reviewed journals, has broad coverage of the social sciences.
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Journal (SMJ), Industrial and Corporate Change (ICC), Research Policy, Long Range Planning
4
5
6 (LRP), Technovation, Journal of Business Ethics (JOBE), Journal of Cleaner Production,
7
8 Business and Society, Energy Policy, California Management Review (CMR), Harvard Business
9
10
11
Review (HBR), and MIT Sloan Management Review (MSM). Our query on Scopus with this
12
13 restriction resulted in 131 papers published between January 2010 and December 2015.
14
15 We included the following two criteria for conducting the search. First, to be
16
17
18 included in our review, an article must deal with the business model concept in a nontrivial and
19
20 non-marginal way. Second, an article also must refer to the business model as related to
21
22 organizations (as opposed to, e.g., economic cycles). As a result, we obtained 83 papers to be
23
24
25 added to those already considered by Zott et al. (2011), leading to a final sample of 216 business
26
27 model papers.
28
29
30
31
32
33
34 How the papers were analyzed
35
36
37 To analyze papers, in addition to reading them, we created a database in which we
38
39 organized important information we extracted from them:
40
41 • Complete Reference
42
43
44 • Title
45
46 • Authors 1 to 5 (5 columns)
47
48
49 • Year of publication (from 1995 to 2016)
50
51 • Type of publication, differentiating between academic and practitioner journals
52
53
54
55
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• Type of definition/conceptualizations of the business model (we divided between
5
6 Direct definition, Indirect definition (conceptualizations), definition provided by
7
8 Other and No Definition as further explained in Table M1).
9
10
11 • Definition / conceptualization (we report the original text in these cells)
12
13 • Functions (what a business model does – examples: “is source of disruptive
14
15
16
innovation”, “simplifies cognition”, “connects a technology to the realization of an
17
18 economic output in a market”).
19
20 • Research Question / Research objective
21
22
23 • Method. We differentiate among empirical (1.1 single case study, 1.2 multiple case
24
25 studies, 1.3 regression and large samples, 1.4 simulation, 1.5 other) and conceptual
26
27
(2.1 general conceptual, 2.2 theoretical work / theory development) (see M2)
28
29
30 • Empirical setting
31
32 • Notes (general comments / observations)
33
34
35 • And a number of additional columns (notably, Antecedents, mechanisms and
36
37 outcomes of business model design/innovation).
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
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TABLE M1 – Definition / conceptualization instructions
4
5
6 Definitions/ Direct Indirect Other No Definition -
7 conceptualizations (conceptualization) conceptualization
8
9 Description These are proper There is no direct Scholars employ a The term business
10 definitions of the definition (a business definition offered model is
11 business model that model is). However, a by somebody else. employed in the
12 point to what a conceptualization of paper without
13 business model is the business is still It includes defining it.
14 offered, often definitions that
15 It includes definitions referring to what a only marginally
16 that are the result of business model does modify other’s
17 significant or by pointing to the definitions,
18 elaboration of components it without
definitions provided comprises. elaboration.
19
by others.
20
21
22
Example(s) Dubosson-Torbay, Viscio & Pasternak, e.g. Chesborugh, e.g. see Markides
23
Osterwalder & 1996. “A firm business Ahern, Finn & and Charitou,
24
Pigneur, 2002 “A model comprises five Guerraz, 2006 and 2004.
25
business model is elements. A global Björkdahl, 2009
26
nothing else than the core…” adopt the Thompson &
27
architecture of a firm definitnion by MacMillan, 2010.
28
and its network of Alt & Zimmerman, Chesbrough &
29
partners for creating, 2001. “ […] we will Rosenbloom, McGrath R. 2010
30
marketing…”(p.7). distinguish six generic 2002.
31 elements of the
32 Chesbrough & business model:”
33 Rosenbloom, 2002 (p.5)” Calia, Guerrini &
34 “The business model Moura, 2007 and
35 is “the heuristic logic Mahadevan 2002. “A Andersen,
36 that connects business model Mathews, Rask,
37 technical potential comprises three 2009 adopt the
38 with the realization of components:” definition by
39 economic value” (p. Morris,
40 529). Van Der Vorst, Van Schindehutte &
41 Dongen, Nouguier & Allen, 2005
42 Morris, Schindehutte Hilhorst, 2002 “The
43 & Allen, 2005 “A Business model
44 business model is a provides a framework
45 concise based on six
46 representation of how elements:…”
47 an interrelated set of
48 decision variables in
49 the areas of…”
50 (p.727)
51
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8 TABLE M2 – METHODS adopted in papers
9
10
Method Type Notes
11
12
13
Empirical Empirical papers may also include theory development (not
14 1.1 single case study vice-versa, a conceptual theory development paper does not
15 1.2 multiple case studies include empirical work).
16 1.3 regression and large samples
17 1.4 simulation (computer) when combines with
18 empirical data
19 1.5 other
20
21
22 Conceptual Theoretical work generally refers to work concerned with
23 2.1 general conceptual theory development - includes identifying propositions,
24 2.2 theoretical work developing hypothesis (which are not tested) or offering
25 some type of causal explanation for a phenomena, or
26 computer simulation used for theory development
27
28
29
30
31
32 Identification of the three interpretations of the term “business model”
33
34
35 We combined two complementary approaches and analyzed two types of data gathered
36
37 from the papers we reviewed. First, we focused on definitions / conceptualizations of the
38
39 business model and prepared Table M3 based on 216 articles, 89 of which provided 71 original
40
41
42 definitions.
43
44 ------------------------------------------------------------
45
46
47
TABLE M3 ABOUT HERE
48
49 ------------------------------------------------------------
50
51 Sometimes scholars state clearly how they understand a business model. For example,
52
53
54 definitions exist stating that the business model is a concise representation (Morris et al., 2005)
55
56 or a conceptual tool that allows expressing the business logic of a firm (Osterwalder et al., 2005),
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clearly pointing to the perspective of a business model as a formal representation/model. In other
4
5
6 cases the business model is defined as a heuristic, as in Chesbrough and Rosenbloom 2002
7
8 (pointing to a cognitive schema).
9
10
11
Second, we also focused on analyzing the data relative to the functions of the business
12
13 model. For function, we refer to statements and verbs explaining what a business model does.
14
15 The papers we review are rich in terms of sentences of this type. Thus focusing on functions
16
17
18 complements the analysis of definitions and can support revealing a scholars view of the
19
20 business model. For example, many scholars state that business models can be source of
21
22 disruptive innovation (Hamel, 2000; Linder and Cantrell, 2000; Johnson et al., 2008), can
23
24
25 influence firm performance (Amit and Zott, 2001; Zott and Amit, 2007; 2008), their ability to
26
27 react to new entrants (Markides and Charitou, 2004), or to commercialize their technologies
28
29
(Chesbrough and Rosenbloom 2002; Chesbrough, 2010), just to mention some. These studies
30
31
32 suggest an interpretation of the business model as an attribute of real firms having material
33
34 impact in markets (in few cases, as for example in Weill et al, 2011 or Zott and Amit, 2007, 2008
35
36
37 scholars have also attempted to measure that impact, another argument in support of a view of
38
39 the business model as an attribute of a real organization). In other cases, scholars say that the
40
41 business model “shapes” (decision making/opportunity recognition), “articulates”, “formulates”
42
43
44 (the intended strategy), overall pointing to the view of the business model as a cognitive /
45
46 linguistic schema (in other cases, e.g. as in Chesbrough and Rosembloom, 2002, this is explicit).
47
48 In yet other cases, scholars state that a business model “describes” or “formally represents”
49
50
51 something (typically how a firm operates, or is believed to operate), suggesting a view of the
52
53 business model as a formal representation (in many cases also offering a framework for the
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business model, frequently obtained by pointing to the fundamental components as in
4
5
6 Osterwalder et al., 2005 or in Alt and Zimmerman, 2001).
7
8 These interpretations are not necessarily mutually exclusive. Many nested cases exist in
9
10
11
which an analysis of the function of the business model provides evidence of two or even three
12
13 interpretations simultaneously. For example, Chesbrough, 2010 states that the same technology,
14
15 combined with two different business models, will yield two different commercial results, thus
16
17
18 pointing to the business model as a vehicle for commercializing technologies (a view consistent
19
20 with the business model as an attribute of a real firm having material impact). However, he also
21
22 defines the business model as a “heuristic logic” (and discusses cognitive barriers related to the
23
24
25 business model as a cognitive representation). Clearly a heuristic logic (a cognitive schema or
26
27 mental model) cannot, alone, unlock the economic value potential of a technology and allow
28
29
execution of a market transaction; to do that, a firm needs something more than a cognitive
30
31
32 schema (e.g., activities, processes, delivery channels, etc.).
33
34 By working on functions and definitions of the business model we first identified
35
36
37 differences in the extent to which a business model has been understood as an attribute of a real
38
39 firm (what we originally called a “BUSINESS model”) or more as a model (what we originally
40
41 called a “business MODEL”). Progressive analysis led us to identify a difference in how the
42
43
44 business model as a model has been understood (cognitive / linguistic schema vs. formal
45
46 conceptual representations). The fact that to bring to the surface the different interpretations of
47
48 the business model as a BUSINESS or as a MODEL (whether mental or formal) we needed to
49
50
51 analyze functions and the fact that within the same paper, scholars have proposed functions
52
53 pointing to conceptually distinct interpretations of the term business model (as in Chesbrough,
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2010), suggests that the sources of confusion on the term business model are not immediately
4
5
6 apparent and that in many cases, they have not been recognized.
7
8 We then used these three interpretations to group 40 recent articles plus three “classics”
9
10
11
which are shown in Table 1. Table 1 also provides a summary of the unit of analysis of each of
12
13 the three interpretations as well as some sample keywords, which for the sake of brevity, are in a
14
15 shorter list than what we describe above.
16
17
18
19
20 Tables M3 and M4 on definitions and components
21
22 Tables M3 and M4 also include the fundamental components (e.g., “a business model
23
24
25 comprises the following components…”) proposed by authors in 71 articles. In preparing these
26
27 tables, we did not include studies that merely adopt definitions / conceptualizations provided by
28
29
others or modified them marginally. We excluded studies that: (1) do not include definitions of
30
31
32 the business model and/or (2) for which is it not possible to identify any component or theme
33
34 (e.g., “business models are models”). A list of such studies is available upon request.
35
36
37 ------------------------------------------------------------
38
39 TABLE M4 ABOUT HERE
40
41
------------------------------------------------------------
42
43
44 Column three reports first order components and themes (to adopt the terminology
45
46 employed by Zott et al., 2011; Zott and Amit, 2010). These (first order components or themes)
47
48
49
are components of the business model that were either explicitly mentioned as components by
50
51 the respective authors, or have been inferred by us from the definitions/conceptualizations
52
53 offered.
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6 Components of business models (mentioned briefly in the article)
7
8 Tables M3 and M4 find 180 unique denominations for first order components we
9
10
11
encountered corresponding to the definitions and conceptualizations. These are grouped into 34
12
13 classes, each one including conceptually similar components. To create this table, two of us with
14
15 the support of one research assistant created a database with all the unique components provided,
16
17
18 and we clustered them in categories such as value (e.g., value creation, value stream, value
19
20 architecture), participants (customers, exchange partners), etc. from top to bottom of the Table
21
22 and grouped similar components adopting different terminology into the same category.
23
24
25 Whenever in doubt on the meaning of a specific component we went back to the original studies
26
27 and tried to understand the original meaning for the component. We iterated in this process until
28
29
at the grouping proposed in the tables.
30
31
32
33
34 Research streams in the literature
35
36
37 Different streams progressively emerged as we analyzed research questions asked
38
39 (research objectives when research questions were not applicable) and, more generally, the
40
41 phenomena of interest to the respective researchers. The three researchers involved in this study
42
43
44 individually analyzed the literature by asking the following questions: What research questions
45
46 have been asked? What phenomena have been analyzed relying on the business model? What
47
48 were the respective scholars trying to understand, explain? We identified initial streams (for
49
50
51 example, two of us initially identified a stream named “business models and strategy” which was
52
53 eventually divided into two streams “competition and rivalry” and “strategic entrepreneurship”).
54
55
56
We held several internal discussions and came up with five final categories: E-business and
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business architectures, technology and innovation management, competition and rivalry,
4
5
6 strategic entrepreneurship, and sustainability. Although we do not wish to claim mutual
7
8 exclusivity among these research streams (other categories are, indeed, possible and boundaries
9
10
11
among them are porous), we believe they offer a comprehensive coverage of the different areas
12
13 of concern that have motivated management scholars to employ the business model. We adopted
14
15 them as an (additional) organizing principle to review the principle insights and findings from
16
17
18 the business model literature as a function of the different research questions asked and
19
20 phenomena studied. This coding was not emphasized in the article, but is available from the
21
22 authors upon request.
23
24
25
26
27
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31
32
33
34
35
36
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TABLE M3 – Business model definitions / conceptualizations and first order components
4
5
6 The Table reports business model definitions and conceptualization, organized chronologically in ascending order. Definitions are
7 statements that explain what a business model is. Conceptualizations are statements that indirectly define a business model by
8 explaining what it does (e.g., ‘the business model performs the following functions…’), or by pointing to fundamental components
9 (e.g., “a business model comprises the following components…”). In preparing this table, we did not include studies that merely adopt
10
11
definitions/conceptualizations provided by others or modify them only marginally. However, the relative authors are reported between
12 parentheses below the authors they directly refer to in column one. Finally, we excluded studies: (1) that do not include definitions of
13 the business model, or (2) for which is it not possible to identify any component or theme (e.g., “business models are models”). A list
14 of such studies is available upon request. Column three reports first order components and themes (cf. Zott et al., 2011; Zott and
15 Amit, 2010). These (first order components or themes) are components of the business model that are either explicitly mentioned as
16
components by the respective authors, or have been inferred by us from the definitions/conceptualizations provided. This table
17
18 includes a total of 89 articles developing 71 definitions / conceptualizations of the business model.
19
20
Author(s) Definitions/conceptualizations First order components/themes
21
22
23 A firm business model comprises five elements. A global core
- Global core;
24 (responsible for key missions across the corporation and meant to add
- business units;
25 Viscio & Pasternack, 1996 value to all of the other elements of the model); Business units;
- service;
26 Service; Governance and Linkages (which tie the corporation
- governance and linkages.
27 together and cover issues such as organization, management
28 processes and communications).
29
30 - Product;
31 "An architecture of the product, service and information flows, - service;
32 Timmers, 1998 including a description of the various business actors and their roles; - information flows;
33 A description of the potential benefits for the various business actors; - business actors;
34 (Holger, et al., 2008) A description of the sources of revenues” (p.4). - roles;
35 - potential benefits (business actors);
36 - sources of revenues.
37
38 “A Business Concept is a radical innovation that can lead to new
39 customer value and change the rules of the industry”(p.66). The
40 Hamel, 2000 business concept is directly related to the business model since the - (New) customer value
41 latter is “nothing else that the business concept implemented in
42 practice” (p.66).
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4 Author(s) Definitions/conceptualizations First order components/themes
5
6 Linder and Cantrell, 2000 A business model […] “is the organization’s core logic for creating - Value Creation
7 value” (p. 1).
8
9 The business model is a “unique blend of three streams that are
10 - Value stream;
critical to the business. These includes the value stream for the
11 Mahadevan, 2000 - revenue stream;
business partners and the buyers, the revenue stream and the
12 - logistical stream.
logistical stream” (p.59)
13
14 “A statement of how a firm will make money and sustain its profit
15 Stewart and Zhao, 2000 - Profits
stream over time” (p.290).
16
17 - Mission (goals, vision, value
18 “ […] we will distinguish six generic elements of the business
Proposition);
19 model:” (p.5)
- structure (Actors and governance,
20 - Mission (Goals, Vision, Value Proposition)
Focus);
21 - Structure (Actors and governance, Focus)
- processes (customer orientation,
22 Alt & Zimmerman, 2001 - Processes (customer orientation, coordination mechanism)
coordination mechanism);
23 - Revenues (source of revenues, business logic)
- revenues (source of revenues, business
24 - Legal issues
logic);
25 - Technology (both an enabler and constraint for IT-based business
- legal issues;
26 models)."
- technology.
27
28
29 - Transaction content
Amit & Zott, 2001 The business model depicts “the design of transaction content,
30 - Transaction structure
structure, and governance so as to create value through the
31 - Transaction governance
(Zott and Amit, 2007; 2008) exploitation of business opportunities.” (p. 511).
32 - Value creation
33
34
35 A business model comprises 3 components. A concept, which - Concept (an opportunity);
36 describes an opportunity; Capabilities, which define the resources - capabilities (resources);
37 Applegate, 2001 needed to turn concept into reality; and value, which measures the - value (return to investors and
38 return to investors and other stakeholders. stakeholders).
39
40
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 Academy of Management Annals Page 84 of 107

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4 Author(s) Definitions/conceptualizations First order components/themes
5
6 - Roles and relationships among
7 “A description of the roles and relationships among a firm’s stakeholders (consumers, customers,
8 consumers, customers, allies, and suppliers that identifies the major allies, suppliers);
9 Weill & Vitale, 2001
flows of product, information, and money, and the major benefits for - flows of product;
10 participants” (p. 34 ) - flows of information;
11 - flows of money;
12 - major benefits for participants.
13
14 - Exchange partners;
15 "A business model is nothing else than the architecture of a firm and
- value creation;
16 Dubosson-Torbay, Osterwalder & its network of partners for creating, marketing and delivering value
- value delivery;
17 Pigneur, 2002 and relationship capital to one or several segments of customers in
- relationship capital;
18 order to generate profitable and sustainable revenue streams” (p.7).
- customer segments;
19 - revenue streams.
20 The business model comprises four components:
21 Value proposition or a value cluster for target customer; - Value proposition;
22 A market-space offering – which could be a product, service, - product, service, information (or all
23 Rayport & Jaworsky, 2002
information, or all three; three);
24 A unique, defendable resource system; - resource system;
25 A financial model. - financial model.
26
27 Provide a framework based on six elements:
28 Value proposition (underlying purpose for which the participants in
- Value proposition;
29 the business web are working together to create competitive
- roles of participants;
30 advantage)
- information exchange;
31 Van Der Vorst, Van Dongen, Nouguier Roles of participants that are interacting with each other, exchanging
- processes;
32 & Hilhorst, 2002 information
- functionalities;
33 Processes supported by the e-business initiative)
- applications;
34 Functionalities that support processes
- specific characteristics.
35 Applications that enables functionalities
36 Specific characteristics.
37
38
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4 Author(s) Definitions/conceptualizations First order components/themes
5 - Value proposition;
6 - market segment;
7 The business model is “the heuristic logic that connects technical
Chesbrough & Rosenbloom, 2002 - structure of the value chain;
8 potential with the realization of economic value” (p. 529). An
- cost structure and profit potential;
9 operational definition is offered by describing the functions of the
(Chesborugh, Ahern, Finn & Guerraz, - position of the firm within the value
10 business model." (p. 533-534)
2006; Björkdahl, 2009) network;
11 - competitive strategy.
12
13 Business models are “stories that explain how enterprises work. A
14 good business model answer Peter Drucker’s age-old questions: Who - Customer;
15 Magretta, 2002
is the customer? And what does the customer value? It also answers - value propositions;
16 the fundamental questions every manager must ask: How do we - how money are made;
17 (Ojala & Tyrväinene, 2006)
make money in this business? What is the underlying economic logic - value delivery;
18 that explains how we can deliver value to customers at an appropriate - costs.
19 cost?” (p. 4).
20
21 "A business model includes the following causally related
- Customers;
22 components: 1) customers, 2) competitors, 3) offering, 4) activities
Hedman & Kalling, 2003 - competitors;
23 and organization, 5) resources, and 6) supply of factors and
- offering;
24 production inputs. To this it is added a longitudinal process
(Eriksson, Kalling, Akesson & Fredberg, - activities and organization;
25 component 7), to cover the dynamics of the business model over time
2008) - resources;
26 and the cognitive and cultural constrains that managers have to cope
- supply of factors and production inputs;
27 with. ... We refer to it as the scope of management". (p. 52-53)
- scope of management.
28
29 - "Who";
30 - "what";
"A business model comprises the combined elements of "who",
31 - "when";
"what", "when", "why", "where", "how" and "how much" involved in
32 Mitchell & Coles, 2003 - "why";
providing customers and end users with products and services". (p.
33 - "where";
16)
34 - "how";
35 - "how much";
36 - customers.
37
38
39
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4 Author(s) Definitions/conceptualizations First order components/themes
5
6 "The business model is a representation of how a company buys and
7 sells goods and services and earns money". (p. 9) - Business logic of a company;
8 Osterwalder, 2004
- the way the company makes money;
9 "The business model is an abstract representation of the business - what the company offers;
10 (Abdelkafi, Täuscher, 2016; Gauthier
logic of a company, an abstract comprehension of the way a company - to whom the company offers this;
11 and Gilomen, 2016)
makes money, what it offers, to whom it offers this and how it can - how the company can accomplish this.
12 accomplish this". (p. 14)
13
14
15 "A business model is a framework for making money. It is the set of
16 activities which a firm performs, how it performs them, and when it - Activities (what, how, when);
17 Afuah, 2004 performs them so as to offer its customers benefits they want and to - customer benefits;
18 earn a profit". (p.2) - profit.
19
20
21 - Geographical location;
22 - age;
23 The business model is operationalized by measuring the following - size;
24 components (variables): geographical location, age, size, level of - level of newness of the biotechnologies
25 Bigliardi, Nosella & Verbano, 2005
newness of the biotechnologies used, level of R&D integration and used;
26 level of industrialization/services of the sector. - level of R&D integration;
27 - level of industrialization/services of the
28 sector.
29
30 - Venture strategy;
Morris, Schindehutte & Allen, 2005 “A business model is a concise representation of how an interrelated
31 - architecture;
set of decision variables in the areas of venture strategy, architecture,
32 - business economics;
(Calia, Guerrini & Moura, 2007; and economics are addressed to create sustainable competitive
33 - competitive advantage;
Andersen, Mathews, Rask, 2009) advantage in defined markets” (p. 727).
34 - markets.
35
36 “A business model is a conceptual tool that contains a set of elements
- Customer value;
37 and their relationships and allows expressing the business logic of a
Osterwalder, Pigneur & Tucci, 2005 - financial consequences;
38 specific firm. It is a description of the value a company offers to one
- revenue stream;
39 or several segments of customers and of the architecture of the firm
(Pousttchi et al., 2009) - customer segment(s);
40 and its network of partners for creating, marketing, and delivering
- value creation;
41 this value and relationship capital, in order to generate profitable and
- partners network.
42 sustainable revenue streams.” (p. 10)
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5 Shafer, Smith & Linder, 2005 - Core logic;
6 "A business model is a representation of the underlining core logic
- strategic choices;
7 and strategic choices for creating and capturing value within a value
(Ammar, 2006; Dahan, et al., 2010; - value capture;
8 network ” (p. 202)
Roome and Louche, 2016) - value creation.
9
10 - Customer;
The business model defines "Who is the customer, What value is it
11 Govindarajan & Trimble, 2005 - value proposition;
offered to her, How is that value delivered?"
12 - value delivery.
13 - Product;
14 - service;
15 “The way product/services are sold to customers, cost is generated
Bonaccorsi, Giannangeli & Rossi, 2006 - cost;
16 and income is produced” (p.1086).
- income.
17
18
19 “A pattern of organizing exchanges and allocating various costs and
- Exchanges of goods and services;
20 revenue streams so that the production and exchange of goods and
Brousseau & Penard, 2006 - cost streams;
21 services becomes viable, in the sense of being self-sustainable on the
- revenue streams;
22 basis of the income it generates.” (p. 82)
- production.
23
24 “The functions of a business model are:
25 1. Articulate the value proposition, i.e. the value created for users by
26 the offering.
27 2. Identify a market segment, i.e. the users to whom the offerings is - Value proposition;
28 useful and for what purpose. - market segment;
29 3. Define the structure of the value chain required by the firm to - structure of the value chain;
30 create and distribute the offering, and determine the complementary - complementary assets;
31 assets needed to support the firm’s position in this chain. - revenue generation mechanism;
Chesbrough, (a) 2007
32 4. Specify the revenue generation mechanism for the firm, and - cost structure and potential of
33 estimate the cost structure and potential of producing the offering, producing the offering;
34 given the value proposition and value chain structure. - position of the firm in the value
35 5. Describe the position of the firm within the value network, linking network (suppliers, customers,
36 suppliers and customer, including identification of potential complementors, competitors);
37 complementors and competitors. - competitive strategy.
38 6. Formulate the competitive strategy, by which the innovating firm
39 will gain and hold advantage over rivals.” (Exhibit 1, p.13).
40
41
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 Academy of Management Annals Page 88 of 107

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5
6 “In essence, a business model performs two important functions: it - Value Creation
7 Chesbrough, (b) 2007
creates value, and it captures a portion of that value.” (p.22) - Value Capture (competitive advantage).
8
9
10 “A set of capabilities that is configured to enable value creation - Capabilities;
11 Seelos & Mair, 2007
consistent with either economic or social strategic objectives.” (p. 53) - value creation;
12 - social value creation.
13 "This paper defines the BM as an abstract representation of an
14 organization, be it conceptual, textual, and/or graphical, of all core - Architectural arrangements (value
15 interrelated architectural, co-operational and financial arrangements architecture);
16 Al-Debei, El-Haddadeh & Avison, 2008
designed and developed by an organization presently and in the - co-operational arrangements (value
17 future, as well as all core products and/or services the organization network);
18 (Panagiotopoulos et al., 2012)
offers, or will offer, based on these arrangements that are needed to - financial arrangements (value finance).
19 achieve its strategic goals and objectives." (p. 372)
20
21 "A typical business model consists of three components - value - Value proposition;
22 Konde, 2008
proposition, value-chain structure and revenue generation." (p. 215) - value-chain structure;
23 - revenue generation.
24
25 A business model is "the total architecture of the firm made up of a - The way of doing business;
26 Hurt, 2008 set of components and linkages, reflecting the firm’s choices.” (p. 1) - the set of choices;
27 - the set of consequences derived from
28 those choices.
29
30 "Business model can be seen as the conceptual and architectural
31 implementation of a business strategy and as the foundation for the - Value proposition;
Richardson, 2008
32 implementation of business processes. The business model - value creation and delivery system;
33 framework is organized around the concept of value." (p. 136) - value capture.
34
35
36 “A business model explains how a venture is expected to create a
Fiet & Patel, 2008 - Profit
37 profit”. (p.751)
38
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4 Author(s) Definitions/conceptualizations First order components/themes
5
6 Johnson, Christensen & Kagermann, “A business model consist of four interlocking elements, that, taken
7 2008 together, create and deliver value” (p. 52). These are: Customer - Customer value proposition;
8 Value Proposition, Profit Formula, Key resources and Key processes. - profit formula;
9 (Hwang & Christensen, 2008; Johnson & - key resources;
10 Suskewicz, 2009) - key processes.
11
12 - Activities;
13 "A business model gives a high level view of the activities taking - agents/actors;
14 Andersson, Johannesson & Zdravkovic,
place in and between organizations by identifying agents, resources, - resources;
15 2009
and the exchange of resources between the agents." (p. 144) - exchange of resources between the
16 agents.
17 Define the business model by mean of the following components
18 -Service component: a description of the value proposition (added
19 - Value proposition;
value of a service offering) and the market segment at which the
20 - market segment at which the offering is
offering is aimed;
21 aimed;
-Technological component: a description of the technical
22 - technology (technical functionality);
functionality required to realize the service offering;
23 - (structure of the multi-actor) value
-Organizational component: a description of the structure of the
24 De Reuver & Haaker, 2009 network;
multi-actor value network required to create and distribute the service
25 - focal firm’s position within the value
offering and to describe the focal firm’s position within the value
26 network;
network;
27 - (value network) revenues;
-Financial component: a description of the way a value network
- (value network) risks;
28 intends to generate revenues from a particular service offering and of
- (value network) investments;
29 the way risks, investments and revenues are divided among the
- (value network) revenues.
30 various actors in a value network.
31
32 Use a two dimensional conceptualization of the business model.
Froud, Johal, Leaver, Phillips & - Cost recovery;
33 Dimensions are cost recovery (i.e. the need to recover costs incurred)
Williams, 2009 - stakeholder.
34 and stakeholder expectations (the need to secure credibility in the
35 eyes of stakeholders meeting stakeholder expectation and demands).
36
37
38
39
40
41
42
43
44
45
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5
6 "We define business model portfolio as the range of different ways a - Value delivery;
7 firm delivers value to its customers to ensure both its medium term - strategy;
8 viability and future development." (p. 431) - time-to-market;
9 Sabatier, Mangematin & Rousselle, 2010
- revenue stream;
10 "Business Model Portfolio describes the firm's strategy to balance - risk;
11 time-to-market, revenue stream, risk and interdependencies". - interdependencies.
12
13
14 “The concept of business model provides a fundamental tool for
15 - Strategic decisions;
analyzing many important strategic decisions, […] for analyzing how
16 Weill, Malone & Apel, 2010 - how a company is managed;
a company is managed and the resulting stock market total return”.
17 - stock market total return.
(p. 19)
18
19 - Sourcing (resources);
20 “A business model reflects the operational and output system of a - Value generation;
21 Wirtz, Schilke & Ullrich, 2010 company, and as such captures the way the firm functions and creates - Value offering (product and services);
22 value”. (p. 274) - Distribution;
23 - Revenues.
24
25
26 - Activity system content: the selection
27 of activities;
28 - activity system structure: how the
29 activities are linked;
30 “A business model [is a] set of activities, as well as the resources and - activity system governance: who
31 Zott & Amit, 2010 capabilities to perform them - either within the firm, or beyond it performs the activities;
32 through cooperation with partners, suppliers or customers”. (p. 217) - exchange partners (partners, suppliers,
33 customers)
34 - resources and capabilities (to perform
35 the activities);
36 - value creation.
37
38
39
40
41
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45
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5
6 “A business model articulates the value proposition (i.e., the value
7 created for users by an offering based on technology), identifies a
8 market segment and specify the revenue generation mechanism (i.e.,
9 - Key activities;
users to whom technology is useful and for what purpose), defines
10 - partner network;
the structure of the value chain required to create and distribute the
11 - key resources;
offering and complementary assets needed to support position in the
12 - cost structure;
Chesbrough, 2010 chain, details the revenue mechanism(s) by which the firm will be
13 - value proposition;
paid for the offering, estimates the cost structure and profit potential
14 - client relationships;
(given value proposition and value chain structure), describes the
15 - client segments;
position of the firm within the value network linking suppliers and
16 - distribution channels;
customers (incl. identifying potential complementors and
17 - revenue flows.
competitors), and formulates the competitive strategy by which the
18 innovating firm will gain and hold advantage over rivals”. (p. 355)
19
20
21 "A business model is an organization's approach to generating - Revenue generation;
22 Gambardella & McGahan, 2010 revenue at a reasonable cost, and incorporates assumptions about - cost;
23 how it will both create and capture value." (p. 263) - value creation;
24 - value capture.
25
26 “A business model articulates the logic, the data, and other evidence
27 that support a value proposition for the customer, and a viable
28 structure of revenues and costs for the enterprise delivering that - Value proposition (logic, data, other
29 value. [...] It’s about the benefit the enterprise will deliver to evidence that support it);
Teece, 2010
30 customers, how it will organize to do so, and how it will capture a - revenue and cost structure (value
31 portion of the value that it delivers”. (p.179) "It reflects capture).
32 management's hypothesis about what customers want, how they want
33 it, and how an enterprise can best meet those needs and get paid for
34 doing so".
35 - Logic of the firm;
36 - the concrete choices made by
“Business Model refers to the logic of the firm, the way it operates
37 management about how the organization
Casadesus-Masanell & Ricart, 2010 and how it creates value for its stakeholders”. (p. 196) “A firm’s
38 must operate;
business model is a reflection of its realized strategy”. (p. 205)
39 - the consequences of these choices;
40 - value creation for the customers.
41
42
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45
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6 “A business model is composed of two elements, a business system
Itami & Nishino, 2010 - Business system;
7 and a profit model.” (p.364)
- profit model.
8
9 “A business model distinguishes a company/unit according to its - Strategy;
10 Markides & Oyon, 2010
strategy, culture and processes”. (p. 7) - culture;
11 - processes.
12
13 “Generally speaking, the concept refers to the description of the
14 articulation between different BM components or "building blocks" - Resources and competences;
15 Demil & Lecocq, 2010 (resources and competences, organization, value propositions) to - organizational structure;
16 produce a proposition that can generate value for consumers and thus - value propositions.
17 for the organization". (p. 227)
18
19
20 "Business models can be defined both objectively and subjectively.
21 Objectively they are sets of structures and interdependent operational
22 relationships between a firm and its customers, suppliers,
23 complementors, partners and other stakeholders, and among its - Set of interdependent operational
24 internal units and departments (functions, staff, operating units, etc). relationships;
25 These "actual" relationships are articulated in procedures or contracts - customers;
26 Doz & Kosonen, 2010 and embedded in (often) tacit action routines. But, for the firm's - stakeholders (suppliers,
27 management, business models also function as a subjective complementors, partners, internal
28 representation of these mechanisms, delineating how it believes the departments);
29 firm relates to its environment. So business models stand as a - departments;
30 cognitive structures providing a theory of how to set boundaries to - subjective representation.
31 the firm, of how to create value, and how to organise its internal
32 structure and governance". (p. 370-371)
33
34
35 “Two core components constitute a business model. The first is the
36 basic ‘unit of business’, which is the building block of any strategy,
37 because it refers to what customers pay for. The second are process - Business units;
McGrath, 2010
38 or operational advantages, which yield performance benefits when - process or operational advantages.
39 more adroit deployment of resources leads a firm to enjoy superior
40 efficiency or effectiveness on the key variables that influence its
41 profitability”. (pag.249)
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4 Author(s) Definitions/conceptualizations First order components/themes
5 - Markets;
6 - customers;
7 - value propositions;
8 "By business model, we mean the design by which an organization
- people;
9 converts a given set of strategic choices - about markets, customers,
- competencies;
10 value propositions - into value, and uses a particular organizational
Smith, Binns & Tushman, 2010 - processes;
11 architecture - of people, competencies, processes, culture and
- culture;
12 measurement systems - in order to create and capture this value." (p.
- measurement systems;
13 450)
- value creation;
14 - value capture.
15
16
17 - Value proposition;
Yunus, Moingeon & Lehmann-Ortega, “We suggest that a business model has three components: a value
18 - value constellation;
2010 proposition, a value constellation, a profit equation.” (p. 311)
19 - profit equation.
20
21 - Customer value proposition;
22 “A business model describes the logic of how a business creates and
- profit formula;
23 Hienerth, Keinz & Lettl, 2011 delivers value to users and converts payments received into profits”.
- key resources;
24 (p. 346)
- key processes.
25
26
27
28 - Firm's organizing logic (structures,
"A business model is a well-specified system of interdependent
29 Sorescu, Frambach, Singh, Rangaswamy activities, processes);
structures, activities, and processes that serves as a firm’s organizing
30 & Bridges, 2011 - value creation for the customers;
logic for value creation (for its customers) and value appropriation
31 - value appropriation (for the company
(for itself and its partners)." (p. S4)
and its partners).
32
33 - Internal values;
34 “Business models have traditionally been viewed as constructions of
- strategies;
Provance, Donnelly & Carayannis, 2011 the internal values, strategies, and resources of organizations”. (p.
35 - resources
5630)
36 of an organization.
37
38 - Technology;
"Business models can be understood as a framing device for
39 Mason & Spring, 2011 - market offering;
influencing and shaping collective and individual action". (p. 1038)
40 - network architecture.
41
42
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45
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4 Author(s) Definitions/conceptualizations First order components/themes
5
6 “A business model describes how a product or service is provided,
7 San Román, Momber, Abbad & Miralles, - Product or service;
including perceived value creation of a certain product for a final
8 2011 - Value creation for a final customer.
customer”. (p. 6364)
9
10 Describe more than 40 components, such
11 as:
12 “[…] A business model includes all aspects of a company’s approach
Sinfield, Calder, McConnell & Colson, - target customer;
13 to developing a profitable offering and delivering it to its target
2012 - type of offering;
14 customers”. (p.87)
- pricing approach.
15
16
17 “We define the business model as a system that solves the problem of
18 identifying who is (or are) the customer(s), engaging with their
19 needs, delivering satisfaction, and monetizing the value. The
20 - Customer identification;
framework depicts the business model system as a model containing
21 - customer engagement (value
cause and effect relationships, and it provides a basis for
22 Baden-Fuller & Haefliger, 2013 proposition);
classification. We formulate the business model relationship with
23 - value delivery and linkages;
technology in a two-way manner. First, business models mediate the
24 - monetization (value capture).
link between technology and firm performance. Secondly, developing
25 the right technology is a matter of a business model decision
26 regarding openness and user engagement”. (p.419)
27
28 - Business units;
“We view the business unit-level business model as the business unit
29 - value creation;
Aspara, Lamberg, Laukia, Tikkanen, managers’ perceived logic of how the unit in question functions and
30 - market environment;
2013 creates value, in connection with both its market environment, and
31 - revenue and/or costs production.
within the corporation (i.e., with its other business units).” (p. 460)
32
33
34 "The business model in this agenda is not a complete description of - Customers;
35 what the firm does, but rather it should be stripped down - customer engagement (value
36 characterization, that captures the essence of the cause-effect proposition);
37 Baden-Fuller & Mangematin, 2013 relationships between customers, the organisation and money. Hence, - monetization;
38 a business model is a special example of a configuration (as defined - value chain and linkages (sometimes
39 by Fiss, 2011)." (p. 2) called architecture or governance
40 systems).
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4 Author(s) Definitions/conceptualizations First order components/themes
5
6 “Our definition of a business model - the value proposition, - Value proposition;
7 organization of supply chain and customer interface, and financial - supply chain;
8 Boons & Lüdeke-Freund, 2013
model.” (p. 16) "[…] a business model is used as a plan which - customer interface;
9 specifies how a new venture can become profitable." (p. 10) - financial model.
10
11
12 - Resources;
13 - processes;
14 “The business model is the platform which connects resources,
- supply of a service;
15 Nielsen & Lund, 2014 processes and the supply of a service which results in the fact that the
- connections and interrelations of the
16 company is profitable in the long term.” (p.9)
business;
17 - value creation.
18
19 "Business model in a broad sense is as a ‘scale model’ that describes
20 a business as such as well as the general way in which firms create
21 and capture value". (p. 285)
22 - Value proposition;
23 Bohnsack, Pinkse & Kolk, 2014 - value network;
“…[We] structured it by distinguishing between three main
24 - revenue & cost model.
components – i.e. value proposition, value network, and revenue/cost
25 model derived from existing frameworks". (p. 288).
26
27
28 “Sustainable business models (SBM) incorporate a triple bottom line - Stakeholder interests (including
29 Bocken, Short, Rana & Evans, 2014 approach and consider a wide range of stakeholder interests, environment and society);
30 including environment and society.” (p. 42) - Triple Bottom line.
31
32
- Value creation;
33 “Business models describe the design or architecture of the value
Reim, Parida & Ortqvist, 2015 - value delivery;
34 creation, delivery and capture mechanisms”. (p. 65)
- value-capture mechanisms.
35
36
37
38
39
40
41
42
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45
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5
6 “[…] a “business model” might provide a structured way for
7 - Purpose;
sustainable business thinking by mapping the purpose, opportunities
8 - opportunities (for value creation);
for value creation across the network, and value capture (how to
9 - network;
generate revenue) in companies.” (p. 67). This requires that
10 Bocken, Rana & Short, 2015 - stakeholders;
“a wider [than done for traditional business models] range of
11 - Environment;
stakeholders, including environment and society, and value creation,
12 - Society;
needs to be considered.” (p.78)
13 - value capture.
14
15
16 "In broad terms, a business model can be defined as having three
17 constituting elements: the value network and product/service offering
18 that defines how the business is articulated with other businesses and
19 - The value network and product/service;
internally (i.e. how value is created); the value proposition that
20 Wells, 2015 - the value proposition;
defines how products and/or services are presented to consumers in
21 - socioeconomic framework.
exchange for money (i.e. how value is captured); and the context of
22 regulations, incentives, prices, government policy and so on (i.e. how
23 value is situated within the wider socioeconomic framework)". (p.
24 37)
25
26 "A business model for sustainability helps describing, analyzing,
27 managing and communicating (i) a company's sustainable value - Sustainable value proposition;
Schaltegger, Hansen, Ludeke-Freunde,
28 proposition to its customers, and all other stakeholders, (ii) how it - how value is created and delivered;
2016
29 creates and delivers this value, (iii) and how it captures economic - how economic value is captured.
30 value while maintaining or regenerating natural, social, and economic
31 capital beyond its organizational boundaries". (p.6)
32 "A description of how a business defines and achieves success over - Definition of success;
Upward, Jones, 2016
33 time". (p. 98) - how success is achieved over time.
34
35
36
37
38
39
40
41
42
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5 TABLE M4: FIRST ORDER COMPONENTS
6
7 (All references from M3 that point to that component or equivalent)
8
9
10
11
12
13
1 Value creation
14
15
16 • Value creation (Osterwalder, Pigneur & Tucci, 2005; Shafer, Smith & Linder, 2005; Seelos &
17 Mair, 2007; Richardson, 2008; Gambardella & McGahan, 2010; Sabatier, Mangematin &
18 Rousselle, 2010; Smith, Binns & Tushman, 2010; Zott & Amit, 2010; Aspara, Lamberg,
19 Laukia, Tikkanen, 2013; Klang, Wallnofer & Hacklin, 2014; Nielsen & Lund, 2014; Reim,
20 Parida & Ortqvist, 2015; Abdelkafi, Täuscher, 2016; Schaltegger, Hansen, Ludeke-Freunde,
21 2016; Linder and Cantrell, 2000)
22 • Value generation (Wirtz, Schilke & Ullrich, 2010).
23 • Opportunities (Bocken, Rana & Short, 2015).
24
25
26 2 Value creation (stakeholders)
27 • Business actors (Timmers, 1998).
28 • Return to investors and stakeholders (Applegate, 2001).
29 • Benefits for participants (Weill & Vitale, 2001).
30 • The concrete choices made by management about how the organization must operate to create
31 value (Casadesus-Masanell & Ricart, 2010).
32
33
3 Value creation (customer(s))
34
35
36 • Benefits for participants (Weill & Vitale, 2001).
37 • Customer value (Osterwalder, Pigneur & Tucci, 2005).
38 • Value creation for the final customer (San Román, Momber, Abbad & Miralles, 2011;
39 Sorescu, Frambach, Singh, Rangaswamy & Bridges, 2011).
40 • Value proposition (Alt & Zimmerman, 2001; Chesbrough & Rosenbloom, 2002; Rayport &
41
42
43
16
44
45
46
47
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4
5 Jaworsky, 2002; Van Der Vorst, Van Dongen, Nouguier & Hilhorst, 2002; Yip, 2004;
6 Govindarajan & Trimble, 2005; Hwang & Christensen, 2008; Johnson, Christensen &
7 Kagermann, 2008; Konde, 2008; Richardson, 2008; Chesbrough, 2010; Demil & Lecocq,
8 2010; Boons & Lüdeke-Freund, 2013; Bohnsack, Pinkse & Kolk, 2014; Wells, 2015;
9 Abdelkafi, Täuscher, 2016; Schaltegger, Hansen, Ludeke-Freunde, 2016).
10 • Concept defining an opportunity (Applegate, 2001).
11
• What the customer values (Magretta, 2002).
12
• Customer benefits (Afuah, 2004).
13
14 • Service component (De Reuver & Haaker, 2009).
15 • Logic, data, other evidence that support it (Teece, 2010).
16 • Value offering (Wirtz, Schilke & Ullrich, 2010; De Langea, 2011).
17 • Customers, product/service (Yunus, Moingeon & Lehmann-Ortega, 2010).
18 • Market offering (Mason & Spring, 2011).
19 • (New) customer value (Hamel, 2000).
20
21 4 Value delivery
22
23 • Value delivery (Dubosson-Torbay, Osterwalder & Pigneur, 2002; Govindarajan & Trimble,
24 2005; Richardson, 2008; Sabatier, Mangematin & Rousselle, 2010; Baden-Fuller & Haefliger,
25 2013; Klang, Wallnofer & Hacklin, 2014; Reim, Parida & Ortqvist, 2015; Schaltegger,
26 Hansen, Ludeke-Freunde, 2016).
27
28 5 Value stream
29
30
• Value stream (Mahadevan, 2000).
31
32
33
34 6 Value architecture
35
36 • Architectural arrangements (Al-Debei, El-Haddadeh & Avison, 2008)
37 • Architecture (Morris et al., 2005)
38 • Value constellation: internal value chain, external value chain (Yunus, Moingeon & Lehmann-
39 Ortega, 2010).
40 • Value network (Bohnsack, Pinkse & Kolk, 2014; Wells, 2015).
41
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43
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5 • Value chain structure (Konde, 2008).
6 • Logistical stream (Mahadevan, 2000).
7
8
7 Value capture
9
10
• Return to investors (Applegate, 2001).
11
12 • Benefits for participants (Weill & Vitale, 2001; Richardson, 2008; Gambardella & McGahan,
13 2010; Sabatier, Mangematin & Rousselle, 2010; Klang, Wallnofer & Hacklin, 2014; Bocken,
14 Rana & Short, 2015; Reim, Parida & Ortqvist, 2015; Abdelkafi, Täuscher, 2016; Schaltegger,
15 Hansen, Ludeke-Freunde, 2016).
16 • Value capture (Shafer, Smith & Linder, 2005).
17 • Value appropriation (Sorescu, Frambach, Singh, Rangaswamy & Bridges, 2011).
18 • Monetization, often labeled value capture (Baden-Fuller & Haefliger, 2013).
19 •
20 8 Offering (Service / product / information goods)
21
22 • Offering (Hedman & Kalling, 2003).
23 • What, when, why (Mitchell & Coles, 2003).
24 • What the company offers (Osterwalder, 2004).
25
• Nature of outputs (Yip, 2004).
26
Service
27
• Service (Viscio & Pasternack, 1996; Chesborugh, 2007b; San Román, Momber, Abbad &
28
29
Miralles, 2011; Nielsen & Lund, 2014; Wells, 2015; Bonaccorsi et al., 2006).
30 Product
31 • Product (Timmers, 1998; Weill & Vitale, 2001; Chesborugh, 2007b; San Román, Momber,
32 Abbad & Miralles, 2011; Wells, 2015; Bonaccorsi et al., 2006).
33 Information goods
34 • Information goods (Rayport & Jaworsky, 2002).
35
36 9 Delivery channels
37
38 • Distribution channels (Chesbrough, 2010).
39 • Distribution domain (Wirtz, Schilke & Ullrich, 2010).
40
41
42
43
18
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5 10 Customers/market segment
6 • Customer (Magretta, 2002; Hedman & Kalling, 2003; Govindarajan & Trimble, 2005; Doz &
7 Kosonen, 2010; Sabatier, Mangematin & Rousselle, 2010; Smith, Binns & Tushman, 2010;
8 Baden-Fuller & Haefliger, 2013; Wells, 2015).
9 • Market segment (Chesbrough & Rosenbloom, 2002).
10
• Customer segments (Dubosson-Torbay, Osterwalder & Pigneur, 2002).
11
12
• Target customer (Rayport & Jaworsky, 2002).
13 • Who (Mitchell & Coles, 2003).
14 • To whom the company offers this (Osterwalder, 2004).
15 • Nature of customers (Yip, 2004).
16 • Service component (De Reuver & Haaker, 2009).
17 • Client segments (Chesbrough, 2010).
18 • Markets (Morris et al., 2005).
19
20 11 Exchange partners/stakeholders
21
22 • Business actors (Timmers, 1998).
23 • Exchange partners (Dubosson-Torbay, Osterwalder & Pigneur, 2002).
24
• Actors (Mahadevan, 2000; Alt & Zimmerman, 2001; Panagiotopoulos, Al-Debei, Fitzgerald &
25
Elliman, 2012).
26
• Roles of participants (Van Der Vorst, Van Dongen, Nouguier & Hilhorst, 2002).
27
28 • Partners network (Osterwalder, Pigneur & Tucci, 2005; Chesbrough, 2010).
29 • Stakeholders (Weill & Vitale, 2001; Zott & Amit, 2007; Doz & Kosonen, 2010).
30 • Agents or actors (Andersson, Johannesson & Zdravkovic, 2009).
31 • Multiactor value network (De Reuver & Haaker, 2009).
32 • Network architecture (Mason & Spring, 2011).
33 • Network (Bocken, Rana & Short, 2015).
34
35 12 Resources/capabilities
36
37 Resources
38 • Resources (Applegate, 2001; Chesborugh, 2007b; Hwang & Christensen, 2008; Johnson,
39 Christensen & Kagermann, 2008; Andersson, Johannesson & Zdravkovic, 2009; Chesbrough,
40 2010; Demil & Lecocq, 2010; De Langea, 2011; Provance, Donnelly & Carayannis, 2011;
41
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43
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5 Nielsen & Lund, 2014).
6 • Resource system (Rayport & Jaworsky, 2002).
7 • Supply of factors and production inputs (Hedman & Kalling, 2003).
8
• Inputs (Yip, 2004).
9
• Sourcing domain (Wirtz, Schilke & Ullrich, 2010).
10
11 • Resources to perform the activities (Zott & Amit, 2010).
12 Capabilities
13 • Capabilities (Applegate, 2001; Seelos & Mair, 2007; Dahan, Doh, Oetzel & Yaziji, 2010).
14 • How the company can accomplish this (Osterwalder, 2004).
15 • How to transform inputs (Yip, 2004).
16 • Competences (Demil & Lecocq, 2010).
17 • Capabilities and competences (Sabatier, Mangematin & Rousselle, 2010).
18 • Capabilities to perform the activities (Zott & Amit, 2010).
19
20 13 Technology
21
22 • Technology (Alt & Zimmerman, 2001; Björkdahl, 2009).
23 • Functionalities and applications (Van Der Vorst, Van Dongen, Nouguier & Hilhorst, 2002).
24
• Level of newness of the biotechnology used (Bigliardi, Nosella & Verbano, 2005).
25
• Technological component (De Reuver & Haaker, 2009).
26
27 • The technologies that make up the product/service offering, its delivery and management
28 (Mason & Spring, 2011).
29
30 14 Revenue stream
31
32 • Sources of revenues (Mahadevan, 2000; Alt & Zimmerman, 2001).
33 • Flows of money (Weill & Vitale, 2001).
34 • Revenue streams (Dubosson-Torbay, Osterwalder & Pigneur, 2002; Osterwalder, Pigneur &
35 Tucci, 2005; Brousseau & Penard, 2006; ).
36 • How money are made (Magretta, 2002).
37 • The way the company makes money (Osterwalder, 2004).
38 • Revenue logic (Ojala & Tyrväinene, 2006).
39 • Financial arrangements (Al-Debei, El-Haddadeh & Avison, 2008).
40 • Revenue generation (Konde, 2008).
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5 • Revenue model (Bohnsack, Pinkse & Kolk, 2014).
6 • Revenue flows (Chesbrough, 2010).
7 • Revenue structure (Teece, 2010).
8
• Revenue domain (Wirtz, Schilke & Ullrich, 2010).
9
10 • Revenue production (Aspara, Lamberg, Laukia, Tikkanen, 2013).
11 • How products and/or services are presented to consumers in exchange for money (Wells,
12 2015).
13 • Revenues (De Reuver & Haaker, 2009).
14 • Income (Bonaccorsi et al., 2006)
15
16 15 Cost structure
17
18 Cost structure
19 • Cost structure (Chesbrough & Rosenbloom, 2002; Chesbrough, 2010; Teece, 2010).
20 • Underlying economic logic for value delivery (Magretta, 2002).
21 • Cost stream (Brousseau & Penard, 2006).
22 • Financial arrangements (Al-Debei, El-Haddadeh & Avison, 2008).
23 • Cost(s) (Gambardella & McGahan, 2010; Aspara, Lamberg, Laukia, Tikkanen, 2013;
24
Boncaccorsi et al., 2005).
25
• Cost model (Bohnsack, Pinkse & Kolk, 2014).
26
Investments
27
28 • Investments (De Reuver & Haaker, 2009).
29
30 16 Financial model/profits
31
32 Financial model
33 • Financial model (Rayport & Jaworsky, 2002; Boons & Lüdeke-Freund, 2013).
34 • Business Economics (Morris et al., 2005)
35 Profits
36 • Profit potential (Chesbrough & Rosenbloom, 2002).
37 • Profit (Afuah, 2004).
38 • Financial consequences (Osterwalder, Pigneur & Tucci, 2005).
39 • Profit formula (Hwang & Christensen, 2008; Johnson, Christensen & Kagermann, 2008).
40 • Financial arrangements (Al-Debei, El-Haddadeh & Avison, 2008).
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5 • Expected returns (Sabatier, Mangematin & Rousselle, 2010).
6 • Stock market total return (Weill, Malone & Apel, 2010).
7 • Profit equation: sales revenues, cost structure, capital employed (Yunus, Moingeon &
8
Lehmann-Ortega, 2010).
9
Cost recovery
10
• Cost recovery (Froud, Johal, Leaver, Phillips & Williams, 2009).
11
12
13 17 Exchanges (Exchanges / relationships / transactions/information flows)
14
15 Exchanges
16 • Exchange of goods and services (Brousseau & Penard, 2006).
17 • Connections and interrelations of the business (Nielsen & Lund, 2014).
18 • Co-operational arrangements, value network (Al-Debei, El-Haddadeh & Avison, 2008).
19 • Exchange of resources between the agents (Andersson, Johannesson & Zdravkovic, 2009).
20 • Interdependencies with other organisations (Sabatier, Mangematin & Rousselle, 2010).
21 Relationship(s)
22 • Relationship capital (Dubosson-Torbay, Osterwalder & Pigneur, 2002).
23 • Client relationships (Chesbrough, 2010).
24 • Set of interdependent operational relationships (Doz & Kosonen, 2010).
25
• Interaction with the customers (Sabatier, Mangematin & Rousselle, 2010).
26
• Customer engagement, linkages (Baden-Fuller & Haefliger, 2013)1.
27
28 • Relationships with upstream suppliers; customer interface (Boons & Lüdeke-Freund, 2013).
29 • Linkages (Viscio & Pasternack, 1996).
30 Transactions
31 • Content, structure and governance of the transactions (Zott & Amit, 2007).
32 Information flows
33 • Information flows (Timmers, 1998).
34 • Exchanging information (Van Der Vorst, Van Dongen, Nouguier & Hilhorst, 2002).
35 • Communication flows (Panagiotopoulos, Al-Debei, Fitzgerald & Elliman, 2012).
36 • Flows of information (Weill & Vitale, 2001).
37
38 18 Activities/processes
39
40 1
Baden-Fuller at al., 2013 consider “customer engagement” and “linkages” as two distinct components.
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5
6 Activities
7 • Activities (Afuah, 2004; Chesborugh, 2007b; Andersson, Johannesson & Zdravkovic, 2009;
8 Chesbrough, 2010; De Langea, 2011; Sorescu, Frambach, Singh, Rangaswamy & Bridges,
9 2011).
10 • Activities and organisation (Hedman & Kalling, 2003).
11
• Activity system content, structure, governance (Zott & Amit, 2010).
12
13 • Activity systems (Zook & Allen, 2011).
14 Processes
15 • Processes (Van Der Vorst, Van Dongen, Nouguier & Hilhorst, 2002; Hwang & Christensen,
16 2008; Johnson, Christensen & Kagermann, 2008; Markides & Oyon, 2010; Sorescu,
17 Frambach, Singh, Rangaswamy & Bridges, 2011; Nielsen & Lund, 2014).
18 • Production (Brousseau & Penard, 2006).
19
20 19 Strategy
21
22 Strategy
23 • Strategic choices (Shafer, Smith & Linder, 2005).
24 • The concrete choices made by management about how the organization must operate
25 (Casadesus-Masanell & Ricart, 2010).
26 • Strategy (Markides & Oyon, 2010; Sabatier, Mangematin & Rousselle, 2010; Provance,
27 Donnelly & Carayannis, 2011).
28 • Strategic decisions (Weill, Malone & Apel, 2010).
29 • Venture Strategy (Morris et al., 2005).
30
31
Competitive strategy
32
• Competitive strategy (Chesbrough & Rosenbloom, 2002).
33
34 • Competitive advantage (Chesborugh, 2007b; Morris et al., 2005).
35 • Operational advantage (McGrath, 2010).
36 • Sources of differentiation (Zook & Allen, 2011).
37
38 20 Markets/boundaries
39 Markets
40 • Markets (Sabatier, Mangematin & Rousselle, 2010; Smith, Binns & Tushman, 2010).
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5 • Market environment (Aspara, Lamberg, Laukia, Tikkanen, 2013).
6 Vertical scope
7 • Vertical scope (Yip, 2004).
8
• Level of R&D integration (Bigliardi, Nosella & Verbano, 2005).
9
Horizontal scope
10
• Horizontal scope (Yip, 2004).
11
12 Geographic scope
13 • Geographic scope (Yip, 2004).
14 • Geographical location (Bigliardi, Nosella & Verbano, 2005).
15 • Size
16 • Size (Bigliardi, Nosella & Verbano, 2005).
17 Industry
18 • Level of industrialization and service of the sector (Bigliardi, Nosella & Verbano, 2005).
19
20 21 Risk
21
22 • Risk(s) (De Reuver & Haaker, 2009; Sabatier, Mangematin & Rousselle, 2010).
23
24 22 Triple Bottom Line
25
26 • Triple Bottom Line, stakeholder interests (society, environment) (Bocken, Short, Rana &
27 Evans, 2014)2.
28
• Social and environmental value creation (Bocken, Rana and Short, 2015).
29
• Social value creation (Seelos & Mair, 2007).
30
31
32
23 Organization informal
33
34 • Purpose (Bocken, Short, Rana & Evans, 2014).
35 • Behaviors (Zook & Allen, 2011).
36 • Routines (Zook & Allen, 2011).
37 • Internal values (Provance, Donnelly & Carayannis, 2011).
38 • Culture (Markides & Oyon, 2010).
39
40 2
Bocken et al., 2014 consider “Triple Bottom Line” and “stakeholder interests” as two distinct components.
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5 • Subjective representations (Doz & Kosonen, 2010).
6 • Scope of management (Hedman & Kalling, 2003).
7
8 24 Organization formal
9
10
• The value chain of activities (Demil & Lecocq, 2010).
11
12
• Organization architecture (Smith, Binns & Tushman, 2010).
13 • How a company is managed (Weill, Malone & Apel, 2010).
14 • Structures (Doz & Kosonen, 2010; Sorescu, Frambach, Singh, Rangaswamy & Bridges, 2011).
15
16 25 Business units
17
18 • Business units (Viscio & Pasternack, 1996; McGrath, 2010).
19
20 26 Departments
21
22 • Departments (Doz & Kosonen, 2010).
23
24 27 Competitors
25
26 • Competitors (Hedman & Kalling, 2003).
27
28 28 Governance
29
30 • Governance (Viscio & Pasternack, 1996).
31
32 29 Age
33
34
• Age (Bigliardi, Nosella & Verbano, 2005).
35
36
30 Legal issues
37
38
39
• Legal issues (Alt & Zimmerman, 2001).
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5 31 Time-to-market
6
7 • Time-to-market (Sabatier, Mangematin & Rousselle, 2010).
8
9 32 Socioeconomic framework
10
11
• The context of regulation, incentives, prices, government policy and so on (Wells, 2015).
12
13
33 Consequences of choices
14
15
16 • Consequences of choices (about how the organization must operate) (Casadesus-Masanell &
17 Ricart, 2010).
18
19 34 Stakeholder expectations
20
21 • Stakeholder expectations (Froud, Johal, Leaver, Phillips & Williams, 2009).
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
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