Yoshi Thesis Print09
Yoshi Thesis Print09
Yoshi Thesis Print09
Tsuyoshi Amano
Feb 2019
Abstract
This study proposes a theoretical framework for business model prototyping
(BMP), one in which design thinking is applied as a means of facilitating business model
of innovation have received increasing recognition in the past decade, as the concept of
design thinking (e.g., Brown, 2008; Martin, 2009) has gained broader application and
credibility. In parallel, the concept of BMI has been discussed increasingly in research on
ways in which design thinking might inform prototyping of BMI is less articulated. Thus,
the research provides a framework for prototyping business models in the process of
literature review with expert interviews, multiple institution-level case studies, and a
prototyping in BMI and covers three topics in-depth: innovation, business models and
practitioners, and case studies explore various contexts of business model development
The validation interviews use feedback from industrial experts to aid and revise the
ways. First, it aims to bridge design methodology research and innovation management
2
research by articulating prototyping in design with business model innovation. Second, it
proposes a theoretical framework for business model prototyping that incorporates four
theoretical foundation for further research in the area. Third, the thesis reframes
framework and mode of thinking) that supports the management of business model
3
Contents
ABSTRACT.................................................................................................................................... 2
TABLES ......................................................................................................................................... 8
FIGURES ....................................................................................................................................... 9
INTRODUCTION.................................................................................................................. 11
OVERVIEW .......................................................................................................................... 11
BUSINESS MODEL PROTOTYPING AND INNOVATION: THE STATE OF THE ART ...... 24
INNOVATION ....................................................................................................................... 24
4
DESIGN AND DESIGN THINKING ........................................................................................... 68
FIELDWORK.......................................................................................................................163
5
EXPERT INTERVIEWS ........................................................................................................ 163
4.2.5. Case Study 04 – Pinnacle Trading Service (Private Company) ...................... 193
206
6
5.4.4. Process within business model prototyping ...................................................... 241
CONCLUSION ....................................................................................................................268
REFERENCES ....................................................................................................................290
APPENDICES .....................................................................................................................344
7
Tables
Table 1-1: The criteria of the sizes .............................................................................................. 22
Table 2-2 The key differences between prototyping and other methods (adopted from
Kimbel’s table in Edovald (2016b) and modified by the author) ........................................ 117
Table 2-3: A comparison of prototyping approaches (adopted from Nacheva (2017) and
Table 4-1: The interview protocol of the expert interviews .................................................. 164
Table 4-2: The connections of the cases with design thinking ........................................... 200
Table 4-3: The interview protocol of the validation interviews ............................................ 202
8
Figures
Figure 1-1: The map of the target audiences ............................................................................ 19
Figure 2-2: The three views of business model representation (adopted from Täuscher &
Figure 2-3: The level of abstraction of Business Models (adopted from Massa and Tucci
Figure 3-1 The theoretical framework of systematic combining (adapted from Dubois
Figure 3-4: An exmaple of affinity diagram (taken by the author) ...................................... 148
Figure 3-5: The divergent and convergent thinking process (adobtepd from Brown
Figure 5-1: The frameworks behind the business model prototyping framework .......... 208
9
Figure 5-5: The framework of context ...................................................................................... 243
Figure 6-2: The interdisciplinary state of innovation management research ................... 280
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Introduction
This chapter shows an overview of this thesis and the contextual background of
this research. The former clarifies how this thesis presents the argument, and the latter
Overview
This thesis is the outcome of my exploratory research for developing a potential
design thinking. Based on the theoretical setting, Chapter 3 describes the research
validation interviews. Chapter 4 represents the findings from the fieldwork. Chapter 5
research. The contribution is three-fold. First, this thesis introduces the role of design
reframes business model prototyping not as a method or tool but as a methodology for
managing BMI.
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Context Setting
This section clarifies the contextual background of this research to illustrate the
importance of this study. The argument mainly focuses on three factors. The first one is
the increasing uncertainty and complexity surrounding organisation to force them to find
alternative business models. The second one is a growing interest in BMI in various
fields. The third one is how innovation studies have expanded from a subject of
thinking are relatively new topics in the context of innovation, and the argument clarifies
enhanced attention to BMI issues (Chesbrough, 2010). These concepts are also core to
recent theorising about design thinking (Cross, 2011; Liedtka & Ogilvie, 2011). However,
the application of design thinking to BMI is not well theorised. This research proposes a
for BMI. It does so to encourage and support effective efforts to deploy BMP and to
underpin and encourage further research via the provision of a theoretical foundation for
the concept.
last decades that have been forcing the organisations to explore alternative business
One of the key drivers to change is globalisation (Lee et al., 2012; Cao et al.,
2018). Business competitions for organisations have become more global, and the
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resources around the world has also become more accessible (Friedman, 2005; Kuruvilla
& Ranganathan, 2010; Intriligator, 2017). Globalisation have redefined the basic rules of
the competitions and forced organisations to reconsider their existing business models
even though they seem to follow the best practices in the industry (Casadesus-Masanell
Guy Julier (2017), researcher of design culture and economies, argues that
neoliberalism. identifies four key factors of neoliberalism that are reated to the context of
design – deregulation, New Economy, financialisaton and austerity – and points out that
following the economic changes, design have accumulated their roles to tackle the
higher level of complexity and uncertainty (see also Vogel, 2010; Ignatius, 2015b). The
changes in capitalism have expanded the territory of design from specific issues such as
graphics and interiors to more complex issues such as services and strategies. It also
organisations and expands the role of design from corporate issues to social issues (see
Not only the economic changes have technological developments been also
observed as a key driver that urges the organisations to pursue alternative business
models, especially the advent of the Internet in 1990s (Amit & Zott, 2001; Osterwalder &
Pigneur, 2002) and Web 2.0 (Wirtz et al., 2010). The technological change also affects
well (Rachinger et al., 2018). The emerging technologies have made business
competitions more intense by lowering the entry barriers to various industries (Michael,
2015; Wright-Whyte, 2016). However, such technologies can be opportunities rather than
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utilising the benefit of such emerging technologies, realigning business models is crucial
The growing interest in social issues such as sustainability also makes the
problems organisations face more complex (Seelos & Mair, 2007; Yunus et al., 2010;
Massa & Tucci, 2013). In addition, some scholars observe innovations facilitated in
developing countries, which are usually less innovative as they tend to lack the
knowledge and resources to make innovation (Prahalad & Hart, 2002; Seelos & Mair,
2007; Thompson & MacMillan, 2010). The findings increase the interest in opportunities
for innovation from the ‘bottom- of-the-pyramid’ in emerging markets (Prahalad, 2006).
While technologies have been still considered as the main source of innovation (Norman,
2010), such new findings made many organisations notice that there are various
developing a right business model has been argued as a key driver of exploiting such
opportunities in a holistic way (Zott & Amit, 2010; Massa & Tucci, 2013).
et al., 2010; Schneider & Spieth, 2013) and more broadly for management of
organisations as a whole (Pohle & Chapman, 2006; Chesbrough, 2007; Amit & Zott, 2010;
Teece, 2010; Lüttgens & Montemari, 2016). Furthermore, surveys of senior executives
Corporation (IBM) published a report featuring BMI back in 2006 (IBM, 2006).
Management consultancy, the Boston Consulting Group (BCG) also started to consider
and examine the value of BMI at a relatively early stage (Lindgardt et al., 2009). BCG has
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published an annual survey of senior executive views on innovation since 2004, one that
charts the growing interest in the field in the period. BCG’s 2014 survey indicates that
innovation is a top three priority for senior executives representing a diverse range of
industries and regions (Andrew et al., 2010; Taylor et al., 2012; Wagner et al., 2013;
Wagner et al., 2014). Of particular significance, the survey asserts that successful
innovative companies more often than not engage in business model innovation
(Lindgardt & Hendren, 2014). While the importance is growing among professionals,
business model innovation has also become an important topic in academia. Special
issues on business models and business model innovation have been published in
2010; Robins, 2013), product development (Björkdahl & Holmén, 2013a), innovation
management (Spieth et al., 2013) and Research and Development (R&D) management
innovation studies itself has extended from a subject focusing on competitiveness (at
dynamics and complexity surrounding our society are increasing (Wallner, 1999; DG
MediaMind Research, 2013; Hausman et al., 2014), organisations come under further
complexity is observed not only in the sociological discussion but also in innovation
studies and management research as an obstacle for innovation (Tsai, 2014; Berger &
for initiating new activities and sustaining their growth. As approaches to complexity,
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business model innovation and design thinking have become emerging subjects in
innovation studies have expanded the practice focusing on policies for R&D
2012; Fagerberg et al., 2013b). This expansion is also one of the important factors that
lead many researchers to the concept of business models (e.g., Chesbrough, 2007;
Teece, 2010) and also design thinking (e.g., Boland & Collopy, 2004; Martin, 2009;
As for business models, despite the growing interest, there is still little agreement
on what business models are (Teece, 2010; Spieth et al., 2014a; Wirtz et al., 2016).
Reflecting the diversity of the argument, researchers on business models Massa and
Tucci (2013) suggest a broad definition of the concept: “the [business model] may be
and captures value […] in relationship with a network of exchange partners” (p.423; see
Afuah & Tucci, 2003; Osterwalder et al., 2005; Zott et al., 2011).
design thinking (Liedtka, 2015), and there are several strands in the research on the
concisely the characteristics of design thinking. However, former President of the Design
concurrent business analysis” (2010b, p.xi). This definition encompasses the key
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features of design thinking that are also conceptualised as applicable to managing the
design problems has been argued as ‘wicked’ problems at least since the 1970s in
design methodology research (e.g., Rittel, 1972a; Buchanan, 1992). The differences in
ways of thinking among science, humanities and design also support the argument that
“scientising” (Cross, 2007a) design methodology, the scientised form of which is hardly
effective for managing complex design problems (Schön, 1983; Cross, 2001). It is
asserted that design has a different way of thinking for tackling complex problems, and
liberal art (Buchanan, 1992) inherently different from science and the humanities. From
this perspective, design is not a subject in science or humanities, but a discipline with
value for everyone to learn (Archer, 1979; Cross, 1982). The difference influences not
only a way of thinking but also the terminology used in design, and the argument of
design started to use their terminology. For instance, in the current argument of design
managing the complexity of design problems (e.g., Brown, 2009; Lockwood, 2010b;
Liedtka, 2015).
apply experimental approaches (e.g., Sosna et al., 2010; Hawryszkiewycz, 2014), but
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designing business models (Osterwalder & Pigneur, 2013). Furthermore, the approaches
are mainly labelled as ‘experimentation’ (Bucolo & Wrigley, 2012), and the terms,
‘business model experimentation’ and ‘business model prototyping’ are often used
articulation of its meaning (e.g., Chesbrough, 2010; McGrath, 2010). According to design
problems has been problematic (Rittel, 1972b; Schön, 1983; Buchanan, 1992; Cross,
2011). Thus, developing the theory of BMP will enable researchers and practitioners to
understand the process of business model innovation further. Therefore, this research
explores what a theoretical framework of BMP would be and suggests implications for
further studies.
the work. It clarifies the evolving interest in both business models and design thinking,
and the relationship between core concepts and the approach adopted for the study.
Figure 1-1 identifies the target audiences for the study and plots these across
from design management research (e.g., Wylant, 2008; Hestad & Brassett, 2013; Liedtka,
2015) to innovation (e.g., Tschimmel, 2012; Vetterli et al., 2012; Seidel & Fixson, 2013;
Leifer & Steinert, 2014) to business and management research (e.g., Beckman & Barry,
2007; Leavy, 2010; Kolko, 2015). Another sits at the level of theorisation. In this
dimension, three types of target audiences can be identified: practitioners (e..g, IDEO,
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2009; Liedtka & Ogilvie, 2011; Tschimmel, 2012; Cook & Ermoyan, 2016), educators (e.g.,
Angehrn et al., 2009; Carroll et al., 2010; Hestad & Brassett, 2013; IDEO, 2013; Glen et al.,
2015) and researchers (e.g., Dorst, 2010; Thoring & Müller, 2011; Tjahja, 2017; Elsbach &
Stigliani, 2018).
The main target audience for the study is design researchers, (the vivid red circle
in Figure 1-1). As mentioned above, there is some research on how to use design
thinking for innovation, though the use prototyping for business model innovation
remains only partially articulated and under-theorised (Seidenstricker et al., 2014). As the
role of design is evolving (see 2.3.5), the design of intangibles (for example, services,
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strategies and business models) has become a new frontier in design management
(Vogel, 2010; Erichsen & Christensen, 2013; Ignatius, 2015; Ceschin & Gaziulusoy, 2016;
important aspect in the design methodology and process (e.g., Buchenau & Suri, 2000;
Brown, 2008; Lockwood, 2010; Dow et al., 2012; Liedtka, 2015). However, the ways in
which prototyping might be deployed in a future ever more focused on intangibles is not
well-eleaborated: research on the use of design thinking for the creation of value
discipline (e.g., Bentham, 2017; Joyce, 2017; Buehring & Liedtka, 2018). Buehring &
Liedtka (2018) assert that “architects build models, Product Designers construct
prototypes […] – but prototyping a new future is more challenging to envision” (p.144). In
(Chesbrough, 2010; Amit & Zott, 2012; Spieth et al., 2014; Foss & Saebi, 2017). As
Chapter 2 will show, the principles of design thinking emphasise the importance of a
holistic perspective (see also Micheli et al., 2019), and prototyping is one of the key
activities to gain holistic perspectives (Buchenau & Suri, 2000; Brown, 2009; Blomkvist,
important research area, and one in which further exploration is required. To engage with
the research opportunity, the current study provides a theoretical framework for the
framework will aid the design research community in extending the possibilities provided
Business researchers (the pale red circle in Figure 1-1) is a secondary target for
the study. The research on design thinking is not limited to the design research
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community, indeed considerable research and theorisation activity is evident in the
business and management research discipline (e.g., Beckman & Barry, 2007; Leavy,
2010; Kolko, 2015). However, arguments in the latter tend to deploy the concept of
Chesbrough, 2010; Thomke & Manzi, 2014). Therefore, this research proposes
innovation.
The circles in pale yellow indicate the sub audiences for the research. Whilst
they are not a primary target, the theoretical framework can be used as a guideline for
that may have a less detailed understanding of knowledge re: business model innovation
(for example, colleagues and students with limited background in or familiarity with
innovation practices). Further research will be needed to investigate the feasibility of this
Organisations relevant to
the research findings
The research explores various types of organisation that have attempted to apply
design thinking to business model development. Figure 1-2 shows the characteristics of
the case study organisations in terms of the size (Table 1-1) and the level of
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Figure 1-2: The characteristics of the cases
breadth of the study’s relevance, recent research in innovation has argued that some
high degree of uncertainty is present (e.g., Ries, 2011; O’Reilly & Tushman, 2016).
used not only for issues of commercial organisations but also for non-commercial
organisation’s attitude to dealing with complex situations and uncertainty (see also
Fixson & Rao, 2014; Ben Mahmoud-Jouini et al., 2016). This attitude is influenced by the
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mindsets of employees, including leaders and managers (Boland & Collopy, 2004b;
Michlewski, 2008; Bojovic et al., 2018). Therefore, the findings will be useful for
uncertainty, regardless of their size or market orientation. This point will be discussed
further in 3.4.2.2.
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Business Model
Prototyping and
Innovation: The State of
the Art
This chapter introduces key debates on important topics of this research:
the argument on the concept is not settled yet. Thus, the second section reviews various
debates about the concept to clarify the meaning of business model innovation. Finally,
gathers attention as part of design thinking, the third section explores various arguments
prototyping in this research and sets the starting point of setting the methodology for
the fieldwork.
Innovation
This section reviews the literature on innovation as part of the theoretical
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management research plays an important role in the debate of design thinking, this
section also reviews the literature of innovation in management. Finally, it shows what
innovations through business model prototyping. One of the obstacles to achieving this
objective is the lack of a unified and accepted definition of innovation (Adams et al.,
assert that three factors are causing the difficulty. First, innovation is a complex
interdisciplinary subject (Fagerberg, 2006; Martin, 2012). Third, the concept of innovation
Cruickshank (2010) claims that “the way innovation is used in design is more varied and
key step in clarifying the direction of this research. The following argument shows the
scholars play the important roles in promoting the concept of design thinking (Boland &
Collopy, 2004a; Martin, 2009), it also argues the current significance of innovation in
management. After these arguments, the key operational definition of innovation in this
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research is set as “the successful exploitation of new ideas” (Cox, 2005, p.2).1 This is the
definition proposed in Cox Review by Sir George Cox, former director-general of the
Institute of Directors. Although this definition is fairly basic (see Lawrence & Oliver,
2011), it captures the importance of design for making creative ideas happen for
innovation (Bolton & Green, 2014; see also De Mozota, 2003; Press & Cooper, 2003;
working on the history of the concept of innovation, innovation was a negative term from
at least the seventeenth century to the nineteen century. It was in the twentieth century
that innovation became a positive word, with the complete reversal of the connotation
occurring after World War II. Recent historical research on innovation studies has also
suggested that innovation research began to gain the traction around the 1950s (Martin,
2012; Fagerberg et al., 2013b)2. While these arguments indicate that the current research
stream of innovation can be found to have originated during this time, it is also reported
that some of the distinctive research on innovation can be found even at the turn of the
twentieth century, such as a sociologist, Gabriel Tarde (1843-1904) (e.g., [1890] 1903)
(Rogers, [1962] 2010; Kinnunen, 1996) and an economist, Joseph Schumpeter (1883-
1950) (e.g., [1912, 1926] 1934)3 (Fagerberg & Verspagen, 2009; Martin, 2012; Louçã,
2014).
1
Originally, Department of Trade and Industry (DTI) (2003, p.8) formulates the definition.
2
See Martin (2012) about the detail of the research field. It should be emphasised that the view of
innovation studies could not represent the whole historical background of innovation research,
but the extensive research is conducted in the research field.
3
Although the original German version was published in 1912, the English translated version in
1934 was based on the second German edition in 1926, which was arguably radically revised
(Fagerberg et al., 2013).
26
Nevertheless, innovation studies did not instantly become a popular topic
following the publication of their work. In the case of Tarde, his view on Sociology, which
Durkheim (1858-1916) (see Lukes, 1973), who was then the leading scholar in the field
and asserted that Sociology should study societies as a whole and not individuals
(Kinnunen, 1996; Katz, 2006)4. As for Schumpeter, he became influential sooner than
Tarde. However, neoclassical economics, a branch that views the economy as static and
emphasises the equilibrium of the market, was flourishing at the time. His dynamic and
evolutionary view of the market, from which disequilibrium produces values and profits,
was followed only by a few scholars (Fagerberg & Verspagen, 2009). These examples
suggest that their approaches to investigating innovation had conflicts with the main
research streams in their disciplines at the time. The importance of innovation was
recognised, yet the dynamics of innovation did not become a key subject in academia.
After World War II innovation studies had not yet flourished, however, the studies
were being driven by policymakers, who became interested in the activities of research
and development (R&D) mainly for military purposes. The tendency is particularly
apparent in the US (and also for the civil sector but to a lesser extent) (Hounshell, 2000;
Godin, 2006; Fagerberg et al., 2011). Meanwhile, in Britain, the Federation of British
Industries started to research on R&D activities in British firms, and the Paris-based
framework for gathering data for statistics on R&D activities (Fagerberg et al., 2011).5
From a historical point of view, Godin (2015) also asserts that ‘technological’ innovation
4
Other explanations about the dismissal of his research were the popularity of communication
study in Sociology, the lack of methodological tools (Kinnunen, 1996) and the usage of the less
favourable term, ‘imitation’, which could have been labeled as ‘influence’ (Katz, 2006).
5
The framework was published as the Frascati Manual (OECD, 1962).
27
was an emerging term and R&D became a new topic of discussion for managing
innovation after World War II. With this interest in R&D from policy makers, scholars
within different disciplines gradually began contributing to the area of innovation studies.
This is particularly the case in economics (e.g., Nelson, 1959; Schmookler, 1966),
management (e.g., Woodward, 1958; Burns & Stalker, 1961) and sociology (e.g, Rogers,
[1962] 2010; Coleman et al., 1966) (Fagerberg et al., 2012; Martin, 2012). In the context of
characterised by the foundation of Science and Technology Policy Research Unit (SPRU)
at the University of Sussex in 1965 (Fagerberg et al., 2013b), and subsequently Policy
science and technology policy, the SPRU not only cultivated the foundation of the field’s
interdisciplinary characteristics but also revealed that science is just one of the key
That said, the interactions among disciplines for innovation studies were still rare
in the 1960s and 70s, and it was by the early 1980s that the research field of innovation
studies clearly started to share its wealth of literature, methods and concepts, as well as
conferences and journals7 (Martin, 2012). It is thought that this transition of being an
(Fagerberg, 2006). As the research fields expanded, the agenda of innovation studies
also broadened its perspective (Fagerberg et al., 2013a). As we have seen, innovation
6
Godin (2015) asserts that the term science policy changed through technology policy to
innovation policy as innovation became a positive term.
7
Martin (2012) mentions Research Policy, R&D Management and Technovation as the examples.
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something that continues to this day with technology as the most general topic in
innovation studies (Nelson, 2013) and often considered the dominant source of
innovation (e.g., Norman & Verganti, 2014), but it eventually shifted to a wider scope,
including ‘systems’ of innovation (Lundvall, [1992] 2010; Nelson, 1993). The systemic
activities of firms and the national, regional and sectoral environment surrounding it. Jan
Fagerberg, Ben Martin and Esben Andersen (2013b), researchers of innovation policy,
highlight three reasons for the shift. First, empirical research on innovation, surveys8 in
particular, revealed that some of the important roles in fostering innovations are not
played only by firms but also users (e.g., Lundvall, 1985; Von Hippel, 1986). Secondly,
R&D strategies of firms changed from solely relying on in-house R&D departments to
also identifying and utilising externally distributed knowledge, resources and skills for
innovation (e.g., Cohen & Levinthal, 1990; Chesbrough, 2003). Thirdly, it is also identified
that the distributed knowledge, resources and skills are not only in private firms but also
With this background, market demands have been recognised as another driving
force for innovation as well as technology, and there have been debates on the
advantages and disadvantages of the technology push and market pull (demand pull)
approach (e.g., Mowery & Rosenberg, 1979; Dosi, 1982; Martin, 1994). One of the
researcher of technological innovation, Eric von Hippel (1986; 2005) identified that some
innovations were facilitated by ‘lead users’, who are deeply involved in the context of
products and services by heavily using the product or service. Von Hippel’s findings
8
Fagerberg et al. (2013b) argue that surveys, such as the Yale survey (Levin et al., 1987) and later
the Community Innovation Survey (CIS) (see Smith, 2006), contributed to providing new evidences
for the innovation research.
29
reveal that there are different types of key actors in innovation, and the process of
Another concept relevant here, especially to the change in the roles of internal
closed environment with the internal resources of firms, but through a distinctive case
study of Xerox Palo Alto Research Center (PARC), Chesbrough (2003) claims that the
values of the research are occasionally captured by people or organisations that are not
inside, but outside the company. Based on the findings, he proposes the concept of open
commercialise new ideas to be profitable products and services, and also exploit internal
and external routes to market. Because of this complexity, he argues, the roles of
internal R&Ds, especially R&D managers, need to change; they have to consider not only
technological matters but also how to commercialise the technologies, as “the economic
value of a technology remains latent until it is commercialized in some way, and the
same technology commercialized in two different ways will yield different returns” (p.64).
In other words, the structure of how to capture values becomes as important as the
recognise that the sources of innovation can flexibly come from both inside and outside
the boundary of the organisation, and also there are various routes to market for
than for what the closed R&D model is designed. This expansion also influences some
researchers and practitioners to assert the importance of service innovation and public
service innovation (e.g., Riel, 2005; Chesbrough, 2011; NESTA, 2011; Osborne & Brown,
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This section has shown that the study of innovation has been shifting from an
managing innovation. The topics include the studies of the context (system) of
innovation and the management of internal and external sources as well as routes to
market.
section clarifies the position of design in the context of innovation research for
connecting this research stream of innovation with the research on design thinking.
subject as noted above, Cruickshank (2010) suggests that design is still relatively
isolated from the research stream of innovation studies, by providing two pieces of
evidence. One is that there are no references to design in the 650 page The Oxford
Handbook of Innovation (see Fagerberg et al., 2006). The other is that no design journals
are represented in the review of the top fifty technology and innovation management
(TIM) journals in 2004 (see Linton & Thongpapanl, 2004). It has been over a decade that
the pieces of evidence were published, but if we follow the same kind of reasoning, we
can still find ourselves in a similar situation. In a more recent publication titled Innovation
Studies (Fagerberg et al., 2013b), the role of design is still not clearly argued9, and in a
chapter of the book, Ben Martin (2013), scholar of innovation studies, admits that
innovation studies have been still prone to concentrate on product and process
9
As an exception, although it is not the main topic, Luc (2013) mentions the important role of
design research for innovations facilitated in developing countries. About this type of innovations,
see Prahalad (2006).
31
innovations and ignore other types of innovations, including ones based on design. In
the list of examples also does not include design (2012).10 On the evidence from the
journal ranking, the updated ranking of the TIM journals is published in 2012and
concludes that the TIM is turning to be more interdisciplinary 11 over time, but design
The articles indicate that the awareness of the role of design is not greatly
claims, it cannot be simply concluded that deign has not contributed to managing
innovation. He asserts that product design has been acknowledged as part of the
activities of innovation management at least since the 1990s (see Utterback et al., 2006).
Jeanne Liedtka (2015), management scholar recently arguing about design thinking,
highlights that business researchers have been interested in product design for more
than a decade, referring to the research by a marketing scholar, Peter Bloch (2011).
Bloch (1995) claims that the academic marketing research was not aware of the
importance of design by 1995, but his more recent research identifies that the body of
research relevant to design in marketing has been growing since then (2011). Also,
Cruickashank (2010) asserts that the third edition of Oslo Manual by OECD and Eurostat
(2005) include the marketing category of innovation and it makes it easier to see design
Manual, one of the characteristics of the third edition is the addition of marketing
10
Hobday et al. (2011) also assert that design is absent from innovation studies, but also mention
there are well-written innovation papers on design such as Walsh (1996) and Tether (2005).
11
Thongpapanl (2012) interchangeably uses multidisciplinary and interdisciplinary, but this paper
regards interdisciplinary as more engaged interactions among various disciplines than
multidisciplinary.
32
previously only product innovations and process innovations. In the argument about the
relationship between design and innovation, it is also acknowledged as the turning point
for Oslo Manual to include non-R&D activities in the major aspects of innovation
management (Hobday et al., 2011). In the third edition of the manual, OECD and Eurostat
themselves also reflect that the focus of the first edition (1992) was on technological
product and process (TPP) innovations in manufacturing, and the second edition (1997)
attempted to include innovations in service sectors. However, they admit that, as the
second edition still relied on the same TPP based definition of innovations as the first
edition, it did not adequately capture the value of innovations in less R&D intensive
importance of the sectors in the following years, they eventually modified the definitions
innovations and organisational innovations to include the less R&D intensive sectors.
The line of the argument shows that the new definition of innovations by OECD
contribute to expanding the field of innovations, but what should be paid attention to
here is that in this debate, design is still regarded as a supporting factor for marketing
activities, and the strategic role is not clearly identified yet (also see Tether, 2005;
Hobday et al., 2011). For instance, while being aware of the integral role of design for
innovation, OECD and Eurostat (2005) conceptualise product design as part of marketing
innovations involve the implementation of new marketing methods. These can include
changes in product design and packaging, in product promotion and placement, and in
12
OECD was aware of a growing body of literature on innovation in services (e.g., Hauknes, 1998;
De Jong et al., 2003; Howells et al., 2004; Miles, 2006)
13
About low-tech industries, see, Von Tunzelmann & Acha (2006)
33
methods for pricing goods and services” (p.17). OECD and Eurostat describe that this
idea is derived from the theory of marketing chiefly represented by the concept of 4 Ps in
the marketing theory.14 One of these Ps is products, and product design is regarded as
an element of products (p.31). In this context, product design plays an important role in
increasing the attractiveness and appeal of products to a new market or a target market
innovation.
innovation, but it does not fully recognise the importance of design for innovation,
especially the strategic side (see OECD & Eurostat, 2005). To argue the connection
between innovation and design, the aforementioned Cox Review (2005) needs to be
referred to. In the review, design is defined as “what links creativity and innovation”, and it
suggests that design is given a significant role in facilitating innovation. A parallel study
by the Department of Trade and Industry (DTI) (2005) shows that the definition is based
innovation at the same level as technological R&Ds, which are regarded as a typical
regarding design is that the role of design is not limited to matters of aesthetics, such as
style16 and appearance. Cox admits that the considerations of aesthetics are important,
but they are only a small part of creativity and design. Also, the paths of innovation
through creativity and design are not only new products and services but also greater
productivity. If we use the types of innovations provided by OECD and Eurostat here, it
14
About 4Ps, see McCarthy (1960).
15
For the diagrammatic model, see Swann & Birke (2005).
16
These arguments are based on an assumption that design as styling is less important than the
strategic role, and there is a contrary argument that the value of design as styling is neglected
and should be discussed further (Tonkinwise, 2011; Brassett & O’Reilly, 2015).
34
suggests design can contribute to all the kinds of innovations including organisational
innovations. Similarly, management scholars, Boland and Collopy (2004a) also assert
that creativity itself does not facilitate innovation, and a design attitude is needed to turn
the creativity to innovations. Although Boland and Collopy loosely define the design
attitude as “the expectations and the orientations one brings a design project” (p.9), their
perspective resonates with Cox’s view of design as a link between creativity and
innovation. The concept of the design attitude will be discussed further in a later section.
In sum, design is not well integrated with the current stream of innovation
studies yet, and even though the involvement of design activities in innovation are
identified, the argument on the role of design is still limited. The new definition of
acknowledged, but the role is still limited as a supporting part of marketing activities.
However, as Cox Review exemplifies, the wider role of design in managing innovation is
gradually recognised, and especially the strategic role becomes a prominent topic since
the late 2000s in particular, which is argued and promoted as ‘design thinking’ (e.g.,
Brown, 2008; Martin, 2009; Lockwood, 2010a). Although there has been a research
topic not only for design practitioners but also in management research, the following
least since the late 1950s (Fagerberg et al., 2013; e.g., Woodward, 1958; Burns & Stalker,
35
1961), it is important to note that there is an increasing interest in innovation in
innovation. For instance, the research above on TIM journals between 2006 and 2010
Consulting Group (BCG) started senior executive surveys on innovation (Andrew & Sirkin,
2003b), which continues for more than a decade.17.A key motivation for them to conduct
the series of surveys was that through their consulting work for fifteen years they
identified that many companies understood the importance of innovation, but most of
them struggled with gaining the financial return from their effort to make innovation
(Andrew & Sirkin, 2003a). This insight was supported by the result of their first survey in
2003; 69 percent of the executives ranked innovation as one of the top three priorities of
their firm, but at the same time 57% of them were not satisfied with the financial return.
The survey in 2005 reported that 87 percent of the participants agreed with the notion
that organic growth through innovation is essential for the success of their business.
Although the last decade has seen a global economic downturn, the importance
of innovation is still alive. BCG’s 2014 survey (Wagner et al., 2014) claims that three-
quarters of senior innovation executives reported that innovation is in their top three
(Shelton & Percival, 2013) shows 83% of executives think innovation is important and the
figure increases to 88% when they are asked about next five years. Furthermore, a
survey on innovation by General Electric (GE) in 2014 shows that 64% of senior
executives “are convinced that businesses have to encourage creative behaviors and
17
For the report in 2014, see Wagner et al. (2014).
36
disrupt their processes more” (p.8). However, gaining the capability of managing
innovation is still a difficult task for the majority of businesses. The same survey by GE
indicates that 72% of them think they are not ready for the change (2014). To clarify the
One of the key topics in the management study in the 1980s was how to gain a
consistently (e.g., Porter, [1980] 2004b; Porter, [1985] 2004a)1819, and one of the
traditional strategies to achieve it was building entry barriers20 (Caves & Porter, 1977;
Wernerfelt, 1984; e.g., Bain, 1954; Bain, 1956; Wenders, 1971; Needham, 1976). Based on
this strategy, Michael Porter, the main proponent of competitive advantages, elaborated
the concept of the barriers (Porter, 1976; Caves & Porter, 1977) and asserted the basic
types of competitive advantages are low-cost and differentiation, which are attributes of
products or services to set up the barriers (2004b).The approach assumes that the
the industry structure and the positioning of the products or services (Amit &
18
There was the study of corporate venturing (Burgelman, 1983) but it was in a relatively small
scale
19
Porter mentions innovation, but mostly it is not as a key source of growth, but as a possible
factor of changing industrial structures. Also see Porter (1981). Initially, his attention was payed
to criticise the view of the industrial organisation study to see industries as homogenous, and
introduce the structures of industries (1979b). However, his theory would be criticised as it
ignores the heterogeneity of firms (e.g., Barney, 1991; Teece et al., 1997). That said, it has to be
admitted that the management approach based on competitive advantage can be compatible
with more recent approaches such as dynamic capabilities.
20
Entry barriers or barriers to entry are costs that new market entrants have to pay, while
incumbents do not need to. For more details, see Porter (1976) and Caves and Porter (1977).
37
analyses and product positioning strategies. This approach is called in various ways
such as the industrial analysis framework (Amit & Schoemaker, 1993) and five force
approach (Teece et al., 1997), but this research uses the term, the “product based” view
(see Wernerfelt, 1984)21 to clarify the contrast with the resource based view, which the
Despite the dominance of the view, some scholars criticised the product based
view as it sees the market in a static way and the focal point of the approach tends to be
how to exploit the market power (Teece et al., 1997). It is argued that the product based
view does not regard resources as the source of sustainable competitive advantage, or
the barriers because the view rests on two assumptions. One is that firms in the same
industry are identical and the other is that the resources are mobile and tradable in the
market so that the internal resources are difficult to be distinctive from others in the long
develop the concept of ‘Resource-based view’ (Wernerfelt, 1984; Barney, 1991), which
sees that resources are heterogeneity and difficult to trade so that the uniqueness of the
resources can last long. Thus, the composure of the resources can be a sustainable
capabilities as part of resources (Amit & Schoemaker, 1993), and how to develop the
(1997) proposes the concept of ‘dynamic capabilities’, which is defined as “the firm's
21
In the modern context of business, it is more precise when it is called the product and service
based view or offering based view as Keeley et al. (2013) use the term, offerings, for indicating
both products and services. However, as Wernerfelt (1984) develops the concept of the resource
based view through the comparison between the characteristics of products and resources, this
research uses the term, the product based view to clarify the contrast.
22
While the two approaches are complementary to each other (Amit & Schoemaker, 1993), it is
also asserted that the two are competitive (Teece et al., 1997).
38
ability to integrate, build, and reconfigure internal and external competences to address
However, it assumes that firms are surrounded by rapidly changing environments as the
definition shows, while the resource based view sees the business environments as
more static (e.g., Barney, 1991). Thus, the argument aims to understand resources as
the sources of entry barriers for sustainable competitive advantages (Barney, 1991).
Indeed, the initial argument by Wernerfelt (1984) proposes resources as another source
of entry barriers as much as products. Therefore, the static view raises several questions
about the effectiveness of the view for gaining a sustaining competitive advantage. For
example, when resources are regarded as a key factor for the success of firms, it has to
clarify how to acquire the resources in turn, and the change of market situations can
potentially nullify the value of the resources (Porter, 1991). Furthermore, recent research
become shorter over time (Wiggins & Ruefli, 2005), and also competitiveness relying on
cost-effectiveness is no longer sustainable (e.g., Porter & Ketels, 2003; Neely, 2009).
Porter & Ketels, 2003; McAdam & Galloway, 2005; Neely, 2009). Moreover, it is even
argued that gaining sustainable competitive advantages from core competencies itself
Christensen (2003) also identifies that the profitability is diminished not because the
23
This rapidly changing environment is also argued as high velocity environments (Bourgeois III &
Eisenhardt, 1988) and hypercompetition (D’Aveni, 1995).
39
company is beaten by the competitors, but the quality of the product overshoots the
demand of the majority of the customers as the result of responding to the demand of
their main customers. The theory indicates that the key issue for managers is not only
competing with their peers but also constantly identifying new sources of innovation for
and compete with their rivals, and pays less attention to how to deliver and create new
Therefore, the key subject in the argument of dynamic capabilities turns from
how to build entry barriers and gain competitive advantages, to how to sustainably adapt
conditions (Teece et al., 1997; Barreto, 2010).25 Dynamic capabilities can be skills for
recognising the need for innovating existing business models (Leih et al., 2014). The
(Teece et al., 1997), and an essential element of capabilities is collective learning (Leih et
al., 2014), but Teece (2014) claims that the functions relevant to the discovery of
opportunities, learning and knowledge creation were almost neglected before the
innovative firms face the problems of gaining the competencies that are difficult for
competitors to copy. One way of solving this problem, Teece et al. (1997) argues, is to
strategically choose where the firm concentrates on and invest in to gain the
competencies (Dierickx & Cool, 1989), but another problem is that the choices are
24
They develop the concept of ‘blue ocean strategy’ from the point of view (Kim & Mauborgne,
[2005] 2015).
25
Porter (1998) asserts the importance of clusters for innovation more than internal activities of
firms.
40
influenced by past choices, which means decisions in the past influence the
competencies in the future. Therefore, firms need to not only exploit the current
capabilities but also explore and develop new capabilities for the future. Teece et al.
(1997) admit it is not the first argument to consider both the exploitation and exploration
of capabilities in strategic management (e.g., Penrose, [1959] 2009), but the argument of
dynamic capabilities initiate a more focused discussion on the subject. From the
competition and the capability for managing innovation to compete should be exploited
Management scholar, Rita McGrath (2013) also elaborates the shift of the
the study of corporate venturing and innovation processes. Although the research on
corporate venturing existed in the 80s and 90s (e.g., Burgelman, 1983; Eisenhardt &
Tabrizi, 1995; Block & MacMillan, 1993), most of the research in strategic management
treated as something apart from the core of corporate business activities. However, as
some research reveals that competitive advantages last rather only tentatively (e.g., Ian
C. MacMillan, 1982; Boisot, 1995; D’Aveni et al., 2010) and the market environments
change rapidly (e.g., Bourgeois III & Eisenhardt, 1988; MacMillan, 1988; D’Aveni, 1995;
Chen et al., 2010), the integration of corporate strategies and innovation management
41
enters the mainstream of the management research (e.g., Christensen, [1997] 2003;
innovation studies, especially regarding the role of design, and management. Innovation
studies expand the domain from being focused on R&D to capturing the complexity of
the process of managing innovation. In the research stream, the role of design is not well
argued yet, and the value of using design is limited to a supporting function for
positioning based on the product based view has become harder, as the business
environment are changing more rapidly. In this condition, relying on market positioning
new ideas” (2005, p.2), responds well to the demand in the current business situation. In
order to understand the key points of this definition, the meanings of ‘new ideas’ and
defines creativity as “the generation of new ideas – either new ways of looking at
26
It has to be stressed that these arguments might look like a linearly developing process
but this simplified perspective on the discourse is possibly problematic. For example, more
recently Porter also asserted that the model of competitiveness is dynamic and based on
innovation (Porter & van der Linde, 1995). They clearly state that “internationally competitive
companies are […] those with the capacity to improve and innovate continually. […] Competitive
advantage, then, rests […] on the capacity for innovation and improvement that shift the
constraints” (p.98). It can be considered that those concepts and arguments are organically
directed towards the growing importance of innovation and the awareness of dynamism in the
current business environment.
42
existing problems or of seeing new opportunities, perhaps by exploiting emerging
contrast with ‘exploitation’ in the definition of innovation, but it can be understood that
‘new ideas’ mean reframing problems and finding new opportunities, through new
perspectives not only on new technologies but also market changes. The important
point here is that new ideas come from seeing problems and opportunities in new ways
for exploitation, the full definition of innovation needs to be referred to. He rephrases
innovation as “the process that carries [new ideas] through to new products, new
services, new ways of running the business or even new ways of doing business” (p.2).
Here, exploitation can be interpreted as turning new ideas into new actual outcomes
including organisational changes. Based on this understanding, this research will use the
innovation. However, this will also be critically reviewed in the following arguments about
innovation, which connects creativity and innovation. Other researchers also claim that
the concept of design has been expanded from a part of product development to a more
prominent role in managing innovation (Tether, 2005; Hobday et al., 2011), and the
design management (e.g., von Stamm, 2004; Mozota, 2006; Bucolo & Matthews, 2010;
Brown et al., 2014), management research (Boland & Collopy, 2004a; Utterback et al.,
2006; Verganti, 2006; Jelinek et al., 2008) and policy making (e.g., Tether, 2005; NESTA,
2009). Particularly, the strategic role of design for managing innovation has been placed
43
under the concept of ‘design thinking’ (e.g. Dunne & Martin, 2006; Beckman & Barry,
2007; Brown, 2008; Lockwood, 2010a). The term, design thinking was already used in
1987 as the title of a book written by Peter Rowe, professor of architecture and urban
planning at Harvard’s School of Design ([1987] 1991). However, the focus was on
currently argued (Liedtka, 2015). Moreover, a design scholar, Richard Buchanan (1992)
used the term, design thinking to describe design as a liberal art to tackle ill-defined
problems, but the key objective of the argument was to turn design as a new discipline
different from natural, social and humanistic sciences. While the arguments about
design thinking have existed at least since then, the concept is popularised by the more
recent publications in business and management (e.g., Boland & Collopy, 2004b;
Nussbaum, 2004; Utterback et al., 2006; Martin, 2009) as well as in design (e.g., Kelley &
Liedtka, 2015). As a result, design thinking is widely discussed not only in the context of
design (e.g., Rodgers, 2013; Brown et al., 2014) but various contexts such as Human-
Computer Interaction (e.g., Klemmer & Carroll, 2014) and management (e.g., Ignatius,
2015).
While the popularity has provoked extensive arguments on the subject, it has
been criticised for the lack of a solid theoretical foundation of the concept and the
disconnection from existing research in the design research community (Kimbell, 2011;
Johansson-Sköldberg et al., 2013). What’s more, the isolation from design practice is
This section has argued about the complexity of the contexts surrounding the
concept of innovation and innovation studies. In Design and design thinking section, the
44
context surrounding the concept of design thinking will be discussed to clarify the
theoretical setting in this research. Before moving to the argument, the next section will
Zott, 2013). Also, Casadesus-Masanell & Ricart (2010) suggest that the factors driving
the importance of business model innovation in the current business environment are
competitive threats could come from the outside of the industry, and it makes it difficult
al., 2008). Therefore, this section will show how the concept of business model
innovation has become a popular topic as an approach for innovation in the last several
years. Before arguing business model innovation itself, the following subsections show
27
Teece et al. (1997) define dynamic capabilities as "the firm’s ability to integrate, build, and
reconfigure internal and external competences to address rapidly changing environments"
(p.516).
45
innovation is not well defined yet (Casadesus-Masanell & Zhu, 2013) and the cause of
(Spieth et al., 2014a). The following sections show, with the concept of business models
being articulated, the argument reveals that business model innovation should be
conceived of as an approach to, not simply the outcome of, innovation by critically
Rapha Amit and Lorenzo Massa (2010) assert that business models turned to be a
major topic in the recent years and there had been 1170 academic papers since 1995.28
They suggest three factors behind the growing interest in business models since the mid
1990s: the advent of the Internet (Amit & Zott, 2001; Osterwalder & Pigneur, 2002),
Hart, 2002; Seelos & Mair, 2007; Thompson & MacMillan, 2010), and the demand for new
2010). Especially, it is claimed that the rise of the Internet produced new types of
businesses based on the Internet technology called e-business, and the academic
research of business models started from the study of e-business (e.g., Amit & Zott,
2001; Osterwalder, 2004). As the Innovation Section indicates, it is argued in the context
innovation have become less effective, and some scholars increasingly recognises the
importance of business model development for capturing the values for fostering
28
Osterwalder et al.(2005) assert that the term, business model was used in an academic paper
at the first time in 1957 (see Bellman et al., 1957), and appeared in the title of a paper in 1960 (see
Jones, 1960), although it did not rise as a key subject until the end of the 1990s.
46
innovation (e.g., Calia et al., 2007; Chesbrough, 2007). Furthermore, in the research of
the practice of entrepreneurship, and the skills of making a detailed business plan before
entrepreneurs (e.g., Mason & Stark, 2004; Shane & Delmar, 2004; Gruber, 2007). In
addition, it is considered that business plan competitions are helpful for building new
ventures (Dodt et al., 1999; Thomas et al., 2014). However, in the recent study of
enterprise education the advantage of the business plan based approach has been
questioned (Honig, 2004; Bridge & Hegarty, 2012; Jones et al., 2013). Researchers of
enterprise education, Colin Jones and Andy Penaluna (2013) show their concern as
“outside the boundaries of academia, the business plan would seem to be increasingly
study research that business plans are rarely updated or referred to once they are
developed, and the actual operation tends to become dissimilar to the plan as time goes
by (Karlsson & Honig, 2009). Furthermore, the benefit of business planning, especially for
new small firms, is reduced (Brinckmann et al., 2010) as the high degree of uncertainty
surrounding firms makes the planning difficult (Forbes, 2007). Moreover, practitioners in
entrepreneurship criticise the business plan based approach, as it takes time to develop
and most of them do not work when they are implemented (e.g., Mullins & Komisar,
2009; Blank, 2010; Maurya, 2012). Therefore, Blank (2013) argues that business models
are more suitable for developing new businesses than business plans, and asserts that
entrepreneurs should use a more agile approach to developing businesses, and the
47
holistic perspective provided by business models is preferable to the details required in
business plans (see also Osterwalder & Pigneur, 2010; Blank & Dorf, 2012).
formulate a unified definition (e.g., Osterwalder et al., 2005; Zott et al., 2011; Wirtz et al.,
2016), there is little agreement on what business models are (Kallio et al., 2006; Al-Debei
et al., 2008; Teece, 2010; Girotra & Netessine, 2013; Spieth et al., 2014a; Gerasymenko et
al., 2015; Wirtz et al., 2016). The concept of business models is argued in various ways
(Linder & Cantrell, 2000), and it is even asserted that the research is still at an early stage
Morgan, 2010; Massa & Tucci, 2013). In line with simplicity, clarity is regarded as a key
29
There are similar concepts to business models in management research and some scholars
attempt to clarify the concept of business models by dividing from the existing concepts such as
strategy, organization theory or business planning (Wirtz et al., 2016; e.g., Mansfield & Fourie,
2004; Seddon et al., 2004; Al-Debei et al., 2008; Casadesus-Masanell & Ricart, 2010). One of the
distinctive examples is strategy. For instance, comparing strategy with business models,
Casadesus-Masanell and Ricart define strategy as “the choice of business model through which
the firm will compete in the marketplace” (2010, p.196), but they also assert that “much more
than the mere selection of a business model; it is a contingent plan as to how the business model
should be configured, depending on contingencies that might occur” (p. 205). An interesting point
of their argument is that strategy and business models are identical without contingencies.
However, they argue that business models have to be modified to respond to contingencies, and
such strategic modification is very complex. Magretta (2002) also argues about the difference
between strategy and business models, and the key element in her argument is competition.
Porter (1996) difines that “[s]trategy is the creation of a unique and valuable position, involving a
different set of activities. […] The essence of strategic positioning is to choose activities that are
different from rivals” (p.68). Here, a key issue is also how to be different from competitors. When
competition is seen as a contingency, the definitions resonate with the assertion of Casadesus-
Masanell and Ricart. The definition of strategy, however, is also not coherent. For instance, Wirtz
et al. (2016, p.38) conclude that “the business model can thus be understood as a link between
future planning (strategy), and the operative implementation (process management)". In this
argument, strategy is not differentiation for competition but future planning.
48
advantage of business models to support communication with actors and employees
business models (Vecchi & Brennan, 2014). For instance, through the literature review of
business models, management scholars, Christoph Zott, Raphael Amit and Lorenzo
Massa (2011) argue that “business models emphasize a system-level, holistic approach
to explaining how firms ‘do business’” (p. 2). Business models, in their argument, show
not only what to do in the business, but also how to do it in a holistic way. Similarly,
through literature review, Wirtz et al. (2016, p.41) define it as “a business model is a
describes how marketable information, products and services are generated by means
are described as ‘simplified and aggregated’. The two things are contradictory, but
business models need to be concise to achieve both simplicity and inclusivity. In other
words, business models should be expressed in a simple way but at the same time it
of business, the following question is what should be included in the model. 30 An early
success in the market. Amit and Zott (2001) give a slightly different perspective. They
argue that “a business model depicts the content, structure, and governance of
30
Osterwalder et al. (2005) suggest that concepts, especially business model, evolves from a
definition to taxonomies to instances.
49
transactions designed so as to create value through the exploitation of business
opportunities” (p.511). This definition suggests that not only what is developed as the
content, but what actors are involved and how they are linked (structure), and how the
content and structure are put in control (governance) are also important for business
models. Similarly, Johnson (2010) describes that a business model “defines the way the
(2010) also assert that “a business model describes the rationale of how an organization
creates, delivers, and captures value”.31 In addition to the creation of values, these
definitions suggest the importance of the delivery of values to customers with financial
profit as a key element of business. By reviewing these definitions, Massa and Tucci
(2013) suggest “the [business model] may be conceptualized as depicting the rationale
of how an organization […] creates, delivers, and captures value […] in relationship with a
network of exchange partners” (p.423; see Afuah & Tucci, 2003; Osterwalder et al., 2005;
Zott et al., 2011). The creation, delivery and capture of values are repeatedly mentioned
business ideas.
This review identifies two key points to consider regarding the key elements of
business model:
31
As a more detailed definition, Osterwalder et al. (2005) propose the following definition:
A business model is a conceptual tool that contains a set of elements and their relationships and
allows expressing the business logic of a specific firm. It is a description of the value a company
offers to one or several segments of customers and of the architecture of the firm and its
network of partners for creating, marketing, and delivering this value and relationship capital, to
generate profitable and sustainable revenue streams. (pp. 17-18)
50
The learning point from the first one is that business models should not
represent only how to create products, which the technology-driven point of view
emphasises, or how to monetise the business (or capture values), which the finance-
driven point of view tend to prioritise. This point resonates the argument of innovation
driven by design (see Cox, 2005; Brown, 2008; Lockwood, 2010b). Based on this
understanding, including the three aspects of creating, delivering and capturing values is
considered as the crucial aspects of business models. In addition, what the value itself is
or value proposition is another key element of business models, as the models including
only the operational aspects tend to be too generic and abstract and not to direct any
activities and business patterns to follow (Abdelkafi et al., 2013; Carayannis et al., 2015).
Therefore, this research sets four elements, value, creation, delivery and capture, as the
key components of business models. Each element can be represented in the following
questions respectively: ‘What is the value proposition of the business?’, ‘How do you
create the value?’, ‘How to deliver the value?’ and ‘How to capture the value’?
framework for the operational purpose. The reason is that fixing business models in a
representations of business models find various forms of business model frame works.
51
Figure 2-1: The operational framework of business models
and how they are visualised (Osterwalder et al., 2005; Sundelin, 2010; Beha et al., 2015;
Täuscher & Abdelkafi, 2017). There are many arguments on the key components, but
what is interesting is that the numbers of key elements in each model are diverse. Even
some models do not have a set of key elements but rather represent the value network
or causal relationship among key elements and stakeholders. For instance, by reviewing
commercial sources, Täuscher & Abdelkafi (2017) suggest that three types of views to
classify business models: elements view, transactional view and causal view. In their
argument, the frameworks with the elements view have a set of predefined elements to
be filled in by users. The ones with the transactional view represent the flows of cash or
resources by boxes (usually representing actors) and arrows. The ones with the causal
52
view represent causal relations between different actions and decisions by arrows.
There are some frameworks to have both the elements view and the transactional view
or the elements view and causal view, but there is no framework to have three views.
Elements view
Transactional
Causal view
view
Figure 2-2: The three views of business model representation (adopted from Täuscher & Abdelkafi (2017))
This suggests that identifying key elements of business models is important, but
the set of key elements might represent the business model only from one of various
views. However, if the key point of using business models is to represent the business by
a simple but holistic way, it is logical that there exist many variations, because the
dynamics of the market (see Blank, 2010; Bridge & Hegarty, 2013), controlling the level of
abstraction of the representation following the context is essential. The reason is that as
the speed of exploring the possible opportunities is crucial, simpler models have an
advantage over more complex ones, which can be useful for analysing business model
53
in turn. Therefore, as Massa and Tucci (2013) suggest, this research consider business
models have various ways of representing business in a form of models with different
Bu siness
Sim ple
M odel
Ex am ples
Ar chet ypes
N ar r at ives
Bu siness m odel can vas
M i ni m um v iabl e pr odu ct s
Hol ist ic
Com plex
r eal it y
Figure 2-3: The level of abstraction of Business Models (adopted from Massa and Tucci (2013) and modified
by the author)
At the most abstract level, business models can be simple architypes (e.g.,
‘feemium’ (Pujol, 2010)). On the other hand, at a more concrete level, business models
can be detailed meta models32. When business model prototypes are regarded as
can be wide as Massa and Tucci suggest. Although acknowledging the importance of
both the analysis and the exploration of business models, this research prioritises the
value of business model for exploration, as it is one of the key advantages of design
approach for innovation (Berardino, 2016). Thus, the business model framework with
four key elements – value, create, deliver and capture – is suitable for this research for
32
Massa and Tucci borrow the term meta model from the literature of system engineering, which
regards meta-modelling is “the analysis, construction, and development of the frames, rules,
constraints, models, and theories applicable and useful for modelling a pre-defined class of
problems” (p.438). In other words, it is a model for analysing, constructing, developing a model.
54
the operational purpose. However, as mentioned above, complex models are useful to
capture what the business is in detail. Rather than rigorously defining the framework, it is
important to condense and expand the elements and the complexity of business models
in order to align the agility with for matching the role of models with the objectives of
models, as business models do not only represent what the business is but also what
the business should be (Massa & Tucci, 2013), which can guide actors to actions as a
‘recipe’ of the business (Baden-Fuller & Morgan, 2010; Perkmann & Spicer, 2010). Thus,
business models play various roles for business. For instance, Burden-Fuller and Morgan
(2010) suggest that business models can act as a means to describe businesses, an
From the literature review of business models, Spieth et al. (2014a) also identify three
roles of business models: explaining, running, and developing the business. As possible
directions of business in the future are varied and open-ended, business models can be
a hypothetical model of a business which does not exist yet, and possible business
models as a recipe are not just one but can be many. Based on the arguments above,
business. Business models do not only show what the business is but what it should be.
33
Barden-Fuller and Morgan assert that business models have "different roles for different firms
and for different purposes: and will often play multiple roles at the same time" (2010, p.168).
55
2.2.2. Definitions of Business Model
Innovation
This subsection argues definitions of business model innovation to identify the
definition for this research. There are two distinct directions to consider the definition of
business model innovation. One way is to see business model innovation as innovations
models. This research supports the latter, business model innovation as an approach for
making innovation. The following sections show the arguments of the both directions,
business models, which are “not just new to the firm” (Vecchi & Brennan, 2014, p.134;
e.g., Birkinshaw et al., 2008; see also Markides, 2006) or at least new also to the industry
or market (Johnson et al., 2008). For instance, Markides defines that “business-model
business” (2006, p.20). In this definition, the discovery of a radically new business model
is emphasised. Johnson (2010) defines it as the act of innovating “something more core
than the core, to innovate the very theory of the business itself”. He also asserts that a
radically new business model can drastically change the landscape of an industry. In the
business but a tool for exploring possible directions and developing a business towards
innovation. Indeed, it is also suggested that even a subtle change of a business model
can trigger business model innovation (Zott & Amit, 2010; Vecchi & Brennan, 2014).
From this point of view, business model innovation can be conceptualised in another
way as innovation through business models, which the next section explores.
56
When business models are considered as a tool for exploring opportunities and
are simplicity and inclusivity. The reason why inclusivity and simplicity are important for
approaches with agility (Doz & Kosonen, 2008; Doz & Kosonen, 2010). This point is
clarified through the comparison with business plans. Blank (2010) argues that, in an
uncertain situation, business models should be used rather than business plans to seek
for potential business opportunities. Business plans are useful when many important
facts are validated, but the problem is that it takes a lot of time and effort to develop it.
Especially, in uncertain situations, the reliability of the plan tends to be low as the plan
has to be developed based on many assumptions. On the other hand, business models
do not show the detail of business ideas as much as business plans do, but business
models enable the users to quickly response to the situation. Thus, utilising the
elements, simplicity and inclusivity, for managing innovation is the essence of business
business model which drastically changes the market situation. However, some of the
context through business models is important rather than inventing a new business
model (e.g., Zott & Amit, 2010; Vecchi & Brennan, 2014). Similarly, in an argument of
strategic entrepreneurship, Luis Martins, Violina Rindova and Bruce Greenbaum (2015)
57
the existing business model schema” (p.112). In this definition, a fundamental aspect of
current business model and a possible business model. Zott and Amit (2015, p.395)
an activity system that is new to the focal firm or new to the product - market space in
which the focal firm competes”. They regard business models as activity systems, and
the key point of this definition is to regard the innovation as designing and implementing
innovations through business models. It does not need to invent a radically new
business model but identifies the opportunities for innovation through designing and
implementing business models. The following section overviews the argument about
types of innovation, in which the innovation makes a change, to clarify what kind of
innovation (Meyers & Tucker, 1989; Song & Montoya-Weiss, 1998; Veryzer, 1998a;
Chandy & Tellis, 2000). One category is for innovation with a high degree of change, and
the other is one with a more frequent but minor impact. Although the dichotomous
typology is the same, the discussion is set up in various contexts. Thus, the terminology
for dichotomised models of innovation is still not completely settled (Garcia & Calantone,
34
Amit and Zott (2001) also assert that efficiency, complementarities, lock-in and novelty as
potential sources of value creation, and Chesbrough (2010) see them as key aspects of business
model innovation.
58
2003; Hang et al., 2006; Linton, 2009). The former, for instance, is referred to as radical
innovation (Ettlie et al., 1984; Leifer et al., 2000), discontinuous innovation (Veryzer,
1998b; Reid & De Brentani, 2004), breakthrough innovation (Zhou et al., 2005) and
(Ettlie et al., 1984; Norman & Verganti, 2014), continuous innovation (Kassicieh et al.,
2002; Hang et al., 2006; Vuola & Hameri, 2006) and sustaining innovation (Christensen,
2003).35
product into components and the architecture, which shows how the components are
integrated into the products. They assert that innovation can be made, even without
modifying components, by only changing the architecture, and conceptualise that sort of
change, the term discontinuous innovation tends to be used as the umbrella term, under
oriented approach (e.g., Henderson & Clark, 1990; Christensen, 2003).The term,
35
Although this research mainly follows this dichotomised scheme of innovation, it has to be
mentioned that there are also arguments about the differences between all of these terms of
innovation (Garcia & Calantone, 2003; Hang et al., 2006). Marketing and product innovation
scholars, Rosanna Garcia & Roger Calantone (2003) assert that the dichotomous categorisation
is too simplistic and propose ‘really new innovations’ (p.122) as the third category for categorising
innovations with a moderate degree of change that the innovation makes. They divide
discontinuities on macro level into technological continuity and market discontinuity. Innovations
should be classified as radical innovations when both discontinuities occur, and really new
innovations are for when just one of them happens. The attempts to refine the category of
innovation should be appreciated. However, they could not identify the clear boundary between
radical innovations and really new innovations. Also, the fragmented terminology of innovation is
criticised as it often produces confusion more than clarification (Hang et al., 2006; Linton, 2009).
Thus, to avoid further complexity of the argument on innovation, this research uses the
dichotomised view of the categorisation for further discussion.
59
make an additional change. On the other hand, disruptive innovation is argued as also
al., 2005; Hang et al., 2006). In the terminologies, business model innovation is treated as
innovation is not clearly defined in their argument, Bessant et al. (2005) claim it as a
innovation partly derives from the criticism against technology focused approaches for
innovation is. The next section articulates the concept of disruptive innovation.
innovations unless they are successfully brought to the market when we follow the
definition of innovation, “the successful exploitation of new ideas” (Cox, 2005, p.2). In
not as innovations but inventions in this context. From this point of view, the
As for innovations with a low degree of change, Christensen (2003) asserts that
36
Christensen initially calls it sustaining technologies.
60
innovation can be discontinuous or radical innovation as well as incremental. The key
served by innovation is the segment of existing main customers or not. In other words,
whether the change is incremental or radical does not matter as long as it follows the
value appreciated by existing main customers. An interesting point about the concept of
disruptive innovation is that solutions provided by new technologies can be suitable for
low-end users and non-users (or new market)37, not only for high-end customers
(Christensen, 2003).38
are not always facilitated by a radically advanced technology, but the key point is to aim
at underserved markets different from the current main markets (Christensen & Raynor,
2003). Also, it is asserted that gaining new markets often requires new business models
(Chesbrough, 2010).
Historically, innovation with a radical change was not always praised, and some
asserted incremental innovation was more important, especially in the late 80s to the
early 90s in US (Gomory, 1989; Florida and Kenney, [1990] 1992; Womack et al., [1990]
37
It is argued that disruptive innovation can be ‘low-end’ innovations for overserved customers,
‘new-market’ innovations for non-served customers, or combinations of the two (Christensen &
Raynor, 2003; Christensen et al., 2004; see also Ansari et al., 2015).
38
In contrast, for instance, Porter (1979a) suggests that technological innovation can increase
the fixed costs so that the entry barriers can be higher and the competition be fiercer.
61
(Dertouzos et al., 1989; Kash, 1990; Kano, 1993).39 More recently, Bessant (2003) also
Joseph Morone and Albert Paulson (1996) criticise that the overemphasis on
incremental improvements in the 80s and 90s in the US resulted in a decline in some
innovations are not completely divided. Rather, the theory of disruptive innovation
describes the trajectory of innovations at the entry phase, and the trajectory of
sustaining innovation explains the late phase of innovation. In other words, disruptive
exploiting the value of innovation. As the concept of disruptive innovation gets popular
incumbent firms confront (Hill & Rothaermel, 2003; Danneels, 2004; 2011; Christensen,
2006) and how they can tackle the problems (Christensen & Raynor, 2003; Ansari & Krop,
2012; Wessel & Christensen, 2012). However, how to manage disruptive innovation is a
less researched area (Yu & Hang, 2010). Although the advantage of business model
innovation is not limited in disruptive innovation, business model innovation can make a
innovation to manage affects the selection of the strategy for managing innovation
39
In these arguments, the term incremental improvement is often used rather than incremental
innovation. As an overview of the argument, see Lynn et al. (1996).
62
(McGrath & MacMillan, 1995; Bower & Christensen, 1995). The argument is in line with
two types of activities for sustainable growth, most commonly referred to as the
2008). Although the two activities tend to conflict with each other when the resource is
scarce, it is asserted that taking a balance between the two is inevitable for the long term
success for organisations (March, 1991). The capability of organisations to deal with the
Tushman, 2008; Raisch & Birkinshaw, 2008). However, it is argued that the conventional
they are optimised for exploiting opportunities that are already identified rather than
exploring new ones (MacGrath, 2000; Christensen, 2003; Martin, 2009; Ries, 2011). Thus,
how to develop and retain the capability of exploration is a key topic in management, and
design has been argued as providing an efficient strategy for exploring innovative
From these arguments, it has to be clarified that this research is based on some
assumptions.
innovation
63
• A better combination of commercialisation and technology can beat a better
shown the importance of business model innovation, the argument on how to manage
business model innovation is still at a nascent stage, and there are some difficulties
identified in the literature. The next section argues the challenges for making business
model innovation.
business model prototyping is needed and can be effective for business model
that lack of clear understanding about the current business model in an organisation
causes difficulty in managing business model innovation, as well as the fact that there is
40
Magretta (2002) asserts that having business models themselves are not sufficient enough
and an effective strategy is required to be successful. While business models are not for coping
with competition, and strategy is needed to perform better than competitors. As ‘being better’ is
‘being different’ in her definition, strategy can be understood as the plan for differentiation. As a
way of testing the viability of business models, Magretta (2002) proposes ‘narrative test’ and
‘number test’.
64
conflict between existing models and new models can prevent organisations from
exploiting the value of new business models (Amit & Zott, 2001; Christensen, 2003;
Johnson et al., 2008; Chesbrough, 2010). Also, Chesbrough (2010) argues that as the
Prahalad, 1995), even what the right business model should be may not be clear for the
superior foresight ex ante - rather, it requires significant trial and error, and quite a bit of
model components as each component is interdependent with each other (Mayo &
Brown, 1999; Morris et al., 2005; Zott & Amit, 2010; Zott & Amit, 2009; see also
Siggelkow, 2001). Thus, changing a part of it can influence the viability of the entire
(e.g., Sinfield et al., 2012), the perspective of the approach is positivistic43, which ignores
existing research on complex problems. In other words, it can stay in the same
41
Massa & Tucci (2013) distinguish the development of business models in new firms from that
in incumbent firms, which usually already have an existing business model. They label the former
‘business model design’ and the latter ‘business model reconfiguration’. Calia et al. (2007) also
use the term, business model configuration.
42
Uncertainty is also regarded as a key issue in modern societies that can turn to both a danger
or/and an opportunity {Citation}
43
In an attempt to integrate positivstic and interpretive research approaches, organisation
researcher, Allen Lee (1991) describes postivistic approaches as “those associated with
inferential statistics, hypothesis testing, mathematical analysis, and experimental and quasi-
experimental design” (p.342).
65
epistemology as the one that the design methodology research used to be caught in
Based on the argument above from the existing literature, there are two types of
key challenges identified for this research: uncertainty and complexity. They create
The uncertainty and complexity do not allow business managers to identify right
and complexity are experienced in design and design thinking, and prototyping is
proposed as a way to manage uncertainty (e.g., Gerber, 2009) and complexity (e.g.,
Jobst & Meinel, 2014). Problems in design are recognised as ill-defined and
conceptualised as ‘wicked’ problems (Rittel & Webber, 1973; Buchanan, 1992). In other
words, the advantage of design approaches for uncertainty and complexity has been
context of this research. Initially, it clarified the concept of business models in the
literature and how business model innovation is defined based on the understanding.
This section also explored various types of innovation to identify the position of business
model innovation. Different from other types of innovation such as product innovations
and marketing innovations, business model innovation does not simply mean
can be categorised into two types: sustaining innovation and disruptive innovation.
66
Business model innovation often manages disruptive innovation, which needs to mange
complexity and uncertainty. The issues are identified also in design problems and the
design approach can be applied for business model innovation. Especially, as we will
clarify the theoretical context of prototyping in design and design thinking, the next
section reviews the theoretical background of design and design thinking, followed by
debates on prototyping.
67
Design and design thinking
Innovation section has reviewed the trajectory of how innovation studies move
advocating design thinking. Business model innovation section has reviewed the
concept.
Following these augments of the key concepts, this section demonstrates how
the varied arguments to clarify the theoretical position of this research regarding design
and design thinking. The arguments on design thinking is mainly promoted by design
practitioners, particularly design innovation consultancy, IDEO (e.g., Brown, 2008; Brown,
2009; Brown & Wyatt, 2010) and management scholars, notably Roger Martin, former
Dean of Rotman School of Management (e.g., Dunne & Martin, 2006; Martin, 2009)
(Kimbell, 2011; Johansson-Sköldberg et al., 2013). Meanwhile, there have been extensive
studies on design practices and methodologies in the design research community (e.g.,
Cross, [1982] 2006; Buchanan, 1992), which include prominent events such as the
68
Conference on Design Methods of 1962 (Jones & Thornley, 1963) and the inaugural
Design Thinking Research Symposium in 1991 (Cross et al., 1992) (see Cross, 1993;
Cross, 2007). In this context, ‘design research’ does not mean research for design but
research about design itself (Archer, 1981; Bayazit, 2004). This is also claimed as ‘design
Many scholars assert that there is the discontinuity between the two discussions
(Badke-Schaub et al., 2010; Cross, 2010; Dorst, 2010; Tonkinwise, 2011; Kimbell, 2011;
order to clarify the concept of design thinking, the following argument attempts to re-
in this research is mainly based on two reviews on the concept. One review is done by a
researcher of design research, Lucy Kimbell (2011; 2012), and the other is by scholars of
(2013). First, we will overview the critique by Kimbell, then move to that by Johansson-
Sköldberg et al. (2013). Then it will argue what research streams should be reviewed.
Kimbell initially clarifies the position of the current arguments of design thinking
in the research of design practice by classifying the discourses of design thinking into
three types: a cognitive style (e.g., ; Lawson, [1980] 2006; Cross, 1982; Schön, 1983;
Rowe, [1987] 1991; Cross, 2006; Dorst, 2006), a general theory of design (Buchanan,
1992) and a resource for organisations (e.g., Dunne & Martin, 2006; Bauer & Eagen, 2008;
44
Design researcher, L. Bruce Archer (1981) starts the argument with ‘Design Research’ with
capital D and R, but the followers argues design research without the capital letters (Bayazit,
2004; Cross, 2006). Thus, this thesis also uses the term ‘design research’ for meaning research
about design.
69
Regarding the key sources of each type, the first one, design thinking as a
cognitive style, derives from how (successful) designers individually think and do in the
process of design so that it mostly relies on protocol analysis, which is useful for
tracking what they do and think during a project. While the first discourse is mostly
about the practice of designers, the second one, design thinking as a general theory of
design, theoretically removes the traditional practice in craft and product development
from the design theory in order to develop a more general theory of design applicable to
other fields and practices. The third strand, design thinking as a resource for
organisations, originates from a different root from research in the design community,
practitioners.45
She claims, however, all of those discussions are incomplete because of the
following three reasons. First, the arguments assume that thinking and doing are
something separate from each other so that designers and the world in which they do
design activities are also conceptually divided. Because of this assumption, design
generated from the perspective of management, they may not recognise the importance
Secondly, design thinking ignores the diversity of the practices of designers. She
argues that there are various types of design disciplines and practices, as well as cultural
and sociological aspects playing important roles in design practice. Additionally, she
45
A distinct example is CEO of IDEO, Tim Brown. He asserts that “a discipline that uses the
designer’s sensibility and methods to match people’s needs with what is technologically feasible
and what a viable business strategy can convert into customer value and market opportunity”
(Brown 2008, p.86).
70
claims that understanding the diverse contexts of design – especially by non-designers
such as engineering and service design - will help scholars who look for a way of
applying design to other fields, rather than simply identifying the commonality.
Finally, in the discourse of design thinking, designers are located in the centre of
the design process even though they appeal the importance of human-centredness and
studies, however, have identified design as a distributed social activity. From this point of
view, designers should not be a definite factor in the practice, and artefacts and other
discourse through an extensive literature review and categorise the arguments at two
levels. First, based on another research by Johannson and Woodilla (2010), they
distinguish the recent argument of design thinking in the recently accessible business
media, from the debate in the design research community since the 1960s. The authors
label the arguments from the traditional research community 'designerly thinking' and
the newly emerging discourse 'design thinking'. In order to keep the argument coherent,
this section will follow the same terminology. At the second level, they further divide the
two categories into more specific topics. Designerly thinking is categorised into five
types, and design thinking into three types. This suggests that, although the design
thinking is not a single stream. Some of them are profoundly connected, but some of
them are not. For instance, while Simon's argument ([1969] 1996) is referred to in most
of the categories of designerly thinking, Cross (2006) and Buchanan (1992) do not
directly mention each other, despite the fact that they discuss similar issues. While
Cross argues about the design discipline as the third discipline distinctive from science
71
and humanities, Buchanan asserts design as a new liberal art, which is different from
science and arts. In addition, the emergence of the discourse of deign thinking makes
The two reviews do not propose a unified definition of design thinking but
indicate the discourses that should be taken into consideration when design thinking is
discussed (Table 2-1). To articulate the discourses, the next sections will argue on some
philosophy of Bauhaus founded by Walter Gropius in 1919 (Margolin & Buchanan, 1996;
72
Bayazit, 2004). Also, the attempts of turning design to be a more rigorous and scientific
Stijl in the early 1920s (Cross, 2001; Bayazit, 2004). While the arguments of then thought
leaders in design such as Walter Gropius, Adolf Loos and Edgar Kaufmann, Jr. are
mainly about the physical object or artefact (Margolin & Buchanan, 1996), the aim of
setting objectivity and rationality as the foundation of design can be found in the
It is considered that the argument becomes important again in the 1960s (Cross,
2007a), and the Conference on Design Methods in London in 1962 (Jones & Thornley,
1963) is considered as the crucial moment for the foundation of the design research
community (Cross, 2001; Bayazit, 2004; Kimbell, 2011). The key reason is the influences
of World War II and the subsequent technological competition in Cold War between the
United States and the Soviet Union (Rittel, 1972b; Cross, 1993a; Bayazit, 2004). Cross
(2001) asserts that comparing the argument in the 1920s, which was mainly concerned
with how to develop scientific design products, the focal point of the arguments in the
1960s is on scientific design ‘process’. In the argument of design research, Cross (2001)
also identifies three strands of the argument about the relationship between science and
design: scientific design, design science, and a science of design. The argument of
scientific design is based on scientific methods, as the design methods movement in the
1960s tried to acquire the scientific methods into design. This was also influenced by the
transition from craft-based design to industrial design, and also there was the rapid
various types of design. Therefore, design was conducted based on scientific knowledge
and the industrialised design activities seemed distinctively different from traditional
73
craft-based design. To put it another way, it asserts that design is, and should be, based
on scientific knowledge, but it does not critically argue what design is. Thus, Cross
concludes, the concept of scientific design was not controversial, but on the other hand,
Another argument in the 1960s was ‘design science’, the term of which was
coined by Buckminster Fuller (Cross, 2001; Bayazit, 2004; see Fuller & McHale, 1963),
and adapted by Sidney Gregory into the context of the design research for the 1965
conference on ‘The Design Method’ (Cross, 2001; see Gregory, 1966). Under this term,
Scholars of Engineering Design, Vladimir Hubka and W. Ernst Eder (1987; 1996) also
argue how design can be turned to be a more scientific process. Therefore, compared
with the fundamental essence of scientific design, which was that design is based not
only on intuitive methods but also on scientific methods and knowledge, Cross
characterises that the argument of design science asserts that design itself can be a
scientific activity.
study; instead of regarding design itself as a scientific process, it investigates the activity
of design by scientific methods (e.g., Grant, 1979). For Cross, this difference is of
2001, p.53). The existing research on design methodology, Cross asserts, focuses on
referred to as the starting point of the discussion about the nature of design (e.g. Cross,
1982; Schön, 1983; Buchanan, 1992; Kimbell, 2011; Johansson-Sköldberg et al., 2013).
With this book, Simon attempts to establish the sciences of the artificial that
74
complement the sciences of the natural (natural science), as the latter is so dominant in
academia that the sciences of artificial are undervalued despite the importance. The
difference between the natural and the artificial in this context is more complex than the
usual usage of the terms. Being made from natural materials does not automatically
mean it is natural. For example, a forest can be natural, but a farm is not. Whether "they
are adapted to human goals and purposes" (1996, p.3) divides the artificial from the
natural. The artificial (artefacts) obeys the natural laws as much as the natural does, but
at the same time, the artificial embodies a human purpose as well. The sciences of
artificial, he argues, deal with these subjects and phenomena, and connect the natural
For Simon, “how to make artifacts that have desired properties and how to
design” (p.111) is primarily the task of engineering, but "engineers are not the only
changing existing situations into preferred ones" (1996, p.111). Thus, he calls the study
of the creation of the artificial “the science of design” (p.111). Compared to natural
science concerned with how things are, he asserts that “design […] is concerned with
how things ought to be, with devising artifacts to attain goals” (p.114). In this context,
design is regarded as a core and common subject of all professions relevant to the
the science of design “not only as the professional component of a technical education
but as a core discipline for every liberally educated person” (p.138). This argument
75
suggests that Simon considers design is not only for professionals but a discipline for all
However, in the 1970s, there was a backlash against the pursuit of the rigour for
design methodologies (Cross, 2001), and the scientific approach is also regarded as the
first generation of design methodology research (Rittel, 1972b; Bayazit, 2004). It is partly
because the attempts of making design more scientific rather reveal the difference
between science and design (Cross, 1993). As the argument of the science of design is
not about making the design process scientific but understanding design through
However, how to perceive the state of design problems is problematic for the following
researchers. One of the distinctive critiques was Donald Schön, who advocates the
of urban planning, Donald Schön (1983). He argues that professionals in practice have a
different scheme of the way of thinking from science, and conceptualises the approach
46
His argument is based on the concept of ‘bounded rationality’ (Simon, 1957; 1996), which
suggests that in reality an available information and time are limed when decision is made so that
rationality for decision making is also limited. In this situation, what decision makers seek is not
optimal but satisfactory solutions, which are shaped for responding to how things ought to be.
Cross (2006) points out that this approach has been observed in the study of decision making in
the various subjects of design, such as in engineering design (Marples, 1961), urban design
(Levin, 1966) and architecture (Eastman, 1971). Therefore, the characteristics of the sciences of
the artificial is different from the traditional natural science, but, Simon asserts that it does not
mean the sciences of the artificial are less important than natural science. Thus, he asserts the
need for founding “a science of design, a body of intellectually tough, analytic, partly formalizable,
partly empirical, teachable doctrine about the design process” (1996, p.113). Because of this
statement, Simon’s argument is regarded as the foundation of ‘a science of design’ (Cross,
2007a).
76
as "reflection-in-action". On the one hand, he praises the argument of design by Simon
knowledge and practice in the natural science, and proposes a science of design, in
which the condition ought to be changed to a more preferred one, as the concept for
filling the gap between natural science and design practice. On the other hand, he
attempt to raise the importance of the professional schools and the knowledge area, but
Therefore, Schön criticises that what he calls design itself is the thing that those schools
do not teach, and “his science can be applied only to well-formed problems already
design means that changing design to be an analytic and formalised subject, and the
statement itself contradicts with the inherent characteristics of design, which he instead
formulated by design theorist and scholar, Horst Rittel (1972a). Based on a conversation
with Rittel, systems scientist, C. West Churchman (1967, p.141) introduces wicked
problems as a "class of social system problems which are ill-formulated, where the
information is confusing, where there are many clients and decision makers with
conflicting values, and where the ramifications in the whole system are thoroughly
confusing”. Rittel criticises the phase-based linear model of design processes as it only
works when problems are well-defined, which he calls “tame” problems (Rittel & Webber,
47
There is a contrary argument (Chua Soo Meng, 2009), asserting that Simon’s epistemology is
rather constructivist.
77
1973).48 However, he argues, most of the problems for designers – and all the other
professionals dealing with a variety of social problems – are the ill-defined “wicked”
problems, and they have to take a different approach from the one in science to solve
Planning, Melvin Webber (Rittel & Webber, 1973) introduce ten properties of wicked
problems.49 In their argument, design is not merely providing a solution to a problem, but
should be an argumentative process (Rittel & Webber, 1973). This shares the theoretical
against the whole argument applying a scientific thought process to design. Rather their
argument does not directly criticise Simon’s argument, and some of wicked problems’
properties even suggest similar points to the argument of Simon’s. As we have seen,
Simon asserts that the key point of design is not to provide the best solution, but turn the
48
This is a modified paper that was originally presented in the Panel on Policy Sciences,
American Association for the Advancement of Science, Boston in December of 1969.
49
The properties (Rittel & Webber, 1973) are:
1. There is no definitive formulation of a wicked problem.
2. Wicked problems have no stopping rule.
3. Solutions to wicked problems are not true-or-false, but good or bad.
4. There is no immediate and no ultimate test of a solution to a wicked problem.
5. Every solution to a wicked problem is a "one-shot operation"; because there is no
opportunity to learn by trial and error, every attempt counts significantly.
6. Wicked problems do not have an enumerable (or an exhaustively describable) set of
potential solutions, nor is there a well-described set of permissible operations that may
be incorporated into the plan.
7. Every wicked problem is essentially unique.
8. Every wicked problem can be considered to be a symptom of another problem.
9. The existence of a discrepancy representing a wicked problem can be explained in
numerous ways. The choice of explanation determines the nature of the problem's
resolution.
10. The social planner has no right to be wrong.
78
third property in wicked problems: “Solutions to wicked problems are not true-or-false,
The argument of design in the early stage was not specifically about deign but
the value of the practice conducted by professionals, which was undervalued as it was
believed that science is more rational and rigid (e.g., Schön, 1983). Professionals tend to
be regarded as a job at a lower level than occupations which deal with more rigid
practitioners, such as designers, conduct their practice in a different, not lesser, way.
Without well-framed problems given, the professionals figure out problems and develop
solutions through reflections from the interaction with their clients and the situations
Design as a discipline
(Designerly ways of knowing)
The arguments of a science of design reveal the limitation of articulating design
investigates how designers think, and asserts design as a ‘discipline’ (e.g., Cross, 1982).
He identifies the lack of the sound foundation for design as a discipline at the end of the
1970s, and the finding makes him conduct extensive research for developing the
complementing science and humanities. His paper, ‘Designerly ways of knowing’ (Cross,
response to the first contribution to the series by Bruce Archer, which claims that design
50
This is based on ‘designerly ways of thinking’ by Bruce Archer (1979)
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is the third area of general education (Archer, 1979). Cross claims that there are many
arguments rather reveal the difference between two of them (Cross et al., 1981). He also
asserts that ‘technology’ is regarded as taking a different approach from science (e.g.,
Whitehead, [1929] 1967; Ferguson, 1977), and re-maps design onto the concept of
knowledge to practical tasks by social systems involving people and machines” (Cross
Part of the argument is about how to shift the education of design from
specialist education to general education, as at the time design became a subject taught
intrinsic values. He claims that there is a particular way of thinking in design, which is
different from science and humanities. Referring to the research by Lawson (1979), he
argues that, while the scientific approach takes a problem-oriented approach to solving
this difference is not observed in junior students in universities. Thus, he concludes that
designerly ways of knowing can be taught and should be cultivated through design
education.51
culture” (1992, p.5), referring to a philosopher, John Dewey ([1929] 1960; [1929] 1998;
1944). Buchanan emphasises that ‘technology’ for Dewey be different from the meaning
51
Cross also asserts that “design is rhetorical” and “persuasive” (Cross, 2006, p.31).
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of technology in the modern society, which is knowledge about the development and use
thinking that may be shared to some extent by all men and women in their daily lives and
is, in turn, mastered by a few people who practice the discipline with distinctive insight
(2011) characterises his argument as taking the concept of design away from the
tradition of crafts and industrial production in order to formulate a more generalised and
Buchanan points out that, as our knowledge was accumulated, the subjects in
academia were specialised and divided into more detailed categories. The specialisation
was useful for advancing knowledge, but it also caused the fragmentation of our
them again and establish the integrative discipline, and it can be design as a liberal art.
The subjects of design such as graphic design and industrial design are set up by
the result of the design subjects, as graphic design produces graphics, and industrial
design produces industrial products. However, Buchanan asserts that design should be
four areas of design and concisely expresses the outcomes of each area as signs,
things, actions and thought. Instead of being stuck in one area, experienced designers
rather explore the different areas to provide innovative outcomes. He also emphasises
that the areas are not only interconnected but they “interpenetrate and merge in
contemporary design thinking” (p.10). This suggests that what designers design should
not be bounded by the type of the outcomes expected in the subject of design, but the
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whole context surrounding signs, things, actions and thought should be considered to
communication gap between the scientific community and the design community. The
gap derives from the types of problems, as the problems designers face do not fit in the
the concept of ‘wicked problems’ (Rittel, 1972a) mentioned above, and raises a question:
why all the design problems are wicked problems. His response is that it is because
design does not have a clear subject matter. This fact theoretically allows the scope of
subject” (p.16) in the course of solving the problems. The interesting point here is that, in
his argument, design is different from other sciences because design regenerates the
subject matter whenever designers face problems. This absence of a specific subject
matter in design also causes the difficulty in communication with other sciences.
sense, as “discipline of thinking” (p.19). He continues that “design also has a technologia
[or a discipline of thinking] and it is manifested in the plan for every new product. The
plan is an argument, reflecting the deliberation of designers and their efforts to integrate
knowledge in new ways, suited to specific circumstances and needs” (p.19). This
indicates that the key aspect of design is the thought process to solve a particular
different design practitioners and asserts that the modality of the new liberal arts of
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impossible only when there is a lack of imagination. Design tackles the impossibility by
defines design as “making sense (of things)” (1989, p.9). One of the key points of this
definition is what is designed is not physical materials. As he uses the term, the semantic
turn in his book title (2006), this argument suggests that design should shift from design
concept reverses the core of design from artefacts to meanings, which Simon’s ([1969]
A characteristic of this argument is that the concept of design derives from the
etymology not the actual practice of design. Thus, while he is aware of the importance of
from their practice (e.g., Rowe, 1991; Lawson, 2006). Design, he argues, was originally a
broader concept intending the creation of meanings, but the unprecedented growth of
industrial technologies turned design into ‘industrial’ design. His claim is, therefore, in the
more complexed society in the modern world, the original sense of design should be
regained.53
52
Later, Simon (1996) also redefines artefacts as things with purposes.
53
He also asserts the need for a science for design (see Krippendorff, 1995; 2006). Design
science is describing design activities through rigorous and systematic ways. A science of design
deals with design activities as a scientific subject, and it is a high affinity with established
scientific disciplines. Thus, it contributes to generating knowledge for existing subjects such as
psychology and sociology but not for design practice. Instead of these theorisations, he asserts
we need to set up a science ‘for’ design, which is a study and conceptualisation of successful
practices of design and practically supports design activities.
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Interestingly, his argument is not often referred to in the other strands of design
research such as Cross and Buchanan, but his definition of design is adapted by
Verganti for the concept of design-driven innovation, which is argued in a later section.
The possible explanation of this is that his concept has a relatively larger distance from
suitable for management scholars to absorb the benefit of design to their theory. As a
‘innovate’ the meaning of products. In his theory, designers can be a part of the cluster,
products can be other actors and professions such as suppliers and artists.
thinking at least since the 1960s in the design research community, but the current
argument of design thinking has emerged apart from the existing strands in the design
avoid a confusion of the terms between the argument of designers’ ways of thinking in
the design research community and the current argument of design thinking, this thesis
calls the former ‘the designerly way of thinking’ and the latter ‘design thinking’.
The concept of Design Thinking gained popularity through the 2000s, as Kevin
McCullagh, a thought leader of design practice and Founder and Director of Plan,
London-based design consultancy, reflects that a climactic moment was when Tim
Brown, CEO of IDEO, was invited to and participated in the World Economic Forum in
Davos in 2006 (McCullagh, 2010) As we have seen, the mid-2000s was also the time
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Innovation is conventionally regarded as a matter of technology (Christensen,
2003; Miles, 2006; Goffin & Mitchell, 2010; Norman & Verganti, 2014). However, Sir
George Cox, a former Chairman of Design Council, highlighted the importance of design
for innovation and creativity for business in his review for the Department of Trade &
Industry (Cox, 2005). He defines innovation as “the successful exploitation of new ideas”
and explains that “it is the process that carries them through to new products, new
services, new ways of running the business or even new ways of doing business” (p.2).
design as “’Design’ is what links creativity and innovation. It shapes ideas to become
practical and attractive propositions for users or customers. Design may be described
as creativity deployed to a specific end” (p.2). This implies that delivering new ideas is as
important as generating them, and one of the key elements of it is design. At least since
then, the strategic role of design for managing innovation has been more widely
acknowledged. This argument has been reinforced with the concept of ‘design thinking’,
which usually includes the method of prototyping as one of the key aspects along with
As the previous sections look through, the argument about design methodology
has existed since the 1960s at the latest. As widely criticised, why the concept of design
thinking’ in the 2000s looks new is because they do not clearly refer to the existing
research on the designers’ way of thinking, and the concept is delivered to a new
audience, management executives, as a new practice for innovation. Despite the lack of
academic rigour, the concept is argued and promoted by some design practitioners and
design scholars (Kimbell, 2011; Johansson-Sköldberg et al., 2013). Both Kimbell (2011)
and Johansson-Sköldberg et al. (2013) recognise that IDEO and Roger Martin are the key
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(2013) regard IDEO’s way of designing as one of the distinct discourses of design
thinking, the following sections overview the supporting arguments of design thinking to
involvement of management scholars (e.g., Boland & Collopy, 2004b; Martin, 2009)
management scholars, Richard J. Boland Jr. and Fred Collopy, publish a book titled
and design. This is based on inspirations from the experience of working with a notable
architect, Franck Gehry, for their new building of Weatherhead School of Management in
Cleveland, and the book includes essays by scholars participating the following
workshop.
They propose the concept of ‘design attitude’, which is compared with ‘decision
attitude’ business managers usually take. The decision attitude assumes that finding
options is not difficult, but the selection of the best option is hard. By contrast, the design
attitude assumes that designing a good option is difficult, but once an excellent option is
designed the selection is not an issue. When this attitude is taken, the risk of making
mistakes is less considered than the risk of failing to develop a better option than
options that are already identified in order to avoid a wrong selection. In their concepts,
the selection of ideas is the key issue for business people, and the development of a
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better solution is the main concern for designers, and they argue this design mindset is
developing the concept of the design attitude is Frank Gehry, a frequently mentioned
Michel Schrage (2000) and Stefan Thomke (2003) mention IDEO as one of the best
practices of fostering an experimental culture for innovation. Also, the success of P&G,
example of innovation by Design Thinking (Lafley & Charan, 2008; Martin, 2009). The
value of design asserted by IDEO is supported by not only management academics but
IDEO themselves also promote their methodology. In the early 2000s, Tom
Kelley, then General Manager of IDEO, published ‘The Art of Innovation’, which introduces
Littman, 2001). More recently, Tim Brown (2008), CEO of IDEO, published an article,
‘Design Thinking’ in Harvard Business Review. The two publications by IDEO being
compared, their practice and attention seemingly changed through the 2000s. In Kelley’s
book, most of the examples are about new product development. By contrast, the main
hospital. This suggests that design in IDEO is no longer only about designing physical
objects but the whole context surrounding products or services. The example of Thomas
Edison as a Design Thinker, introduced by Brown, suggests that the approach for
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innovation should be holistic, and the holistic approach to problems is even regarded as
a key element of design thinking. Brown points out that Edison not only invented light
bulbs but also developed the system of generating and supplying electric power. The
development of the entire system, from design thinking’s point view, was the key factor
Brown mentions that designers were traditionally only in charge of styling so that
they were assigned in the late stage of product development and only provided an
additional value.54 However, he claims that nowadays there are three key aspects that
designers have to consider for making innovation: technical feasibility, financial viability
Brunel as another example of a design thinker. The railway system he built is still an icon
of the industrial revolution, but also he did not only consider the technological side of the
journey to the passengers. This implies that the concept of design thinking does not
necessarily derive from design in the traditional sense. Rather, having a more holistic
Despite the popularity of their methodology, as the authors at IDEO heavily rely
on the examples of their own projects as a member of IDEO, it raises a question whether
their concepts represent the practice of designers in general (Kimbell, 2011). However,
part of the discourse of design thinking can be seen as an argument only about their
own practice (Johansson-Sköldberg et al., 2013), and there are still some essential
conceptual elements they provide for this research. One is how Brown describes their
54
The value of styling in design is an unsettled subject. For further arguments, see Tonkinwise
(2011), Brassett & O’Reilly (2015).
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design process. While he divides the process into three phases of inspiration, ideation
and implementation, he makes the boundaries blurred by using the analogy of space to
describe the design process. This indicates that the design process is highly dynamic
and iterative, or even chaotic. Another key aspect of their argument is the holistic
perspective used in Design Thinking to see problems and the solutions. This is from
possible solutions, he claims that design approach takes a balance among the three
innovation. The common points are argued in ‘The evolution of design and design
thinking
methodology and design thinking. This subsection clarifies how design and design
thinking have been evolving from designing tangible things to designing intangible things
There are some researchers arguing the evolution of design. Analysing a corpus
of literature relevant to design, Findeli and Bousbaci (2005) find three types of the design
concepts: the object- or product-centred model, the process-centred model and the
actor- or stakeholder-centred models. They argue that the object-centred model was the
dominant model by the middle of the twentieth century. The process-centred model
appeared only after the 1960s, and the emergence of the actor-centred model was in the
late 1990s or in the 2000s. The authors also analyse this change from the use’s
perspective and identify the steps historically corresponding to the former models. For
users, the shift moves from objects to functions to experience or their way of life. This
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evolutional, typological model indicates that the focal point of design moves from
Another framework showing the evolution of design is The Design Ladder (Dansk
Design Center, 2001; Ramlau, 2004; Whicher et al., 2016). This framework consists of
four stages of adopting design in organisation. The first step is ‘No use of design’. This
indicates that the organisation does not systematically utilise design for their business.
The second is ‘Design as styling’. At this stage, design is used for styling of a product or
a service at the end of product or service development. The third is ‘Design as process’.
Design is integrated in the entire design process as a work method involving various
discipline. The final stage is ‘Design as strategy’. Design is one of the strategic aspects
transition of design’s role, it suggests that design deals with more strategic and
Through the analysis of the relationship between neoliberalism and design, Julier
(2017) points out that the roles of design have accumulated the complexity as a subject
providing a specific solution to one tackling more intangible and contextual matters.
subject to specific outcomes such as interior and graphics. In this phase, problems
themselves were clear and what design needed to provide was solutions for those
issues. As the complexity and uncertainty in the society increased, the role of design
moved from mere problem solving to problem defining or problem finding (see also
Kruger & Cross, 2006; Dew, 2007; Brassett & Marenko, 2015). Identifying what needs to
be solved itself turned to be the main issue for many organisations. Therefore, the
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approach became popular methods among design communities (see also Salvador et
While such deep learning of the current context is useful to define problems and
improve the situations, the demands of organisations gradually shifted from the current
issues to potential issues and opportunities for the future (e.g., Bentham, 2017; Joyce,
2017; Buehring & Liedtka, 2018). This trend requires design and design thinking to deal
with value creation for the future. It does not necessarily derive from problems but
produce new values (Ceschin & Gaziulusoy, 2016). Such contexts lead the shift of design
management from one for product design to more integrated concepts of design
management including design thinking and designing business models (Erichsen &
This subsection has reviewed some arguments and frameworks to clarify how
design and design thinking has evolved from problem solving to problem defining to
value creation. I also indicates that design expands the subjects from tangible things to
intangible things including business models. The next subsection will initiate the
argument on how business model innovation and design thinking work together.
Sköldberg et al., 2013). He published a book ‘The Design of Business’ in 2009 as well as
many articles in commercial and academic journals since the mid-2000s including
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interviews (e.g. Dunne & Martin, 2006; Martin, 2007; Leavy, 2011; T. Brown et al., 2014).
He explains that the advantage of Design Thinking is to integrate the different modes of
reasoning. He argues that there are two types of thinking, which are analytical thinking
and intuitive thinking. Design thinking, he asserts, is taking a balance between two of
them. Analytical thinking is based on inductive and deductive reasoning; intuitive thinking
deals with another form of logic, abductive reasoning. The first two modes of reasoning
are for declaring that a statement is true or false. On the other hand, abductive reasoning
is for indicating what could be true. While design practitioners build the concept of
Design Thinking mainly from their practices (e.g., Brown, 2009; Lockwood, 2010b),
He also introduces the concept of the knowledge funnel that describes the
analogies represent the degree of uncertainty contained in each phase. In the earlier
stage, there are many possibilities for the shape of business. As moving to the later
stage, the possibilities are gradually eliminated, but the business becomes more
structured and formalised. This ends up with leading greater opportunities for the
business to be scalable. While the key issue in the early phase of business is the
validation of business ideas, the challenge in the later phase is increasing the reliability
of the business. He criticises that established organisations tend to favour reliability over
According to the theory, organisations generally engage the two activities. The former is
for discovering new opportunities and the latter is for maximising the value of the
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learned knowledge through exploration. A key issue is that devoting to only one of the
activities is harmful for the organisation in the long term (March, 1991). Martin claims,
already acquired. Instead, the two approaches should be organically integrated. He says
“the most successful business in the years to come will balance analytical mastery and
intuitive originality in a dynamic interplay that I call design thinking” (2009, p.6).
Those two advocates of design thinking, IDEO and Roger Martin, play important
roles in promoting the concept of design thinking. However, they are not only advocates
arguing the importance. Therefore, the following sections will also look into other
director of the Design Management Institute, edited a book titled ‘Design Thinking’
practice of designers, and they also assert their concepts about Design Thinking. In
Lockwood’s argument, Design Thinking is nothing new, and it is just design practice.
Because of this perception to design thinking, he does not strongly emphasise the
current demand for firms to be more innovative but rather describes the key aspects of
the context of Design Thinking. Although his framework uses a different terminology, it is
similar to the core elements of Design Thinking promoted by IDEO. For instance, as he
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regarded as a key characteristic of Design Thinking in the practice of IDEO (Schrage,
Also, this partly resonates with the concept of Martin, as it mentions business
analysis as part of Design Thinking. Lockwood even uses the term ‘integrative thinking’
in his explanation about concurrent business analysis. In detail, however, they are not the
same concept. Lockwood claims the key point of the integration of creative ideas with
strategic business analyses is to “learn from a more complete and diverse point of view”
(p.xii). Here, the main argument is the importance of broadening the perspective. By
contrast, Martin’s argument is that there are two activities in business and they require a
different way of thinking from each other. Although Martin claims the two way of
thinking should be integrated, it does not clearly indicate that they should happen at the
same time. However, the commonality is that both of them acknowledge the benefit of
agency based in San Jose, is another advocate of expanding the strategic role of design
from the design industry into other fields, notably business, and also claiming the
article describing the essence of his argument was also published in the Design
argument by drawing attention to the fact that the traditional management methods
such as total quality management and Six Sigma have already become the norm and no
be too complex to solve, and he applies the concept of ‘wicked problems’ to describe
these problems. He also conducts a quantitative research with Stanford University about
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what the top ten wicked problems the senior managers currently face. Neumeier argues
design as a discipline having the ability to tackle such wicked problems and also claims
key to survive and innovation provides the differentiation for it. Then, in his claim, what
drives innovation is design. Neumeier claims: “Design contains the skills to identify
possible futures, invent exciting products, build bridges to customers, crack wicked
problems, and more” (2008a, p.12). Compared to the argument of IDEO, although his
seemingly an overview of the transition from the traditional business approach to a more
customers, and this point also resonates with Cox’s definition of design as connecting
Neumeier also asserts the need for shifting from ownership to agility for
surviving in the fast changing market. In the past, he argues, it was effective to build
introducing the case of Kodak, he asserts that sticking to their existing assets and
culture could lead the organisation to a disaster. This sounds similar to what
dynamic capabilities (e.g., Teece et al., 1997), but what is interesting is that he proposes
the concept of agility for solving the problem. He emphasises that agility is an emergent
property from embedding the right mindset, the right skills and the ability of
collaboration for exploiting them to the culture of the organisation. In his argument, this
claims that it is not sufficient enough for organisations in non-design sectors to merely
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hire designers, but business people in the organisation themselves have to think and act
like designers. In other words, it is not sufficient to just have design skills as a function
but to embed the capability of design into the organisation as a culture to be a design-
oriented firm. IDEO also argue the importance of culture for managing innovation, but it
is basically about bringing their methodology and culture to the organisations of their
clients through a deep engagement with IDEO (e.g., Brown, 2009). Neumeier, here,
develops a more general description of the need for the design-based strategy from the
advantage by Porter (1979a; 2004a). Denning (2012) argues that the core feature of
competitive advantage is the strategy for building “safe havens for business”, but the
situation.
For gaining agility to solve wicked problems, Neumeier argues, the way of
thinking taught in business school does not provide a strong advantage, because it is
honed to address well-defined problems. On the other hand, design thinking provides the
skills for dealing with ill-defined problems in the situation. Therefore, the importance of
These are the positive arguments about Design Thinking, and they introduce the
as provide the methods of practising ‘design thinking’. Martin also emphasises there are
two activities in developing and sustaining businesses, and organisations need to take a
balance and integrate two of them. Martin’s concept does not highlight the change of
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competitive, and organisations need to adapt the design-based strategy and culture to
survive.
thinking of design (Kimbell, 2011). Some design practitioners also caution that the
concept of design thinking can mislead designers about the advantages of design
approach (McCullagh, 2010). McCullagh (2010; 2013) critically analyses ‘design thinking’
managers behind the fad of ‘design thinking’: the tacit side of designers' knowledge, the
integration of analytical and intuitive thinking, and the ability to be visionary. Behind this
proposal, there is his belief that design managers should focus on the point where the
following three elements of design management cross over: process, talent and context.
His concern on the fad of ‘design thinking’ is the narrow focus only on process in
the three factors, and it leads to underestimate the design challenges in the complex
community, he finds many design managers respond negatively to the trend. From this
observation, he raises a question where this gap between the responses of the two
points out a problem in the concept. The integrated way of thinking is called ‘design
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thinking’, but it arguably does not have a clear connection with the actual practice of
and methods as ‘design thinking’, to prove the value of their approach for managing
innovation. However, he criticises that what they argue as ‘design thinking’ is not much
different from the design process, which used to be discussed in the design community.
A problem of those discussions on design process is that it looks as if there was a clear
process that innovation can be intentionally managed when it is properly followed, but
the design process in the real world tends to be chaotic that it is almost impossible to
emphasising the importance of process and correctness of design, this idea undervalues
and context in design management, which are relatively underrated in the argument of
Referring to Verganti (2010a), he claims that getting closer to users like business people
Regarding the concept of ‘talent’, he asserts that the quality of designers cannot
be built up just by one or even several workshops. It can be developed only in design
practice, and the development takes time. By contrast, in IDEO’s concept of ‘design
thinking’, Kelley and Kelley (2013) emphasise everyone has the creative capability and
encourage people to regain the confidence to exercise their untapped creativity. Kelley
and Littman (2006) introduce ten characteristics for turning organisations to be more
creative, but they clearly state that their official position in the organisation does not
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have to be innovation managers, and anyone can play the roles in the organisations. Also
the argument of ‘design thinking’ highlight the significance of collaboration rather than
However, if carefully looking at what talent means in his context, the argument
looks different. ‘Talent’ here apparently means people who survive the harsh
competitions in design school and the job market in the design industry, and it implies
Interestingly, to explain the value of those talented people, he highlights the importance
of the aesthetic aspect of crafts and denounces that design thinkers tend to underrate
the aesthetic values. He continues that, because of the aesthetic aspect of design, senior
managers can hardly acquire an essential design skill only in a couple of workshops.
Here seems to be confusion about thinking like a designer and being a professional
designer.
arguably hire many talented designers in the sense of McCullagh. Also, they hire talented
experts in other fields such as ethnography, psychology and even management. There is
a possible hypothesis that ‘design thinking’ might not be a competitive edge for IDEO in
the traditional sense. This is why they publish their knowledge on their design process
and design methods. Rather, as McCullagh asserts, those talented professionals in IDEO
might provide their competitiveness in the design consulting industry, which even can
effectiveness are different matters. Crafting skills might be very useful for the
improvement of design effectiveness, but for design correctness, the skills seem to be
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less important. The problem is that, even if designers create high-quality products, it can
be a waste of their time and effort if customers do not want the products at the end.
In the context of the traditional design industry and discipline, design correctness
and effectiveness are equally important, or the latter can be more important, as what to
design is clearer in the context. On the other hand, in the context of innovation, design
correctness is often more important than effectiveness as what to design is not evident.
When firms enter a new market, what to produce is highly uncertain. This point
resonates with the assertion in the entrepreneurship community. The highest risk for
entrepreneurs is making what customers do not want (Blank, 2005; Ries, 2011).
design managers are changing. It makes them have to consider not only design
effectiveness but also design correctness. A problem for design managers is that the
traditional design skills are for the former, and new skills have to be acquired for the
latter.
before, Martin asserts there are two modes in business. Compared to the two modes,
reliability. In both of management and design, there are two types of activities and the
skill set required for each type is different from each other.
problems and challenges, often categorised as wicked problems (Buchanan, 1992), and
this shift probably changed the balance between the importance of design correctness
and that of effectiveness. His argument can be read as a warning about the
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As we have already seen, Simon (1996 [1969]) is often referred to as a person
formulating one of the distinctive definitions of design. He argues that design is to make
a situation preferred, but it sounds like what should be made preferred is obvious.
However, in the current condition of the business world, what problem should be solved
is not clear. From this point of view, the domain of design is expanded from mere
Critiques of human-centredness
Confusion in the argument of human-
centredness
McCullagh’s argument criticises not only the entire concept of ‘design thinking’
but also human-centredness more specifically. He refers to Donald Norman and Roberto
Verganti as the key authors of criticising the movement of ‘design thinking’, especially
human-centredness (Verganti, 2009; Norman, 2010; Norman & Verganti, 2014). They
claim that human-centred approach is effective only for incremental innovation, but not
1998; Norman, 2004), but more recently he has claimed the importance of technological
point of view, from which innovation is formulated by changing the meaning of products.
For making the change, only following customers is not sufficient enough, and it requires
management is that there are already many established technologies, but most of them
are not adequately commercialised (Cox, 2005). That is why, for example, Moore (1991)
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argues the importance of the transition from a technology-oriented company to a
market-oriented one for crossing the chasm in the process of the diffusion of innovation.
However, Norman’s concern implies that the opposite problem happens when we
focus only on the market side of the business. Simply returning to technology-centric
following the methodology of ‘design thinking’, and a more holistic perspective is rather
as what ‘design thinking’ criticises. Verganti illustrates the case of Nintendo's Wii as a
difference often causes confusion about the advantage of human-centred approach. His
concern is that if firms observe users too closely, they would simply produce a better
version of what customers use, such as faster cars and faster game consoles.
thinking’. Why they promote the method of observation for innovation is to avoid the
exactly same issue. Traditional marketing methods such as surveys and focus groups
are convincing, but they tend to conclude that what they want is simply a better version
Because of this issue, the subject of observation is even not ‘main’ users of the
products. The method is named extreme user research in the context of ‘design
thinking’, and the subject of the research tends to be heavy users or non-users of a
mothers, who are entirely different from the usual target users for game consoles (Hall,
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2006). This approach is similar to the extreme user research in ‘design thinking’. The
point of this argument is not to support the argument of ‘design thinking’, but the human-
centred approach is seemingly not the same as a user-centred approach that Verganti
disputes.
However, as the cases of Verganti and the advocates of ‘design thinking’, the target of
the criticism is often market research based on data and statistics. From this point of
The reason why people should be seen as humans, in the argument of ‘design
thinking’, is to get out of logical assumptions that dominate the standards of the
industry. This is the key point of human-centred approach. While Brown (2008) proposes
using insights, observation and empathy for it, Verganti (2009) suggests partnering with
suppliers.
Based on this understanding, the two concepts do not completely conflict each
other. Rather, while the alternative approaches they propose are different, both of them
criticise the same thing, which is the approach towards innovation overly relying on the
customers say they want and identify what they really need. However, the emphasis on
cared about what customers say they want. This misconception provokes a similar
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criticism against user innovation, which is that human-centredness can only facilitate
incremental innovation (Bucolo & Matthews, 2011; Norman & Verganti, 2014). However,
as we have seen, the key argument of design thinking is rather opposite. Managing
innovation is a ‘wicked problem’, and for instance, Buchanan (1992) asserts that design
importance of vision, but the interpreters in the concept of Verganti do not need to be
designers. As McCullagh points out, even Verganti claims designers became less
visionary (2010a). Why he calls his concept design-driven innovation is not because he
refers to the practice of designers, but the word ‘design’ can be etymologically
Krippendorff (2006).
discusses the importance of envisioning the future and articulating a vision of how
things should be (McCullagh, 2008). The importance of vision for facilitating radical
innovation is difficult to deny, but what seems to be missing in this discussion is the
entrepreneurship, it is pointed out that most of the entrepreneurs more or less have their
vision but often fail because they stick to the vision too much and could not adjust their
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Comparing visions with ideas, Verganti (2010b) stresses the need for “visionaries
who will build the arenas to unleash the power of ideas and transform them into
actions”. He claims the importance of the implementation of ideas as part of the key
characteristics of visionaries. In other words, being visionary is not only conceiving new
ideas for the future but also implementing the ideas to the real world. This suggests a
is a way for designers to implement ideas and embracing the risk to turn it to be
opportunities.
This section has reviewed the arguments of criticising design thinking. The
review reveals, however, the criticisms are not directly against what the arguments of
design thinking suggest. Rather, some parts are in common to criticise the problems of
can be found in the debate of designerly thinking. For instance, Simon (1996) argues the
sciences of the artificial require a fundamentally different mode of thinking from the
sciences of the natural; while the latter is based on analytical modes of thinking, the
Although Simon does not use the term design thinking, his argument is regarded
as a source of the argument on design thinking (e.g., Boland & Collopy, 2004a; Kimbell,
2011). This is because, although the core of the argument is design of artefacts, his
concept of design does not strongly emphasise the physical aspect of design, but the
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subject of design is courses of action. Kimbell (2011) points this out through the
comparison with another definition of design in the same period, which is proposed by
A possible reason for this difference is that Simon himself is not particularly a
designer. His background has a broad range from Economics to Psychology to the
also not based on the practice of design, but engineering, and from his point of view,
design is part of engineering. The key point of his argument is that the origin of design
thinking is from the outside of design, even though it is cited as the starting point of the
Simon suggests that management should be treated as not natural science but a
science of the artificial, which should be based on design (Boland & Collopy, 2004a;
The validity of his argument is not the main topic here, but the important point for
this research is that theorising designers’ way of thinking, in general, raises the
possibility of applying the value of design to other fields outside design. His argument
already clarified the difference between the role of the analytical approach and the
synthetic one. Although Simon does not argue the need for integrating two approaches,
this clearly resonates with the concept of ‘design thinking’ or more specifically
55
Management scholars, Boland and Collopy (2004a) develop the concept of the design attitude
based on his argument. Also, it is claimed that his argument suggests the applicability of design
approach to managerial problems (Dunne & Martin, 2006), as he includes both design and
business (management) in the sciences of the artificial.
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Constructive thinking and
integrative thinking
Similarly, Cross asserts that the designerly way of thinking is ‘constructive’
thinking (1982). Constructive thinking in Cross’s argument is the same kind of reasoning
as abductive thinking. A key advocator of design thinking, Roger Martin also regards
This similarity in the two arguments makes the criticism by McCullagh more
sense. McCullagh argues that the model of ‘design thinking’ proposed by Martin is
seemingly not connected with the design practice from the design management’s point
of view. One of the key objectives of Cross’s argument is to identify the intrinsic values
of design apart from design education as specialist education providing extrinsic skills.
For Cross, therefore, it inherently should be possible for anyone to learn and adopt. For
McCullagh, on the other hand, the key subject of his argument in the article is to suggest
there should be the opportunities for design managers, and ‘design thinking’ should give
anyone can learn, there is an unavoidable conflict with the industry that is founded on
extrinsic skills. The arguments of designerly thinking and design thinking have a similar
Cross acknowledges, however, that designers have to cope with real problems
surrounding many constraints, and the characteristics of the problems require the way
because his argument is based on the comparison between design and traditional
academic disciplines. He describes that main objectives of the academic research are to
identify the best answer in a condition assuming that all the information is available and
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the traditional disciplines “legitimately conclude that further research is needed” (2006,
p.7). By contrast, designers need to propose a solution that is apparently the ‘best’
solution within limitations of time, resources and all other factors, even though the
Interestingly, his concept is very similar to the concept of ‘design thinking’ which
is currently popularised despite the fact that the current advocates do not clearly refer to
his concept. What is different at least is the context surrounding the arguments. The
extract the general aspects of design, which can be applied to the education for
everyone. On the other hand, the current argument involves the management scholars,
suggests that design is possibly established as a discipline already and the problem has
been shifted to how to integrate the discipline with the traditional disciplines.
design thinking in the recent debate including some critiques against it. The arguments
are mostly based on the assumption that designerly thinking and design thinking are
theoretically divided. Nevertheless, the literature review in this thesis suggests the
continuity between two of them. Also, while the arguments of designerly thinking and
design thinking are diverse and controversial, there are some key aspects that are
repeatedly argued. This section discusses some of the key aspects relevant to this
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1. The holistic approach
3. Agility
One of the key aspects is the holistic approach to innovation. Although it is called
‘design thinking’, it is not merely focusing on the design-based approach. Rather, the key
feature is to take a balance among the major elements of new solutions (Brown, 2009)
and ways of thinking (Martin, 2009). In business development, there are at least two
types of activities, exploration and exploitation, and the effective integration is required
for fostering innovation and building sustainable businesses. From the review of the key
texts, the priority of the activities mainly depends on the phase of the business. The
argument of design thinking tend to focus on the exploration phase of business, but
also, as Martin argues, firms need to take a balance between them. For identifying new
opportunities, one of the key points is to take a holistic view covering technical, financial
ideas. This resonates with the argument on innovation management. In the context of
innovation management, the importance of invention had been acknowledged, but how
to deliver the technologies to market has been an obstacle for facilitating innovation.
One of the key aspects of the design-oriented approach is that it takes the
learn’ is used as a catch phrase to represent the ethos. The argument of designerly
thinking also suggests that the design approach is not problem-focused but solution-
focused, which pay less attention to analysing problems but spend more time and effort
to generate solutions.
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The third point is agility. Neumeier (2008a) uses this term for explaining the
newly required capability of organisations for tackling ‘wicked problems’ they face. The
concept does not only mean the speed of change but also implies the flexibility and
adaptability of organisations. Martin points out that large organisations tend to rely on
ideas that are already verified but argues the importance of constantly validating new
agile, some scholars and practitioners introduce prototyping as a key element of ‘design
methodology and design thinking. This subsection clarifies how design and design
thinking have been evolving from designing tangible things to designing intangible things
There are some researchers arguing the evolution of design. Analysing a corpus
of literature relevant to design, Findeli and Bousbaci (2005) find three types of the design
concepts: the object- or product-centred model, the process-centred model and the
actor- or stakeholder-centred models. They argue that the object-centred model was the
dominant model by the middle of the twentieth century. The process-centred model
appeared only after the 1960s, and the emergence of the actor-centred model was in the
late 1990s or in the 2000s. The authors also analyse this change from the use’s
perspective and identify the steps historically corresponding to the former models. For
users, the shift moves from objects to functions to experience or their way of life. This
evolutional, typological model indicates that the focal point of design moves from
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Another framework showing the evolution of design is The Design Ladder (Dansk
Design Center, 2001; Ramlau, 2004; Whicher et al., 2016). This framework consists of
four stages of adopting design in organisation. The first step is ‘No use of design’. This
indicates that the organisation does not systematically utilise design for their business.
The second is ‘Design as styling’. At this stage, design is used for styling of a product or
a service at the end of product or service development. The third is ‘Design as process’.
Design is integrated in the entire design process as a work method involving various
discipline. The final stage is ‘Design as strategy’. Design is one of the strategic aspects
transition of design’s role, it suggests that design deals with more strategic and
Through the analysis of the relationship between neoliberalism and design, Julier
(2017) points out that the roles of design have accumulated the complexity as a subject
providing a specific solution to one tackling more intangible and contextual matters.
subject to specific outcomes such as interior and graphics. In this phase, problems
themselves were clear and what design needed to provide was solutions for those
issues. As the complexity and uncertainty in the society increased, the role of design
moved from mere problem solving to problem defining or problem finding (see also
Kruger & Cross, 2006; Dew, 2007; Brassett & Marenko, 2015). Identifying what needs to
be solved itself turned to be the main issue for many organisations. Therefore, the
approach became popular methods among design communities (see also Salvador et
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While such deep learning of the current context is useful to define problems and
improve the situations, the demands of organisations gradually shifted from the current
issues to potential issues and opportunities for the future (e.g., Bentham, 2017; Joyce,
2017; Buehring & Liedtka, 2018). This trend requires design and design thinking to deal
with value creation for the future. It does not necessarily derive from problems but
produce new values (Ceschin & Gaziulusoy, 2016). Such contexts lead the shift of design
management from one for product design to more integrated concepts of design
management including design thinking and designing business models (Erichsen &
This subsection has reviewed some arguments and frameworks to clarify how
design and design thinking has evolved from problem solving to problem defining to
value creation. I also indicates that design expands the subjects from tangible things to
intangible things including business models. The next subsection will initiate the
argument on how business model innovation and design thinking work together.
some characteristics in common. The similarity suggests the possibility and usefulness
of applying the design methodology to business model innovation. Also, at the practical
level, in both the management consulting and design consulting industry, the distance
between business and design is seemingly getting closer. For example, design for
business and innovation consultancy Doblin was acquired by a global business strategy
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firm, Monitor in 2007 (and both by Deloitte in 2013), and it was a rare case of the
leading design agencies have been acquired by organisations in other sectors such as
management consulting and finance (Accenture, 2013; Adaptive Path, 2014; McKinsey &
Company, 2015; EY, 2015). This could only mean the integration of business and design
at the division level, but at least this suggests the interest in the capability of design from
One of the key characteristics of design thinking is the holistic point of view. CEO
of design and innovation consultancy IDEO Tim Brown (2009) claims the importance of
Tom Lockwood (2010b) emphasises the concurrency with business analyses is a tenet
exist in business components that are possibly ignored. For instance, Osterwalder &
Pigneur (2010) produce a tool of quickly capturing a business model called Business
Model Canvas56, and the distinct advantage is to enable the users to have a swift
snapshot of their business situation. The canvas can help them to see the problems and
assumptions in their business from a relatively objective and holistic point of view. This
approach assumes that there might be opportunities for innovation in blind spots in the
56
Some scholars point out the similarity of business model canvas to balanced scorecard (e.g.,
Trimi & Berbegal-Mirabent, 2012; Pedersen et al., 2016). About balanced scorecard, see Kaplan
and Norton (1992).
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business. This common aspect suggests there are similarities between the ‘design
indicator of the similarity of design thinking to business model innovation. The design
process as space can be associated with the concept of minimum viable product (MVP)
2012; Blank, 2013; Münch et al., 2013). MVP is defined as a “version of a new product
which allows a team to collect the maximum amount of validated learning about
customers with the least effort” (Ries, 2009, para. 3). One of the key aspects of MVP as a
method is to implement a product for gaining feedback as quickly as possible even if the
product has been developed only at the minimum level for learning. In a sense, this is an
attempt to remove the boundaries among inspiration, ideation and implementation, and
take advantage of the learning from implementation in the earlier phases than the
The origins of the two approaches are apparently different, but both of them seek
a way of identifying problems and solving the problems through a more holistic
2.3.7. Prototyping
The previous subsection has shown the potential connection between the
concept of business model innovation and that of design thinking. There are some key
points in common, and the commonality suggests that the application of the design
regarded as an important aspect of the design methodology and process (e.g., Thomke,
1998; Buchenau & Suri, 2000; Terwiesch & Loch, 2004; Hartmann, 2009) as well as a key
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element of innovation processes in management (Leonard & Rayport, 1997; Mascitelli,
2000; Schrage, 2000; Thomke, 2008). As relevant terms to prototyping are varied,
however, this subsection clarifies the terminology of the terms relevant to prototyping
this thesis. As this research uses the literature as a data sources, an overview of existing
here are some terms used as variations of prototyping such as piloting and mock-ups.
Thus, this research includes these variations as part of prototyping as long as they are
and ‘prototypes’ as objects are not clearly divided in most of the literature on prototyping,
and it causes confusion about what the actual topic is in the argument (Blomkvist,
2011). Similarly, it is pointed out that this confusion can also be seen in the debate on
business model prototyping (Bucolo & Wrigley, 2012; Seidenstricker et al., 2014).
this thesis. Lim et al. (2008) clarify the difference between the two. They define that
“prototyping is the activity of making and utilizing prototypes in design”, and also
“prototypes are representative and manifested forms of design ideas” (p. 10). The
Furthermore, Sanders (2013) asserts that as fields that design contributes to expand, the
role of prototyping also changes. The focus of using prototyping was “to help us see
what it could be” (p.63), but in the expanded design fields, the focus also expands “to
help us […] to make sense of the future” (p.64). For this type of prototyping, prototypes
are not simply representations of objects but need to be tools for collectively exploring,
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expressing and testing hypotheses about future ways of living in the world” (p.64). As
prototyping in this thesis is for making business model innovation, which is a new area
for the design methodology, the argument in this thesis follows the distinction between
Distinctions of prototypes from other concepts are argued in some literature. For
instance, interaction design scholar, Lars Erik Holmquist (2005) distinguishes prototypes
attributes. In this thesis, prototypes are not strictly limited to the embodiment of
functions for two reasons. One is to avoid turning the terminology to be too complex.
The other is that this research rather regards prototypes as “learning tools” (Coughlan et
al., 2007, p.124). As for piloting, in the context of design thinking, the main objective of
prototyping is to get feedback and learn from building and implementing a product or
service (Brown, 2008; Lockwood, 2010). This point is sometimes argued as a notable
difference between prototyping and piloting, which aims at evaluating the feasibility of
representations are used for learning, they are perceived as ‘prototypes’ in this research.
Prototyping as an umbrella
concept
This part clarifies where prototyping is theoretically located among other kinds of
treats prototyping as a broad concept of learning form feedback including mock-ups and
Prototyping is not the only way to learn from trials and errors. More scientific
approaches such as randomised control trials and A/B testing are also argued as
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effective methods for innovation or even thought of as the most rigid approach (e.g.,
Ries, 2011; Bravo-Biosca, 2016; Phipps, 2017; Ripsas et al., 2018). Despite the rigidity,
however, some scholars and researchers also critically reflect that they are not always a
perfect solution and seek for alternative approaches (e.g., Edovald, 2016a; Pham et al.,
2016). Edovald (2016b) introduces a table showing the differences between prototyping
and RCTs made by Lucy Kimbell, Director, Innovation Insights Hub, University of the Arts
London (see Table 2-2). There are various differences, but one of the key differences
emphasised in their argument is the difference in the inference logic (see also Kimbell,
2015). While RCTs tend to use the inductive/deductive logic, prototyping follows the
logic is the preferable logic in the traditional research methodology. A question raised
from acknowledging the differences is that how to effectively use the two types of
approaches together. This point will be discussed after the following paragraphs argue
Table 2-2 The key differences between prototyping and other methods (adopted from Kimbel’s table in
Edovald (2016b) and modified by the author)
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Although the general definition of prototyping for this research is ‘learning form
originally asserted by a computer scientist, Christiane Floyd (1984). The variations are
exploratory prototyping (Floyd, 1984; Bischofberger & Pomberger, 1992; Budde et al.,
1992b; Lichter et al., 1994; Bäumer et al., 1996; Carr & Verner, 1997; Gedenryd, 1998;
& Pomberger, 1992; Budde et al., 1992b; Lichter et al., 1994; Bäumer et al., 1996; Carr &
Verner, 1997; Gedenryd, 1998; Hartmann, 2009; Nacheva, 2017), evolutionary prototyping
(Floyd, 1984; Crinnion, 1991; Bersoff & Davis, 1991; Bischofberger & Pomberger, 1992;
Budde et al., 1992b; Davis, 1992; Lichter et al., 1994; Pape & Thoresen, 1992; Bäumer et
al., 1996; Carr & Verner, 1997; De Santis et al., 1997; Nacheva, 2017).
(Table 2-3).
Table 2-3: A comparison of prototyping approaches (adopted from Nacheva (2017) and modified by the
author)
She points out that the key feature in these characteristics is generally argued as
fidelity. Each approach has a different level of fidelity from each other (see also 5.6.1).
Orientation indicates that whether the prototypes is made for representing broad
1984; Budde et al., 1992b; Beaudouin-Lafon & Mackay, 2012; Singaram & Jain, 2018) and
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vertical prototyping (Floyd, 1984; Budde et al., 1992b; Beaudouin-Lafon & Mackay, 2012;
Singaram & Jain, 2018)57. The former is prototyping representing broad aspects of the
subject, and the latter is prototyping for a specific aspect (see also 5.6.2).
include different types of learning activities in the concept of prototyping. From this point
of view, more experimental approaches such as RCTs and A/B testing can be regarded
scope of prototyping to capture how such different types of learning activities interact
each other. However, as we have seen above, the abductive logic is a key characteristic
of prototyping, and the attitude of actors using prototyping is important to learn from
feedback (Boland & Collopy, 2004b; Michlewski, 2008; Kelley & Kelley, 2013). This point
still in a nascent phase. Also, the discussion on innovation, business model innovation
and design thinking - the key concepts surrounding business model prototyping - are
diverse and not fully agreed. Thus, this literature review has initially attempted
There is an early debate on business model prototyping, but this tends to focus
Osterwalder & Pigneur, 2010). As literature reviews on innovation reveal, one of the
57
Singaram and Jain (2018) use the term as prototyping for checking the back end of a product.
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biggest problems in managing innovation is how to manage the complexity in innovation
processes (Dervitsiotis, 2012; Fagerberg et al., 2013b; see also Neumeier, 2008b). The
In this context, business model innovation and design thinking have become new
important concept for managing innovation is that it is effective to gain a simple but
inclusive view of a business in a rapidly changing market environment (Feller et al., 2008;
Doz & Kosonen, 2010; Blank & Dorf, 2012). Innovation has been regarded as a
technological matter, but it is claimed that mere inventions do not successfully capture
(Chesbrough, 2010). To fulfil this purpose, the simplicity and inclusivity of business
models are sufficient, and the approach of utilising business models for innovation is
argue the application of the design methodology to innovation management under the
complexity of design problems at least since the 1970s, but the argument tends to focus
of the approach. On the other hand, the newly emerging argument of design thinking
clarified the connection between the design methodology and innovation management.
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Design thinking is characterised in various ways, and one of the key elements is
and engineering. However, as the domain of design expands, the meaning and role of
of design outcomes called prototypes, and the main objective is verification of ideas and
prototypes are not necessarily physical, and the main objective is exploration.
exploring potentially viable business models, and it is argued mainly as business model
scarce, and the argument tends to focus on verification of ideas and mapping tools of
business components.
important subject for business model prototyping, but it is only part of the entire activity.
Also, while the verification of ideas is significant for business management, the design
is the inability of verifying the effectiveness of solutions. This confusion can be caused
by the vague boundary between business model experimentation and business model
prototyping. Examining the activity through the perspective of prototyping will enhance
to the later stage to scale (Abernathy & Utterback, 1978; Tushman & Anderson, 1986;
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Klepper, 1997; Blank, 2005)58, and the need for purposeful experimentation for managing
uncertainty in the early stage of business is identified (Murray & Tripsas, 2004).
Brunswicker et al., 2013; Girotra & Netessine, 2013; Halecker et al., 2014; Seidenstricker
et al., 2014). While it is mainly labelled as ‘experimentation’ (Bucolo & Wrigley, 2012),
Halecker et al. (2014) conduct a literature review and case studies about the drivers (and
the cause of failure) of business model innovation and assert the importance of
The theory of ‘wicked’ problems suggests that, for complex problems, trial-and-
error approaches may not lead the situation to be desirable as every trial influences
following actions and every solution is ‘one shot operation’ (Rittel & Webber, 1973,
p.163). In other words, each experimentation is unique due to the complexity of the
context so that it does not ‘guarantee’ the success of the solution in the real situation
problems (see also Neumeier, 2008b). As we saw in the argument of design research,
the use of the methodology and the analogy of science is possibly problematic for
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Abernathy & Utterback (1978) argue that there are target uncertainty and technological
uncertainty, and the former makes it difficult to invest in formal research and development.
Tushman and Anderson (1986) identify that there are competence-destroying technology
discontinuities and competence enhancing-technological discontinuities, and the former
generates more uncertainty and tends to be initiated by new firms.
59
The whole list of implications is (p.8):
• clearly identify current and future customer needs
• ensure a sufficiently future-oriented evaluation
• attach great importance to prototypes and pilot phases
• consider existing business models (cannibalization), resources, and brands
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1996; Rittel, 1972a; Cross et al., 1981; Schön, 1983) and even it could cause confusion in
the development of the design methodology (Bayazit, 2004; Cross, 2007a; Alexander,
1971; Jones, 1977). Nevertheless, the terms, ‘business model experimentation’ and
‘business model prototyping’ are often interchangeably used (e.g., Girotra & Netessine,
business model innovation is not often argued, but one of the exceptions is the
al., 2012; Johnson et al., 2013; Brunswicker et al., 2013). Different from most of the
between ‘experimentation’ and ‘prototyping’ (Bucolo & Wrigley, 2012; Brunswicker et al.,
2013).
validation of ideas more than exploration (Brunswicker et al., 2013). By contrast, the term
“thought experiments” (Sinfield et al., 2012, p.85) to reduce the cost, and regards a
business model as a set of variables (e.g., Sinfield et al., 2012). When cost reduction is
rather linear from the diversification of ideas to the selection of the best ideas (e.g.,
Sinfield et al., 2012). The lack of the articulation of the concepts causes the explorative
business model ‘experimentation’ (Bucolo & Wrigley, 2012; Brunswicker et al., 2013).
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Some researchers attempt to apply design thinking to business model innovation
(e.g., Sosna et al., 2010; Gilbert et al., 2012; Hawryszkiewycz, 2014). However, it is also
pointed out that there is still little research on how to explore the possible business
2013; Osterwalder & Pigneur, 2013), and the strategic role of design is not fully argued in
the research on business models and the experimentation in innovation studies and the
Although the argument indicates that the design approach may enhance the
capability of firms to explore and prototype potentially viable business models, it does
not develop a clear definition of business model prototyping and claims that the further
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Operationalisation of
the Study: Aims and
Approaches
This chapter describes the methodology used in this research. The first section
shows how the research question and research purposes of this research are
theoretical frameworks of business model prototyping. The following sections will show
Norman Blaikie (2009) regards research strategies as logics of inquiry and suggests that
they should help researchers to identify the starting point of research and the steps for
answering research questions. The first section, therefore, takes an overview of the
This research includes a literature review and a discussion of fieldwork that has
Relevant ideas from the literature review and findings from the fieldwork are combined
to generate an enhanced and more coherent theory (Dubois & Gadde, 2002; Dubois &
60
Scholars of Educational Psychology, Paul D. Leedy and Jeanne Ellis Ormrod (2010) assert that
there are two key functions of research methodology:
• To dictate and control the acquisition of data
• To corral the data after their acquisition and extract meaning from them
They rephrase the second part as the interpretation of data, and in sum the two of them can be
understood that the role of research methodology is to clarify how to gather and interpret data.
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Gadde, 2014), one that is crystallised in the form of a theoretical framework. An
sideways connections – has also been deployed in the development of our framework.
these to map the four dimensions (purpose, process, context, and engagement) that
constitute what we will show as the core vectors of the business model prototyping
framework. This basic version has been elaborated via the use of fieldwork findings
(from the expert interview and case studies) to create a more nuanced model, one that is
reflective of both theory and practice. We contend that this business model prototyping
framework is a substantive contribution to BMI theory and practice, which we will detail
further below.
model prototyping can be. This chapter describes the background of the question.
Behind the question, this research aims to contribute to the knowledge of how to
manage innovation through the design methodology that has been developed through
academic research and design practices.61 For designing research, it is suggested that
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Björkdahl & Holmén (2013b) claim that there are seven challenges that research on business
model innovation has to engage:
1. Definition and characterisation of business model innovation
2. Managing business model innovation (in established firms)
3. Experimenting, testing and implementing new business models (Murray & Tripsas, 2004;
McGrath, 2010; Blank & Dorf, 2012)
4. Business model scalability
5. Profiting from business model innovation
6. Business model innovation and changes in the eco-system
7. The role of capabilities for business model innovation
They also assert that key questions about experimenting business models are:
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clarifying the formulation of research questions is helpful as the starting point of
research (Creswell, 2012; Fink, 2013) and the questions work as a guideline for the
This research was initiated with a research interest, ‘how might it be possible to
manage business model prototyping?’. As this research progressed, however, the search
for cases gradually revealed that business model prototyping did not clearly exist as an
intentional practice. Thus, the direction of the research moved from ‘how might it be
argued as a characteristic of research on the abductive logic (Dubois & Gadde, 2002).
The research problem (Blaikie, 2009) behind the research question for this research has
been argued as the context setting in Introduction chapter. The study of research
purposes. Therefore, the next section overviews the argument on types of research
major types of questions identified: ‘what’, ‘how’ and ‘why’ (Blaikie, 2009).62 There are
• How do firms experiment with new business models? What are the “best” processes?
• How can firms test new business models in an efficient and cost effective manner?
• Are there patterns to business model innovation?
• How should firms implement changes in their current business model?
• What is the role of users in business model experimentation?
62
“Why questions ask for either the causes of, or the reasons for, the existence of characteristics
or regularities in a particular phenomenon. They seek an understanding or explanation of the
relationships between events, or within social activities and processes” (Blaikie, 2007, p.7)
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other types of questions such as ‘who’, ‘where’, ‘how many’ and ‘how much’, but they can
be categorised in the ‘what’ type of questions (Blaxter et al., 2010; Yin, 2013). The type of
(Blaikie, 2009). What it is has to be understood before it can be explained why it happens,
and why it happens should be understood for intervening to make a change. Therefore,
for answering the ‘why’ question, ‘what prototyping is’ should be answered.63
In this research, the research question was redirected from a ‘how’ to a ‘what’
question, as the data collection process revealed the practice of business model
nascent stage of the research (Edmondson & Mcmanus, 2007). Types of questions are
connected with research purposes (Blaikie, 2009; Yin, 2013), and it is argued that ‘what’
questions are mainly for the purpose of exploration and description (Blaikie, 2009).
(Edmondson & Mcmanus, 2007; Easterby-Smith et al., 2012; Bryman & Bell, 2015). From
this perspective, the objective of responding the key question is to build a theoretical
63
Reflectively, this sequential relationship among research questions is based on the assumption
that something already exists in a social context, and the objective of social research is to reveal
the phenomenon. This research, however, explores possibility of a new practice that even social
actors may not notice or exercise, and some part of a theoretical framework needs to be
developed through exploration. In this situation, what it is needs to be justify why it works, and the
identification of what it is may be done after realising why it works. For this research, it is difficult
to formulate what business model prototyping is without considering why it works or happens. In
this case, why it works is the complexity surrounding the process of managing innovation.
Without recognising the complexity, it is difficult to justify what business model prototyping
would be.
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model innovation, rather than to test it. In other words, the research purpose is
exploratory and qualitative approach to data collection and focuses on finding emerging
streams for future studies. More specifically, the research purpose is to develop an
Hence, one of the key tasks is to reveal the mechanism beneath the process of business
model development.
In sum, the purpose of this research is not to prove, disprove or compare existing
events but rather to discover the underlying mechanisms of the nascent research
domain. For responding to the research question discussed above, this research takes
strategy. While exploring the notions of social actors, this research also relies on existing
design.
design thinking in the literature as part of the sources to develop the theoretical
this research could need to modify the theoretical framework to fit with the context of
knowledge in two ways. One is for researchers of business model innovation and design
prototyping yet, and this the framework works as the theoretical foundation for further
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‘how prototyping, as used in design practice and valued in design thinking discourses,
Conclusion chapter will suggest possible directions for ‘how’ questions. The other is for
practitioners of developing business models and of applying design methodology for it;
abdicative thinking in design thinking is still not well grounded. Thus, the following
strategies, which are also applicable to social sciences. They are labelled as the
inductive, deductive and retroductive research strategy (2007, p.56). As the names
suggest, the forms of logical inference for these strategies are induction, deduction and
retroduction64 respectively. The first two forms contain two types of statements:
64
Retroduction is defined as a “mode of inference in which events are explained by postulating
(and identifying) mechanisms which are capable of producing them” (Sayer, 2010, p.72).
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“singular statements” and “general statements” (p.57). 65 The former states a particular
event in a particular condition, and the latter states all events of a certain kind in any
statement, and deduction is vice versa. The main purpose of the two inference types is
the terms, retroduction, abduction and even ‘hypothesis’ (Blaikie, 2007), his terminology
argues that while abduction is the style of logical inference, retroduction is “the form of a
deliberate and overarching logical method” (p.223). Based on the Latin derivations, she
claims, abduction means “leading away from” (p.227) and retroduction means
(Blaikie, 2007). For generating the hypothesis, it has to use a hunch or guess (Niiniluoto,
1999; Chiasson, 2005). Also, while the process of induction and deduction is “linear in the
65
Blaikie initially introduces these two, and then divides general statements to general and
universal statements (see 2007, pp.57–58).
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nature” (Blaikie, 2007, p.57), the process of retroduction/abduction needs to be recursive
to generate and prove the hypothesis (Chiasson, 2005; Blaikie, 2007). Thus, although
Peirce does not clearly divide the two terms ‘abduction’ and ‘retroduction’, ‘abduction’
should represent the aspect of moving away from a certain course of logic when facing
contrast, ‘retroduction’ should be the term indicating the cyclic aspect of Peirce’s
deduction and abduction for generating and proving hypotheses (Chiasson, 2005). In
this understanding, the forms of logical inferences are three types: induction, deduction
and abduction. Also, retroduction is an overarching logical process using the three types
of inferences. Thus, although Blaikie (2007) asserts the differences among inductive,
deductive and retroductive research strategy are based on the differences of the
Additionally, however, Blaikie (2007) also introduces the abductive strategy, which is only
appropriate for the social sciences. From the perspective of inference forms, the
retroductive strategy and the abductive strategy are confusing, as Blaikie (2007) admits
that both of them are greatly influenced by abduction. As this research adopts the
integrated version of the retroductive and abductive strategies, next subsection argues
66
The ontological and epistemological stance of this research is the following. For generating
new knowledge, it is necessary to acknowledge the logic of the research process, its underlying
assumptions and research approaches. Blakie (2007) asserts that the selection of research
strategies should be aligned with the type of research questions to answer, but researchers also
have to consider the philosophical assumptions about the nature of existence or reality (ontology)
and how the knowledge on the reality can be acquired (epistemology). These assumptions are
combined in research paradigms and establish the foundation for the paradigms (Guba et al.,
1994). Research paradigms are a set of philosophical perspectives or worldviews (Guba et al.,
1994; Creswell, 2013) that guide the actions and the activities of researchers throughout the
research process (Denzin & Lincoln, 2005) as well as it gives the validity to the research (Myers,
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3.2.2. The combined retroductive-
abductive research strategy
As the etymological meaning of retroduction is “deliberately leading backward”
(Chiasson, 2005, p.226), retroduction is considered as a logic asking ‘what must be true
in order to make this event possible?’” (Easton, 2010, p.123). This may sound like the
inductive approach, but Economist, Tony Lawson (Lawson, 1997, p.236) clarifies the
difference:
1997). There are diverse ways of categorising paradigms, but the common pattern of the
structures is that there are two classical extreme paradigms and the critical versions of
paradigms between the two (e.g., Chua, 1986; Orlikowski & Baroudi, 1991; Sayer, 2000; Blaikie,
2007). Positioned as the extreme paradigms are positivism and interpretivism (Proctor, 1998;
Sayer, 2000; Blaikie, 2007; Farquhar, 2012).
The positivist paradigm derives from natural sciences. The ontological assumption is that reality
objectively exists (shallow realist) (Blaikie, 2007), and it is epistemologically believed that it can be
captured by independent observers and their instruments (empiricism) (Orlikowski & Baroudi,
1991; Blaikie, 2007). The general approach of the research is testing theories for improving the
capability of predicting measurable phenomena (Myers, 1997). Positivists tend to collect data at
an observable level, and look for regularities and causal relationships in the data to generalise the
findings into laws (Gill & Johnson, 2010). On the other hand, in the interpretive paradigm, the
ontological assumption is that the reality does not neutrally exist and is socially constructed.
People subjectively generate meanings through the interaction with factors surrounding them
(idealist) (Blaikie, 2007). Thus, as for the epistemological assumption, the neutral stance of
researchers does not exist, and researchers are always involved in the situation to be studied, in
which beliefs, values, and interests of the researchers always influence their investigations
(constructionism) (Orlikowski & Baroudi, 1991; Blaikie, 2007). The critical version of paradigms
takes a critical stance to these extreme paradigms to be more realistic. Blaikie asserts the
retroductive research strategy fits with the research paradigm of social realism or critical realism
(Harré & Secord, 1972; Bhaskar, 2008). Critical realism is positioned as one of the key research
paradigms for social research alternative to the positivist and interpretivist paradigms (Wynn &
Williams, 2012). In critical realism, reality is constituted by not only the events experienced by the
researcher, but also events that happens even if it is not experienced by the researcher, and the
paradigm assumes structures and mechanisms producing the events exit beneath the events
(Blaikie, 2009). Critical realism acknowledges the value of subjective knowledge of social actors
as well as independent structures limiting and also helping the social actors’ action (Wynn &
Williams, 2012). Based on critical realism researchers can develop a detailed explanation about a
particular phenomenon in a certain setting. Methodologically, compared to positivism and
interpretivism, critical realism enables researchers to take a relatively wide range of research
methods, although the selection should follow the nature of the object of study and the learning
objectives (Sayer, 2000, p.19). Based on this understanding of the research paradigm, the next
section argues the theoretical background of research strategies and the selection in this
research. There are two versions of critical realism, one of which assumes that the structure
exists without the influence of social actors, and the other assumes that activities of social actors
rather construct the structure (Blaikie, 2007).
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Whereas [induction and deduction] are concerned with movements at the level
of events from the particular to the general and vice versa, retroduction
involves moving from a conception of some phenomenon of interest to a
conception of a different kind of thing (power, mechanism) that could have
generated the given phenomenon.
The reasoning style builds theories from phenomena, but it is not for identifying
general statements from particular incidents. Rather, the aim is to discover structures or
(Blaikie, 2007). As this point is similar to deduction, the retroductive research strategy is
regarded as including both the aspects of deductive and inductive research (Downward
& Mearman, 2007; Sæther, 1998; Ragin, 1994). However, it is also claimed that it is not
only an iterative process between induction and deduction but also “the process of
deductive inferences are used for the analysis of theory-based qualitative research, the
with data, and the researchers often ignore the aspects missed in the initial theoretical
framework. In contrast, retroductive and abductive research strategies treat the missing
parts as important subjects of the discussion of the findings (Meyer & Lunnay, 2012;
Wynn & Williams, 2012).67 The strategy, therefore, uses an iterative approach to
67
“Within critical realism, a single incident of a finding contrary to expectations would not
necessarily be the basis for falsifying a proposed causal mechanism. While this may be the case,
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As the origin of the terms suggests, the reasoning style on which abductive
research strategy is based is similar to the style for retroductive research strategy.
Therefore, the difference is characterised by not the reasoning style, but the sources for
developing technical descriptions of social phenomena (Blaikie, 2007). While the aim of
the abductive research strategy seeks to turn lay concepts and vocabulary of social
actors to technical descriptions for scientists (Proctor, 1998; Blaikie, 2007). To put it
concepts”(Dubois & Gadde, 2002, p.555), which is similar to induction. It is argued that
“an abductive approach is fruitful if the researcher’s objective is to discover new things -
other variables and other relationships. […] our main concern is related to the generation
existing theory” (Dubois & Gadde, 2002). This research is mainly based on the
retroductive research strategy, but also it appreciates the value of social actors’ notions
not fully articulated in the literature yet. The next section argues the combined approach
Blaikie (2009) asserts that the abductive research strategy can apply to answer
both ‘what’ and ‘why’ types of questions. Moreover, the combination with the
to the research purpose of ‘understanding’ (Blaikie, 2007). This research will adopt a
combination of the abductive and retroductive strategies. This section argues the brief
contrary findings would possibly lead to further explication of events, structure and context, as
well as additional retroduction to identify a mechanism acting to counter or nullify the proposed
explanation” (Wynn & Williams, 2012, p.801).
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background of the combined research strategy, followed by the section argues the
realism’ (Harré & Secord, 1972; Bhaskar, [1979] 1998), which ontologically assumes that
reality consists of three layers: ‘empirical’, ‘actual’ and ‘real’. The ‘empirical’ level is
constructed by what is observed. Beyond the observation, the paradigm assumes that
events and phenomena exist even though they are not directly observed, and constitute
the ‘actual’ level. Beneath the actual level are structures and mechanisms that make the
events or phenomena happen. These structures and mechanisms are regarded as in the
level of ‘real’. Thus, the purpose of the retroductive strategy is to reveal the structure or
In the argument of critical realism, however, the origin of the social structure is
not agreed. Philosopher, Roy Bhaskar (1998; 2008) considers that the social structure
shapes the actions of social actors, not vice versa. Philosopher and psychologist, Rom
Harré (Harré & Secord, 1972; 2002), by contrast, argues that social actors considerably
influence the social structure so that the perceptions of social actors are a major source
research strategy, Blaike (2007) divides it into the ‘structuralist’ version and the
‘constructionist’ version. The versions follow Bhaskar’s realism and Harré’s realism
respectively.
strategy (see Peirce, 1934; Chiasson, 2005). However, while the retroductive strategy
seeks for structures and mechanisms, the fundamental concern of the abductive
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scientific knowledge, which can be used for further refinement of the knowledge by the
same research strategy or forming a theory for other research strategies such as
retroductive strategy (Blaikie, 2007). Thus, the abductive strategy is generally based on
interpretivist paradigm, but it is argued that it can be applied for various paradigms and
work together with the constructionist version of the retroductive research strategy
(Blaikie, 2009). Based on this understanding of methodology and research strategies, the
next section argues the research strategy selection and the research design for this
research.
concept is emerging and there is not an explicitly shared understanding of the concept.
Also, the practice of design is expanding to untraditional design fields (Yee et al., 2013).
Thus, there is little literature directly arguing the subject, and on the other hand, it is
concerned that simply asking experts about what business model prototyping would be
might not produce a clear answer to the question, as different experts have a different
the combined retroductive and abductive research strategy, which is reviewed in the
previous section. The combined strategy allows researchers to take into consideration
The combination of the two strategies are argued as fitting with the research
perspectives (Blaikie, 2009), and it is also argued that including different perspective is
effective for triangulation (see Proctor, 1998; Haig, 2005; Blaikie, 2007; 2009; Abulof,
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2015). Thus, the combination supports using the theoretical ground of prototyping in
applicability of the theoretical framework to a new field, which in this research is the
development of business models. Hence, this research uses this strategy not only for
‘understanding’ the structure and mechanism beneath empirical findings but exploring
strategy takes an iterative and reflexive process moving between theories and findings
combining’ by business scholars, Anna Dubois and Lars-Erik Gadde (Dubois & Gadde,
2002; 2014). As this thesis borrows the theoretical framework to clarify the research
abductive logic (Dubois & Gadde, 2002; 2014; see also Juho-Petteri Huhtala et al., 2014).
The approach relies on both theories and empirical data, and also uses abduction. Thus,
this approach can be well coordinated with the philosophical foundation argued in the
Dubois and Gadde (2002) define systematic combining as “a non-linear, path dependent
process of combining efforts with the ultimate objective of matching theory and reality”
(p.556). They develop this methodological scheme for case studies, as they consider
that difficulty in case studies is to handle and combine various interconnected elements
found during the research process and the standardised, phase-based process does not
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The research process starts with a preliminary analytical framework, but it is
assumed that the framework evolves through an iterative and flexible process moving
around the theoretical framework, data collection and data analysis. During the process,
researchers might find unanticipated factors that could redirect the research to be a new
direction and eventually theories and empirical findings are matched to generate a more
robust framework. Figure 3-1 shows the key ingredients of systematic combining.
Framework
Matching
The empirical world Theory
Direction and
redirection
The case
Figure 3-1 The theoretical framework of systematic combining (adapted from Dubois and Gadde (2002))
One of the characteristics of this approach is the usage of a tight and emerging
categories of frameworks, tight or loose frameworks (Miles & Huberman, 1994), tight
the subject as well as to allow the framework to evolve during the research. While the
dichotomy of tight and loose frameworks fits with deductive and inductive research
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respectively, tight and emerging frameworks can work well the retroductive-abductive
may be needed at the beginning, especially for deductive and retrouctive research
and Lisa M. Amoroso (2010). It is also suggested that the hypothetical frames are often
formulated through literature review (Blaikie, 2009; Ragin & Amoroso, 2010). Therefore,
research with the retroductive research strategy starts from developing a document and
a model of patterns. Then, it moves to describe the context and possible mechanisms of
phenomenon. The abductive strategy starts from finding concepts and meanings of
social actors. Based on the findings, it moves to develop more scientific accounts that
theoretically understood in the early stage of the research, as it allows the researchers to
set significant questions (Haverkamp & Young, 2007; Creswell, 2013; Brinkmann & Kvale,
2014). Yin (2013) also argues that theory development prior to data collection is one of
the characteristics of case study research different from other qualitative methods such
Thus, the starting point was to identify issues in the practice of business model
innovation. Therefore, the exploration began from reviewing the literature on innovation,
business models, design and design thinking. The aim of the review is to develop an
concepts themselves are contested, and it is clear that the concept of prototyping in
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Through the review, this research develops a theoretical framework of
prototyping in design and design thinking, consisting of four dimensions, which are:
purpose, process, context and engagement. This framework provides the preliminary
framework for further investigation. The dimensions are used for framing the learning
outcomes of interviews and case studies, and the details of the dimensions are argued
Similarly, in systematic combining, theory and literature play a different role from
inductive and deductive research, in which the review of existing theories and literature is
used for finding research gap in existing knowledge. However, the systematic combining
approach takes a stance that theories cannot be developed without empirical findings,
and empirical findings cannot be understood without theories. Thus, it assumes that all
the relevant theories and literature might not be thoroughly reviewed before collecting
data as the process of collecting data and analysis could reveal the relevant theoretical
area of the research (Corbin & Strauss, 2015). Therefore, the attention is rather paid to
matching the theories with the reality and vice versa (Dubois & Gadde, 2002).
clarifying the theoretical landscape of the research subject, but also as data sets (see
Dubois & Gadde, 2002) to explore various fields of studies from innovation studies to
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important part of supporting the intellectual credibility of findings (Eisenhardt, 1989).
Furthermore, key concepts for this research of business models and design thinking do
not have widely agreed-upon definitions (Johansson-Sköldberg et al., 2013; Täuscher &
Abdelkafi, 2017) relying only on social actors’ notions may result in incoherent
conclusions. Therefore, this research uses literature not only as a foundation for
clarifying its specific research contexts, but also as an important source for developing
framework evolved through matching theories evaluated from the literature with data
from primary research. Based on this understanding of the methodology, this research
started by developing an initial framework with literature and synthesised it with findings
key elements: agility (e.g., Doz & Kosonen, 2010), tangibility (e.g., Hornecker & Buur,
2006), complexity (e.g., Thackara, 2005) and synthesis (e.g., Kolko, 2009). During the
research, the framework evolved to one that consists of purpose, process, context and
rather than ‘how it might be possible to manage it’. This shift happened as it was
identified that the initial question was rather premature than expected during the
sampling process. To find suitable cases, I had meetings with experts and consultants in
the relevant areas such as product design and service design. Some of the responses,
however, indicated that even the experts and consultants were looking for ways to
prototype business models and it was difficult for them to identify suitable cases to give
the answer to ‘how to prototype business models’. From these interactions with the
industry, I shifted my research focus from ‘how to manage’ to ‘what business model
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prototyping might be’, as the absence of an explicit framework of business model
Such a shift had been expected, as this research evolved through reflections on
each phase and explored three areas of activities: problem definition, data collection and
theorisation (Figure 3-2). The research was initiated by my previous learning and
experience and started from understanding the contextual setting. After the context was
captured not only through my experience but also the literature review, a research
question, ‘how might it be possible to manage business model prototyping?’ was set as
a provisional question for anchoring the starting point of the expert interviews. Through
the expert interviews, it was identified that a theoretical foundation of business model
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prototyping itself was not widely shared.
2008; Harrell & Bradley, 2009), and the content was used for gaining insights through
reflection (Schön, 1983; Bolton, 2010; Johns, 2013). The reflection led this research to
redefine the research questions, which strengthened the connection between this
research and the contextual issues on business model prototyping research (see Dubois
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& Gadde, 2002). With the redefined question, this research further explored actual
practices through case studies and the theories supporting the practices through
literature review.
The findings from the empirical exploration were used as sources for developing
also conducted to strengthen the validity of the framework, and this research suggests
that business model prototyping is not a single method but a methodology for
facilitating business model innovation (Figure 3-3). The author’s stake in the research
relevant theories and practices to build the theoretical framework of business model
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prototyping (Dubois & Gadde, 2002; Dubois & Gadde, 2014). As my research interest sits
between the contexts of business and design, using the network of my university for
setting the sites and finding cases was an effective catalyst to find the starting point of
research, and my expertise and the position as a researcher had been directed to
qualitative data gathering and analysis on the basis of reflective practices (Schön, 1983;
Johns, 2013). As the research journey map (Figure 3-3) shows, such reflections led the
research to move back and forth among problem definition, data collection and
theorisation. Brassett and O’relly (2018) point out that collisions and swerves - changing
directions – are the key activities in creative practices. From this point of view, it is easier
creative practitioner, especially following the design thinking approach (e.g., Boland &
Collopy, 2004b; Rodriguez & Jacoby, 2007; Brown, 2008; Lockwood, 2010a; Kolko, 2011;
While this research borrows the structure of social research using case studies
(e.g., Blaikie, 2009; Farquhar, 2012; Yin, 2013), the process contained various collisions
and swerves. The main reason is that the research subject, business model prototyping,
does not exist as solid cases as case study approach expects, but it was rather a
theories and randomness that collisions and swerves provided. As the theoretical
foundation of this approach, I selected ‘systematic combining’ (Dubois & Gadde, 2002;
Dubois & Gadde, 2014), which iteratively develop the theoretical framework through data
gathering.
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The first large iteration was after the expert interviews. The reflection indicated
that the question of what the practice of business model prototyping is itself is not clear.
Coming back to the literature for research methodologies, I found that Blakie (2009)
asserts that the research should move from what question to how question. In the initial
plan of this research, what business model prototyping was supposed to be more
explicit than I found in expert interviews. While their knowledge is insightful such as the
impressiveness to the context. However, those learning points were not well structured
but still anecdotal. Therefore, I redirected this research question from a ‘how’ question to
open up the possibilities to provide more suitable solutions (Dorst & Cross, 2001; Adams
et al., 2011).
used as a strict methodology but rather a part of data set as Blaikie (2009) suggests.
Thus, the findings from the case studies is also used for the insights for developing the
outcome
• Case Study 02 – Proposing new projects to real clients is one of the biggest
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The findings are synthetically combined with the existing frameworks of
Kolko, 2014). As a part of the technique, for instance, this research used affinity diagram
to synthesise finding and gaining insights (see Tate et al., 2009; Hanington & Martin,
2012) (Figure 3-4). The process followed the divergent and convergent thinking process
148
Figure 3-5: The divergent and convergent thinking process (adopted from Brown (2009))
The case studies and the framework development was followed by validation
interviews. The main purpose was to validate the framework, but the findings were also
used for the further development of the framework through the same divergent and
By reviewing the whole process, it is clear that the research was not simply
gathering data to verify the framework but rather an iterative and creative activity to
generate a possible framework. In the process, my role and stake was not a researcher
who merely listen to the practitioner’s notions but actively engage with the creative
One of the outcomes from the attitude as a creative practitioner in this research
is Stretch, a card game for exploring possible business models (see in 8.1.1.2 the
appendices) (Figure 3-6). The card game is made based on the findings and insights
149
Figure 3-6: An image of Stretch (taken by the author)
(Dubois & Gadde, 2002). While data collection and data analysis tend to be argued as a
separate subject in some of the guidelines for case study research (e.g., Eisenhardt,
1989; Farquhar, 2012; Yin, 2013), it is asserted that social research should be regarded
as a cyclical and iterative process rather than a linear process, and the research design
should consider the room for flexibly adapting to the findings in the later stages of the
68
For theory building through case study, Kathleen M. Eisenhardt (1989, p.533) suggests the
following steps:
1. Getting Started
2. Selecting Cases
3. Crafting Instruments and Protocols
4. Entering the Field
5. Analysing Data
6. Shaping Hypotheses
7. Enfolding Literature
8. Reaching Closure
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review is necessary to show the connection of cases with existent theories and
Especially, case study research tends to be iterative when the purpose is theory
building (Eisenhardt, 1989), and the data analysis is based on explanation building (Yin,
2013).69 Thus, the need for adapting iteration is acknowledged, as flexibility is important
in qualitative research to develop a theory (Eisenhardt, 1989; Dubois & Gadde, 2002;
Blaikie, 2009; Yin, 2013). Furthermore, the importance of matching theory and reality is
claimed (Glaser, 1978; Dubois & Gadde, 2002) and the process of matching needs to
take a non-linear and path-dependent process (Dubois & Gadde, 2002). In the process,
data collection and data analysis frequently overlap each other (Eisenhardt, 1989).
Corbin and Strauss (2015) assert that the process is moving among data collection,
hypothesis generation and comparisons. In the matching process between theory and
reality, data collection and a search for complementary theories can be conducted in
For this research, the data collection was initiated with the major elements of
business model prototyping from literature in mind, but the concurrent literature review
for finding more suitable theories gradually revealed that the dimensional model of
prototyping. This process is in line with the matching process mentioned above. The
69
Yin (2013) suggests that the possible iterative steps for explanation building are following
(p.149):
• Making an initial theoretical statement or an initial explanatory proposition
• Comparing the findings of an initial case against such a statement or proposition
• Revising the statement or proposition
• Comparing other details of the case against the revision
• Comparing the revision to the findings from a second, third, or more cases
• Repeating this process as many times as is needed.
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reflectivity during the data collection is regarded as important to avoid to forcibly fit
findings with a framework developed in advance (Glaser, 1978; Dubois & Gadde, 2002).
research strategy and systematic combining, the key methodological aspect of this
• Using a parallel literature review with data collection and analysis to match
background of this research relevant to innovation, business models and design thinking
framework from the notion of social actors, through fieldwork such as expert interviews
and case studies in particular. Eventually, this research takes a combined abductive-
theoretical framework of business model prototyping. Findings from the fieldwork are
integrated with theories and frameworks from initial and parallel literature review. The
actual process is an iterative process as the research journey map (Figure 3-3) shows.
Data collection
Although the importance of literature in this research is emphasised in the
previous section, it is also not reliable to use only literature as a source of data as the
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theoretical argument of business model prototyping is still at an early stage. Therefore,
this research undertakes fieldwork to collect empirical evidence. The data collection
activities can be categorised into three types, which are initial expert interviews in the
relevant industries, multiple case studies of related activities and validation interviews
this research. As this research is explorative, the samples of interview candidates are
chosen on the basis of reputation and body of work in fields relevant to business model
prototyping, such as business model design and service design. Additionally, a snowball
about potential candidates for further data collection. With the permission of the
The initial purpose of the interviews was finding cases for the case studies, and
the questions were directed to understand how it might be possible to manage business
model prototyping more than what the framework of business model prototyping would
be. After the theoretical framework had been developed, the findings were re-analysed to
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• How to test/explore possible business models?
discovering new concepts to develop (Gioia et al., 2013). The interviews follow the
parallel. Thus, the interviews also follows the flows of interviewees to reveal their
research with cases as a type of data. In social research, ‘case studies’ are understood in
various ways such as a research design, a research methodology (e.g., Perry, 1998) or a
data collection method (Blaikie, 2009). 70 This variety of the interpretations causes
confusion about theorising what case studies are. However, it is reasonable to think that
case studies are not a particular type of research design nor that of collecting data, but a
way of selecting research units to study, as the way of collecting and analysing data can
be flexible to illustrate cases (Hammersley, 1992; Hammersley & Gomm, 2000; Stake,
2005; Blaikie, 2009; Miles et al., 2013). Thus, this research regards case studies as not a
research strategy but a type of data bounded by predetermined criteria. Also, case
studies are suggested to fit with the retroductive and abductive research strategy
70
For instance, Perry (1998) defines case study research as “a research methodology based on
interviews that is used in a postgraduate thesis involving a body of knowledge”.
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(Dubois & Gadde, 2002; Blaikie, 2009).71 This research relies on critical realism as the
research paradigm, and case studies are well-matched with critical realism for
developing a theory of complex events (Dobson, 2001; Harrison & Easton, 2004; Easton,
2010; Wynn & Williams, 2012). Research with case studies “investigates a contemporary
phenomenon in depth and within its real-life context, especially when the boundaries
between phenomenon and context are not clearly evident” (Yin, 2013, p.16). Therefore,
using cases as a type of data in this research is well coordinated with the research
when the research purpose is exploration, and understanding contexts plays a major role
in the research (Eisenhardt, 1989; Leonard-Barton, 1990; Dubois & Gadde, 2002; Voss et
al., 2002). A key advantage of using case studies is to enable researchers to get closer to
theoretical constructs and illustrating causal relationships from a more direct data
researchers have a choice, as multiple-case studies can have analytical benefits and a
single-case design can be vulnerable because all the resources turn to be one case and it
is hard to distinguish a phenomenon from the context (Yin, 2013). There is no ideal
number of cases for qualitative research, but Eisenhardt (1989) suggests the reasonable
number of cases is four to ten. If the number is too small, generating a convincing theory
71
It is considered that case studies are based on the inductive research strategy based on
inductive logic (Eisenhardt, 1989; Svengren, 1993; Farquhar, 2012), when only deductive and
inductive research strategies are considered. In this broad framework containing only deductive
and inductive strategies, retroducitve and abductive resaerch strategies are closer to the
inductive research methodology than the deductive one.
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from complexity, and if the number is too large, the complexity tends to expel the
business model development. The main reason is that soon after starting to search for
cases I realised that business model canvas and the lean startup methodology are so
popular in the business development community that the findings can be easily biased
to support the tool and methodology if the cases are collected only from business model
development, in particular for startups. The overview of the lean startup methodology
prototyping is still not fairly developed as a solid practical approach, it is hard to collect a
Thus, the case studies of this research aim to understand the practice of producing
complex outcomes through an iterative approach. Then, the findings are integrated with
the learning outcomes from literature review and interviews to generate a theoretical
the cases were identified through snowball sampling (Blaikie, 2009), which allowed me
to utilise the university’s network to find cases. Each case represents a different context
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03 Policy Maker Government / Legal Large Reconfiguration 2 (project manager / Stakeholder
service external designer) maps
as we have seen in 1.3, the attitude to uncertainty and complexity is identified through
this research as the key criteria of the cases regarding business model prototyping and
innovation. Therefore, while it might look inconsistent to include the case of Ministry of
Justice and not to include large commercial organisations, the level of uncertainty and
complexity of their issues they faced was in common with other cases.
Complexity As a social It needed to involve There are multiple They needed to find
enterprise, they various departments in stakeholders in the a solution to satisfy
needed to not only their own organisations policy making process, the new market
satisfy financial as well as their clients. and the process itself itself and also the
requirements but tends to be complex. client.
also provide social
values.
Case 01 was the case of a newly set up social enterprise and they needed to
validate their business model or modify it with the market demand (Tootill, 2014). As a
social enterprise, they needed to seek how to produce social values and it added another
Case 02 was a university looking for a new revenue stream different from their
core business, which is providing higher education (University of the Arts London, 2012).
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Although their core business is stable, finding new revenues streams for them were
complex and uncertain processes as they had to deal with new types of clients and
implement more digital and agile processes to make policies (Takwale, 2015). As they
traditionally used more rigid, phase-based processes to make new policies, the
policy making process tends to have various stakeholders, and it brought high
Case 04 was a private company seeking a new business model for a client
company that planned to enter a new market. The client had a certain brand awareness
in their own country, but there was no presence in the UK. While the client was
successful in the existing market, they had to manage the uncertainty of entering a new
market.
with prototypes. The organisations were chosen from the different fields in order to
and sizes are varied, all the cases are using a prototyping approach to identify
opportunities with new business models. Although this research acknowledges the
importance of sizes and industries for the selection of cases, it prioritises capturing
For the first case, small and even large events worked as prototypes to identify
possible new business models. In the second case, pitches to clients and actual project
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management were prototypes for figuring out the viability of new businesses and
cultivating capability of realising the new businesses. The third case includes a map
prototype extracting feedback from various actors. In the final case, business model
discussions among actors. To reveal the detail of the cases, the data were collected
Interviews
The interviews are semi-structured and open-ended for focusing on key aspects
of the research and also keep the space for exploring unexpected insights through the
interviews (Yin, 2013). The questions are focused on understanding interviewees’ views
and one hour, and are audio-recorded. Most of the interviews were face-to-face, with a
The key interviewees are the core members of the process such as co-founders
and project managers. Also, external actors such as consultants are included. For
finding interviews, gatekeepers were found, and an initial interview with them was
conducted.
For the first case, the key interviewees were two co-founders, and a mentor of
the accelerator program they were involved was interviewed. The second case includes
interviews with project manager, studio manager and the director of the division. In the
third case, the project manager and external designer were interviewed. For the fourth
case, the founder had an interview with a prototype of a business model on Business
Model Canvas, and also two external research consultants were interviewed.
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The process is designed as an iterative process, and the data collection are
dynamically conducted for being flexibly responding to new knowledge that can be
to be adaptive to newly identified interesting subjects and adjusting the direction of data
collection with accumulative knowledge and insights (Edmondson & Mcmanus, 2007).
The interviewees include mainly two types of people. One is people who are in
charge of managing the iterative process, such as founders and project managers. The
other is those who are in a supportive position, such as mentors and designers,
map or a drawing. Therefore, this research treats these materials as an important source
contents) is accessible, it is used for underpinning findings and gaining further insights
about how business models (or business ideas) are developed and refined. Also,
published sources such as websites and magazine articles are collected when they are
accessible. In addition, for cast studies, multiple sources are preferable to strengthen the
argument (Yin, 2013). This benefit of multiple sources is argued as triangulation to verify
the accuracy of data (Denzin, 1971; Yin, 2013). Furthermore, multiple sources are useful
for researchers to reveal unknown aspects of the research subjects (Dubois & Gadde,
2002). Thus, this research uses the data to complement findings from interviews, but
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3.4.3. Validation interviews
After conducting the case studies, findings and the theoretical framework are
developed, and the document is used for sharing the proposed theoretical framework of
abductive logic. Thus, the proposed framework is tentative, and it is reviewed by experts
from relevant practical fields to strengthen the external validity of findings. The
The interviewer shares the slide in advance and also described key points during
the interview. As the objective of the interviews is not collecting answers to specific
questions but clarify the gap between the practices, questions are not set up for the
interviews to keep their questions intentionally guided. Instead, the interviewer asks the
interviewees to raise questions if they do not understand some part or feel a gap
Data analysis
The collected data is analysed through building a more comprehensive
explanation fitting with findings from the fieldwork (see Yin, 2013), as the objective of
this research is not confirming an existing theory but developing a possible theoretical
development, rather than theory generation” (emphases in original) (Dubois & Gadde,
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2002, p.559). This thesis follows the approach as the main goal of the analysis is to
(Farquhar, 2012). Another reason for choosing this approach for the data analysis is
that it is hard to set up rigid propositions prior to data collection, as the subject of the
research is a new application of a design approach to external matters, and so were not
fully theorised in advance. For such research topics, iteratively developing an explanation
empirical findings (Yin, 2013). The analysis of data is conducted by taking notes after
interviews, clarifying what was and what was not argued (Farquhar, 2012). The findings
from the fieldwork are reflectively compared and combined with the findings from the
literature review, which is also continuously conducted during the data collection. The
key findings are holistically generated from the data and sorted into a table of the
summarised findings are integrated with theoretical findings from literature to revise and
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Fieldwork
This chapter shows findings from the fieldwork. The fieldwork has three
activities: expert interviews, case studies and validation interviews. Each section has
subsections of overview and findings. Overview describes the background and context
of each activity. Findings show key learning points from the data collection. In Case
Studies, each case has a summary to synthesise findings for this research.
Expert Interviews
4.1.1. Overview
The objectives of expert interviews were to find potentially suitable cases for the
case studies and understand how they perceive the concept of business model
prototyping in their practice and how they manage it. The expertise of interviewees is
business model design, social innovation, social enterprise and service design (see Table
Harrell & Bradley, 2009), and the following table shows the protocol:
Questions
Introduction The main objective of this research is to theorise business model prototyping, and I would like
(5 minutes) to know your experience and perspective on the subject through this interview.
Would you have any questions about this research and this interview?
Final thoughts Would you have any final thoughts on business model prototyping?
(5 minutes) Would you have any other topics you think we should discuss?
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Recommendations Would you know any cases that you think it would be relevant to this research?
of cases
(5 minnutes)
The interviewer took notes during the interview and also audio-recorded the
interview. The record was transcribed to review afterwards. Although the interviews were
explore key aspects of their approach without preventing by formality. The contents are
holistically interpreted and matched with findings from the case studies and the
literature review.
4.1.2. Findings
In the expert interviews, prototyping is perceived as a learning and explanatory
activity (EI02, EI03, EI04). The perception is in line with the literature of design thinking
regarding prototyping as exploration (e.g., Brown, 2009; Leifer & Meinel, 2011). An
problems in the business models at an early stage rather than verifying ideas (EI03,
EI04). While exposing business ideas to potential customers in an early stage is argued
This perspective suggests that further understanding of target customers can reduce
the cost and loss of prototyping as well as prototyping is used for evaluating and
validating findings from qualitative customer research. This resonates how prescriptive
associated with building physical representations, it is also pointed out that the main
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development of prototypes (EI03). Whether it should involve a physical representation of
ideas depends on the objective of prototyping. In literature, it is also cautioned that there
is a risk that prototyping can make the developer of prototypes stuck in the idea
EI03). On the other hand, the importance of organisational culture is also emphasised in
some interviews (EI02, EI04), and it is pointed out that prototyping is not a process but
principles (EI02 – “we run workshops on the principles of prototyping to that hopefully
when the organisations start to plan their prototype, they're using those principles
keeping a little forefront to their mind to design an effective and a useful prototype”).
This suggests that while a structured process is helpful for implementing prototyping in
the business model development, merely following a structured process without setting
a proper context might not have an impact on making an organisational change. While
each interviewee has their own approach, the Lean Startup methodology was often
As for participants, finding early adopters is identified as a key activity for the
innovation process. The diversity of participants is also argued (EI01). Although the
identify a normative set of participants for business model innovation in general. Rather,
exploring the context supports the identification of main actors to involve in prototyping.
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developing viable business models (EI01). “Get out of the building” has become a
keyword for business people to have direct interactions with customers to gain insight
(see Blank, 2005). The value of ethnographic approach popular in design practice is also
recognised (EI01). Variables are always different and understanding the clients’ context
is a key activity for developing business models (EI02). Thus, applying one tool for all the
cases is avoided or believed to be not sufficient (EI02 – “because they have such
different projects and different types of work there's no use like one tool which
encompasses them all and they all use in their work”). The interviews suggest that
although there are various tools for exploring business models, it is recommended to
integrate findings from the tools with insights from the exploration of the market or the
As one of the main objectives of prototyping is the exploration of new opportunities, the
organisational culture are important factors to support the openness during prototyping.
Thus, overconfidence (EI03) and attachment to initial ideas (EI02) are regarded as
negative factors to prevent from conducting prototyping and gaining feedback from
preventing their clients from learning from the insights through prototyping. In an
interview (EI03), the difference between prototyping and piloting is emphasised, and the
suggests that the difference of fidelity influences the role of prototyping. In the
argument, prototyping is conducted with less cost and effort, and possibly multiple
prototypes are built at the same time. However, piloting usually uses one pilot as it
requires more cost and effort. Thus, piloting could increase risk instead of reducing it if it
is built without the verification of the idea. Moreover, it is asserted that prototypes are
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not necessarily 3D representation but can be sketches if they work for testing ideas
(EI03 – “prototyping is not necessarily building something, but it could just be testing an
articulating your idea”). From experts’ perspective, how and what to learn is a
fundamental issue rather than how they are built. In the learning process, the
perceptions of the main actors are important (EI02), and overconfidence could stifle the
learning process (EI04). In the literature, it is also pointed out that participants who
evaluate the result of prototyping tends to be attached to the initial ideas (Leonardi,
2011), and the same point was mentioned in the interviews (EI02, EI04).
Case Studies
4.2.1. Overview
The case studies include four cases from various contexts. The case studies
prototyping.
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4.2.2. Case Study 01 – Supa Academy
(Social Enterprise)
Background and mission
Supa Academy is a London-based social enterprise founded in June 2014 by two
co-founders. Their mission is “to provoke curiosity, build confidence and develop skills in
teenagers and young adults taking their first steps in enterprise” (Dominguez, 2014; Supa
franchise in schools called 'Supa Tuck'. The other was a founding member of SB.TV
online entertainment channel, mainly managing the movements of the youth culture.
The co-founders met each other through a Hackathon event, and after they had
formed their friendship for a while, they set up the social enterprise together. The trigger
was to apply for Bethnal Green Ventures, an accelerator program backed by Cabinet
Office and NESTA (see Bethnal Green Ventures, n.d.). They started with an idea of
developing a mobile app and a web platform for teaching practical business skills to
teenagers. Statistical reports indicated that young people spend 69% of their time on
mobiles and tablets. Also, regarding the competition in the market, although there were
and InspireEngine, they did not fully utilise mobile devices for education.
Through observing the market situation and competition, they initially expected
three revenue stream for the company: licensing with schools, paid online courses, and
However, through the interactions with thought leaders and potential customers,
the co-founders gradually realised that the touch points of the services should be both
online and offline. Based on this finding, they changed their key activity to hack events,
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providing hundreds of teenagers with opportunities to run their own business in a live
working environment.
an accelerator program specialised for retail business. They scheduled ‘the Supa
Academy Hack’ (Supa Hack) in July 2015 as their inaugural hack event, and also as the
Based on these business models, they conducted their inaugural event, the Supa
Academy Hack. The event consisted of a one-day training session and a two-day pop-up
tandem with various corporate partners. The three-day event saw hundreds of young
people attending talks and workshops around retail and enterprise before building a
series of market stalls - selling both established and independent products, an auction
room, bar, food stalls, live music entertainment and an e-commerce platform - all
facilitated by under the 24-year-olds. The event saw 5,000 members of the wider public
attend across the two days and gained over 20,000 unique watchers over a live stream
channel and even more impressively, gained an additional 20,000,000 reach, visibility and
engagement on a variety of social media channels, printed and online news and media
London buses.
A project with one of the key clients was planned to be a prototype of this scheme. They
community to the recruiting process of those companies. They also found 20 business
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leads for the service through the further conversations with their potential corporate
Through the first event, the founders understood what they need to do to run an
event at the same scale. The integration of the recruitment business model into the rest
of the company proposition is still uncertain, and they need to have a plan for how they
hand, it was identified that Training Model and Partner Model needed to be reconfigured
as business models in the future plan. However, as those business models are
One of the key findings to lead Supa Academy to a new direction was that there
marketable digital skills. They discovered that a major corporate partner was struggling
with finding people who are highly skilled for digital tasks for their technology
department. Supa Academy observed that their corporate partners met the participants
outside the event for interviewing, and identified the potential opportunity. Desk research
convinced them further as they found it reported there would be the shortage of 745,000
with a recruitment service for corporations who need talented people and young people
who need a job opportunity. One of the key aspects of their business models is whether
they can be organically integrated rather than work separately, as the lack of resources
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is an obvious issue for them as a startup, and the efficacy of running multiple business
Value Value
Business
Young talent
education
recruitment
through
services
practice
Deliver Deliver
Create To young Create To corporate
people clients
Capture Capture
Findings
Initially, the objective of the prototyping was rather clear to be an evaluation of
their business model, as they had a clear picture of their business model, which was
based on events providing live experiences. There were some smaller-sized pre-events
for the Supa Academy Hack, and they were partly regarded as prototypes to evaluate the
feasibility of the main event. In hindsight, however, the main event, Supa Academy Hack,
can be seen as a ‘pilot’ because the event was fully featured, but interestingly it worked
the other hand, the smaller events in the early phases worked as improving the quality of
the main event rather than identifying a possible radical change. Thus, it was difficult to
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divide exploration with other activities clearly. Rather, the opportunities for gaining new
Regarding the position of prototyping, small events for evaluating the feasibility
was located in an early stage of the process. The main event as a pilot was at the end of
the process. However, when the process of finding new business models is seen as an
unstoppable process, the Supa Hack was an inaugural event, and it was still in the early
stage of a long journey of the social enterprise itself. Thus, it is hard to articulate where
the prototyping was located, but rather the learning opportunities for new business
models were spread into the entire process of business development. When considering
preliminary events as prototypes and the main event as a pilot, the process moved from
low fidelity to high fidelity during the process. For evaluating the event, they set various
These metrics are useful to see the impact of the event, but it seemed to be
difficult to interpret the data to be insightful findings unless there are already clear
connected with promotional activities of the business, the interpretation of the data can
be easily biased. Rather, one of the key insights from the event was identified with the
interactions with the corporate clients and observations of how the participants and
corporate clients behave. The insight led Supa Academy to develop a recruitment service
to conect the corporate clients with young people, which is described in a later section.
It might not be able to be observed that the iterative process led a major change of the
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direction. It is simply because the main event was already scheduled before those
events, and the mindset of the company was already set towards the success of the
main event. However, it could also be assumed that knowledge and experience were
accumulated to end up directing the organisation to a new direction when the mindset
are properly aligned to change. As the Lean Startup methodology introduces the concept
of ‘pivot’ to describe the moment of a major change of direction in the iterative tests of
business ideas (Eisenmann, 2011; Ries, 2011), it can be assumed that the iteration in the
prototyping process also does not evenly happened. The moment of the alignment of
the mindset rather happened after the main event. The theory of ‘windows of
opportunity’ (Tyre & Orlikowski, 1994) suggests that the window of opportunity to
change gets narrowed during the implementation process and an adaptation period
could follow. In this case, the learning points through the implementation were
may be a potential analogical concept for the phenomenon, but the further investigation
through interactions with and observations of their key clients. As the co-founders seem
to have ‘discovered’ the opportunity rather than generated it, their approach may fit
better with the concept of ‘serendipity’ in entrepreneurship (Dew, 2009; Austin et al.,
2012) than formally synthesising findings. Interestingly, also in the context of design, it
is reported that experienced designers behave more intuitively in the synthesis process
more structured approach is recommended (Kolko, 2010). However, when involving the
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customers for gaining feedback, it is concerned that the formality could reduce the
believed that the involvement of decision makers in the process of getting feedback is
preferable to delegating the tasks to others as the report to the decision makers can be
it requires rich feedback from customers and clients. Synthesis and serendipity are both
related to sense making, and the formality of the process can influence the quality of the
sense making. Theorising the relationship between the two concepts can reveal how the
formality should be managed to gain the best result. This will be an opportunity for the
further research.
The co-founders were main decision makers, but mentors were also influential
regarding Supa Academy’s strategic decision, especially as some of them were also
investors. The co-founders also regularly shared their directions with external experts in
a good relationship in the industry and the start-up community to gain feedback and
inspiration for finding new opportunities. The organisation was still small and sharing the
resources. The young people participating in the event were the main target of business
as a social enterprise, but in the situation at the time, the revenue stream from the
participants was still relatively small. Therefore, the influence of their voices seemed to
be smaller than the corporate clients. This can be rationalised as it is because Supa
Academy was still in the initial phase of operation and they need to secure the
However, the process of securing the investment from corporate partners also worked
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Through the interaction with young people through the hack, it was identified that
they were keen on getting opportunities through experience and there was a gap
between what they want and what the current education system provides. As Supa
Academy was still small, the co-founders had plenty of opportunities to interact directly
with their main customers, and it encouraged them to drive their business, and
This prototyping effectively used actual business situation through small events
and the implementation of the main events. The approach helped them to gain rich
feedbacks from their clients and partners. There were three business models in one
prototype, and it seemed that the profitability of the models influenced the further
decision for the future business models. In the prototype, the most successful model in
finance was CSR Model, and eventually, the voices of corporate partners led the
connections with big brands is presumably their advantage, they could understand the
One of the key factors of change is their vision. Their main goal is to develop a
comprehensive platform for teaching young people business skills, and the business
models are a means to build a financially sustainable business. Although starting from a
mobile app, Supa Academy realised that it could be harder for them to achieve the
mission by developing an app. Rather, they gradually realised that the app is a mean to
achieve their goal and not the core of the business. In other words, as they have a bigger
vision than just making an app, they were able to change direction to another potential
business activity. Also, while the inaugural event was successful, one of the key factors
driving the further development of their business model is the fact that there is still a gap
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with their vision. CSR model could be sustainable, and a potential opportunity was
behind it. More comprehensive supports for young people are their goal as a social
enterprise, and from this point of view their business does not fully exploit the market
opportunity.
whole experience of the event. This can be perceived as a prototype with very high
fidelity. As some scholars and practitioners claim, the extensively high fidelity of the
prototype could cause a positive bias about the quality of the event. On the other hand,
exposing the actual service to the real customers and partners also helped the company
to observe how customers and partners actually behave with their service.
As mentioned, the hack events became Supa Academy’s main activity, and the
major value proposition was to teach young people business skills through immersive
experiences in a live work environment. At the narrative level (Magretta, 2002), this has
been the core of their business models. At the level of archetypes and graphical
frameworks, their business can be modelled as three ways. In a simple framework, there
are three key actors in their business: the company itself (Supa Academy), young people
and corporate partners. One of the business models casts young people as customers.
In the model, the young people are trainees in their service, and they pay the registration
fee for the service. Another model is for young people as partners. In this model,
customers are public people to visit their pop-up events, and they pay for the products
and services sold and served in the events. In the third model, the customers are their
corporate partners, and Supa Academy provides them with opportunities for corporate
social responsibility (CSR) activities and PR through the events supporting young people
in the community.
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The following sections labelled the models Training Model, Partner Model and
CSR Model respectively. At the lower level of abstraction of business, the business
models were interconnected, and it is difficult to separate. For instance, Training Model
is supposed to improve the skills obtained by young people, and the improvement will
prototype in the categories of Houde and Hill (1997), as it represents a whole business
model as an event. Nevertheless, this does not mean it covers the whole of the business,
as it only represents part of the business when you see the bigger picture of the
business. Therefore, when the hack event is seen as a comprehensive business model,
the prototype seems to embrace the complexity of the business model. In contrast,
when seen as part of the bigger picture of their business, it appears a simplified version
of their business. The prototype is not as minimal as the Lean Startup methodology
asserts (Ries, 2011), but it is doubtful whether they could gain the same quality of
feedback from a more minimal prototype due to the complexity of what they are doing.
Obviously, there was a risk that the event could end up a complete failure for the
business, and it may be difficult to generalise every case of new business, as the co-
founders already had the entrepreneurial experience before this particular social
suitable for different situations can be a theme of further research, rather than simply
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4.2.3. Case Study 02 – Central Saint
Martins (University)
Background and mission72
Central Saint Martins (CSM) is one of the leading art and design colleges in
London, which was founded in 1854. Despite the long history of art and design
education, since the early 2000s, the college explored the possibility of exercising the
underutilised capability of art and design for managing innovation. In 2012, CSM moved
their main campus from Holborn to King’s Cross. The new venue had a potential
opportunity for a space hiring service. One of the challenges of this case was to integrate
collaborative projects involving students with venue hiring, as partly because the
from Higher Education Funding Council for England (HEFCE). Thus, integrating
education aspects with the venue hiring service was an important factor in this business
model development. Also, adding a creative essence was supposed to increase the value
created by the venue hire service for the clients as well as their students.
value proposition of CSM is to provide education of art and design for students. To give
students opportunities of working with various industries, CSM had provided not only
conventional education based on lectures and tutorials, but also live collaborative
projects with external firms. The venue hire service could have been a mere space hiring
service, which is called ‘cold’ or ‘dry’ hire, as the new venue seemed to be attractive
enough to gather potential clients. However, one of the concerns for the business was
72
Here is the background of participants for the research. This case study resulted mainly from
three interviews with the senior director, the project manager and the creative director. The senior
director was in charge of developing business for CSM in the area of innovation.
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that the value mainly relied on the novelty of the venue, and additional values were
needed to sustainably create values. One of the challenges for this case was to combine
value for their clients and educational value for students. Thorough iteratively upselling
projects, the business changed from a mere venue hire service to be a more integrated
event service with contents. One of the interviewees, however, still concerned that the
novelty of the space was attractive only for a short term, and the business model should
Findings
The overall objective was to find and develop a viable business model for the
new venue. Instead of using an extensive time for exploration, however, the project team
effectively used the opportunities of persuading clients for gaining feedback. Their
upselling process was effective for validating ideas as a business deal, and the outcome
of the projects expanded the customer values provided by their project. When a client
accepted a new project, the activity moved to implement the project, and the
offerings. This approach was enabled by their robust client base from past projects and
the brand value of the university. However, even with the stable business foundation, it
was difficult to propose a radical project from the early stage, and it took time to build a
relationship with clients as well as internal actors through running projects. The process
established the foundation for event production and student collaboration service as one
of the revenue streams for the college (University of the Arts London, 2014).
time to develop their project from space hiring to collaborative projects. It is also still an
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itself is shut down. They used the persuasion process as part of a learning process, and
the implementation process was also a key activity of understanding the viability of
process, the implementation process allowed the team members to learn and identify
further opportunities in more concrete ways. In this process, it looks like persuasion is at
the front end of the process, and it is followed by the development of the capability of
running business model. This cannot fit with the typical normative process model of
design (e.g., Liedtka, 2015), and it is difficult to identify where the prototyping part was
located in the process of business model development. As exposing their ideas to their
clients in an early stage, the process rather fits with the process of minimum viable
product.
One of the interesting points of this case is that a fire happened in the very early
stage of the space hiring service on the site. Although it could be regarded as a failure,
the experience also became an opportunity for learning how to manage the operational
issues. One of the interviewees emphasised how this accidental learning opportunity
was beneficial for further development of the projects. Obviously, there could have been
a risk damaging a commercial image of the site, but fortunately, as there was another
fire in London on the same date, the risk was mitigated enough not to prevent from
content (performance) through an iterative process with multiple projects. Also, the level
of involvement of other actors such as clients became higher in the later projects,
involving various actors such as clients and students. Moreover, in an early co-creation
projects, the project brief was given from the clients, as the co-creation of the project
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concept from an early stage was supposed to increase the complexity of project
management and required a high degree of mutual trust. However, a late co-creation
project achieved the co-creation from an early stage of the project, as the degree of the
mutual trust between the project team and clients were increased and the knowledge of
managing collaborative projects were also improved through the iterative process.
Although the project members did not have formal sessions of synthesising
a new offer for next projects. Also, as offering new projects to potential clients worked
as prototyping, the process of gaining resources was also verifying business ideas. In
other words, when the prototypes can gain resources, the feasibility of the business is
for upselling, there were not many constraints of offering the deal to customers. Rather,
although the projects were confirmed as a business deal, implementation of the projects
useful for gaining feedback from potential customers. This point was connected to the
fact that the proposals of projects to potential customers work as a learning opportunity
One of the projects they conducted was a replication of the same scheme for the
same clients. It was supposed to be easier to deliver, but it turned to be a less effective
as the team members became overconfident about their mutual understanding of each
other. This caused less effective communication among the team members. In the
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however, the theory of wicked problems asserts that it is impossible to solve the
problems through trials and errors as the complexity turns the problems to be always
new, and the result of a trial can influence the next trial (Rittel & Webber, 1973). This
finding suggests that, at least in the case of developing a business, the validation of
business models is not easily confirmed just because the business model worked
before, as the context surrounding the business model might be changed already.
Case 02 can be seen an extension of business models, but it still required several
iterations to figure out a viable coordination of business components. The real business
is not simply a model but including many actors in it. Thus, introducing new actors in a
business needed the designer to build trust among them and could require further
resources to be viable. For the business model development, the internal project
members played important roles as they mainly handled the direction of the projects.
education, there were additional key actors such as students and academics, compared
to a business model only for profit. Students can be regarded as customers as they
usually pay tuition fees for education. However, for the space hire service, the main
source of the revenue was corporate clients. Thus, students can be seen external actors
for the business model. Furthermore, as the implementation of the projects were
important, staff in charge of operation such as production were also key actors in the
process.
As the prototyping was based on the process offering new projects and
upselling, it is important to find clients who pay for the new proposal. The project
members utilised the feedback from clients by offering projects to learn. In this regard,
the prototype was developed as an actual offer to customers. Why it was possible is that
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CSM already had resources to provide the services and had an established client base
from existing businesses. One of the interviewees emphasised that clients also need to
be imaginative to accept unprecedented projects. This requires that not only the project
team but also the clients needed to have a positive attitude for new trials. Finding
potential clients and costumers is a difficult task, but thanks to the existing customer
base of the university, the project team was able to manage to find clients who were
willing to try new projects. As a result, CSM used the opportunities to test the feasibility
It was claimed by an interviewee that the college had a tendency to take risks for
new things, and it was helpful to explore new business models. Moreover, the mindset of
project members also influenced the quality of the project. Although tentatively there
was another project manager, the manager’s mindset did not fit with the role of
exploring opportunities. As mentioned above, the mindset of clients can also influence
Key learning activities, in this case, were mainly two types. One was proposals of
new projects to potential clients. The other was the implementation process of the
projects. The former was not detailed compared to the project itself, but it was
developed enough to convince clients to take a project. The latter can be seen a fully
developed business. Thus, in this case, the fidelity of prototypes was mixed following the
objectives. In the normative model of design, the process moves from exploration to
persuasion, but in this case, the order was the other way around. However, the fidelity of
prototypes or ideas moved from low to high. Different from products, collaborative
projects are difficult to produce before it is sold. Thus, in a sense, the order needs to be
prototype for learning the feasibility of the business model as well as establishing a
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foundation for developing next projects. Each prototype was an attempt of offering new
This case utilised sales activities for gaining feedback from actual clients, and
also the process of implementing projects was a key source of understanding the
viability of the projects and developing the capability of managing projects. Thus, the
scope can be seen as wide and holistic. On the other hand, how to capture the value or
how to sell was not much questionable as it was based on commissions for a project
Initially, there was no evidence of collaborative projects in the venue, and the
business ideas were represented in a verbal form. It was difficult for clients to
understand the value of the service, and it required clients to be imaginative as well as
the project team. After running some projects, visual materials such as images and
videos were produced, and they were used as promotional materials for gaining further
opportunities. The materials did not represent the entire business model, but it was
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Case 02: Central Saint Martins
Value
Corporate
Value event
Art and
services with
design collaboration
education with creative
students
Deliver
Deliver Create
Create To students
To corporate
clients
Capture Capture
Summary
This case study described how the venue hiring service was developed through
various projects. Although they did not intentionally conduct business model
Different from small firms and startups, the organisation had a robust customer base.
The existing customer base was successfully exploited for consecutively running
even running the same type of events, there were a certain amount of uncertainty during
managing the process, and frequent informal interactions among the small project team
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4.2.4. Case Study 03 – Justice Lab (A
Governmental Organisation)
Background and mission
Ministry of Justice Digital and Technology (MOJ Digital and Technology) was set
up to improve the experience when people access and use justice services. They
conducted a project, ‘The Digital Capability’ for defining and implementing digital
capability in Ministry of Justice. In this context, “digital capability” does not only mean
information technology (IT) skills for how to use computers and software but also the
capability of utilising digital resources online. They claim “‘Digital’ is an umbrella term. It’s
about having an innovative mindset and a fast-paced, user-focused style of working” (bold
in original) (Ministry of Justice, 2014). The concept follows five principles (Ministry of
Justice, 2014):
For implementing the capability, the project included various activities such as
As part of this initiative, The Justice Lab was founded as an internal project team
in Ministry of Justice. The main objective was to revise the policy making process and
introduce an agile approach for accelerating the process. This case does not directly
this case, shows similar patterns to the process of business model development through
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prototyping. Thus, this case is included as a source of inspiration for further
Findings
The main purpose of this research was exploration and implementation of the
agile process in policy making. The policy making process usually follows linear
processes called "Policy Wheel", and it takes 2-4 years to change. Thus, one of the
objectives of this project was to implement a more dynamic approach based on agile
development and design thinking (Takwale, 2015). Another challenge was the
improvement of the process of Family Law, as the usability of the service was low and
the service users needed to hustle when they used the service. Also, the cost structure
was unclear so that optimising the running cost for the service was another objective. To
tackle these problems, one of the key activities was to visualise the complex relationship
among actors and the process of the service. Thus, visualisation tools were often used
for making a complex situation understandable. In the project with the family law team,
the team members had numerous interviews with actors to visualise the complex
process of using the legal services. This visualised material was used as a
communication tool to gain feedback from actors as well as a source of inspiration for
further development of ideas and prototypes. In this regard, the map was used for
As this project was planned for a six-week project, the process was well
structured. Although prototyping was at the final stage, a mapping tool was used for
understanding the context surrounding the service. The map was a useful tool to gain
feedback and learn from the actors. From business model prototyping’s point of view,
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the initial stage can also be seen as part of prototyping. Thus, prototyping can be
divorces and marriages. One of the problems in the process was that the current
situation was not clearly understood. The project team used an iterative process based
on a format moving through four steps: discovery, alpha, beta and live (see Waterworth,
2014). In this case, the project was planned as a six-week project and took steps of
context, discovery, design and prototyping. Thus, the project team started from mapping
out the service process through the interaction with the actors of the service. As the
service involved various actors from service users to legal staff, the project members
had numerous interviews with each actor. Also, the project members conducted various
review workshops with the actors to confirm the findings from the interviews. Based on
the learning points from the interviews and workshops, the map was iteratively revised
During the process, the policy-making team identified that some of their
assumptions were unproven. For instance, the team initially expected that what service
to improve the usability of the service. However, soon after they started to have
conversations with the key actors, they realised that it was not necessarily a full-featured
online system to simplify the service. Through the iterative process, they realised the gap
between what they think to do and what the users actually needs.
In this project, various qualitative research was conducted, and the learning
points were reflected in the visualisation of the context, such as scenario planning and
persona methods. Also, after the process of deeply understanding the context of the
service, the project team developed prototypes of their possible new services. For the
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evaluation of the prototypes, the approach was divided depending on the characteristics
of the service. For instance, for the prototype of on-line forms for testing were actually
built up. However, some of the ideas were represented by storyboards and role playing,
and the results were rather difficult to evaluate by KPI. Instead of analysing measurable
metrics, the learning points and inspirations are used for further development of other
A contextual issue for this project was a diversity of the actors. The service
involved not only users of the services but also from judges to lawyers to social workers
to the tech department. Especially, judges were most influenced by the change of the
service process. Therefore, their involvement was inevitable. Also, Legal Aid Agency
(LAA) was the key department involved in this project. The diversity of the actors
influenced the process of this project, as the process needed to be heavily iterative to
However, the information sources underpinning the map was mainly from actual actors.
Thus, the validity of the map was considered as high. Regarding the prototypes of the
potential services, some ideas such as an online form were relatively easy to represent in
a situation close to reality. However, some ideas were difficult to set in a real situation
and needed to use indirect methods such as role playing and storyboarding. Additionally,
it also had various external constraints such as budgets, time and politics. Especially,
political contexts are influential in this case as the key actors were in governmental
organisations.
As the approach was new for the organisation, the project members did not only
implement the process but also gave training sessions to have a mindset suitable for the
approach. One of the problems of this project was that as the project was evolved, it
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gradually revealed that the implementation of the agile process required internal staff
fully committing the deployment of agility. However, it was difficult to identify a right
person for that position. This suggests that implementing an agile approach is a cultural
issue and required a firm commitment to cultivating the culture of using agile processes.
In this case, there were two levels of prototypes. One is a map representing the
complexity of the context surrounding the service. The other is the representations of
new service ideas. The former was represented on a two-dimensional map, and the latter
One of the important prototypes in the project was a visualised map of the
process and actors. For managing the complexity, the visualised map was used for
representing the complex context. The development of the map included numerous
interviews with each actor and review sessions with the interviewees. The visualisation
map was gradually developed, and it supported the participants to get engaged. The key
point is that the visualised map of service absorbed the complexity of the service and
Also, they developed various prototypes for different elements of the process.
Some ideas were able to be represented as an on-line form, and prototypes were actual
on-line forms. In another part such as the meeting point between judges and the service
approach, they used illustration to make the process tangible to gain feedback. The map
helped the participants to realise challenges they face in the process and also
successful points in the process. Policy making processes tend to rely on documents,
and it caused difficulty in communication among various actors. To avoid this problem,
a key characteristic of this project was to use visualisation rather than focusing on
documentation.
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Based on the research with the actors, the project team visualised a possible
pathway to access the private family law service. To gain further feedback, they pick up
key touch points of the service and developed prototypes specific for the touch points.
1. Smart Answer
3. Online Questionnaire
The prototypes were used for getting feedback from the actors.
The visualised map is not functionally interactive, but it was a useful tool for the
participants to engage with the project team to give their ideas and feedback. In this
sense, the prototype was highly interactive. For the prototypes of new service ideas, the
prototyped online form was technically interactive and was helpful to gain highly
also helpful for improving the engagement of the participants and target audience.
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Case 03: Ministry of Justice
Value Value
Create Create
Phase-based Deliver Agile Deliver
rigid process process
Capture Capture
Summary
Although this case did not directly deal with business models, visualisation was
used for managing the complexity of the context based on numerous interviews with
various actors. The visualisation in the map helped the project team to manage the
complexity of the context surrounding the legal service. It also enabled the participants
of the process to engage to give feedback. Interestingly, the map was also used to
absorb the learning outcomes from the iterative interactions with the actors by revising
the map.
One of the issues was how to evaluate the learning outcomes of the iterative
process. The project team responded to the rich learning outcomes from the process by
In this case, the prototypes can be categorised into two types. One is a map
capturing the complexity of the context. The project used their own format, but this
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approach is similar to other mapping tools such as business model canvas for business
model development, and service blueprint and customer journey for service design. The
map was a useful tool for achieving to capture the complexity of the service in a simple
deep commitment to turn the change to be sustainable. Although the project involved a
project team and external partners, the importance of an internal leader was gradually
revealed.
mainly specialising in supporting foreign companies to enter the UK market. The director
has a diverse business experience both in Poland and the UK. Therefore, their service is
diverse from supports for distribution to the consultations on marketing. Especially, the
developing the capability to be more multinational. Not only geographical diversity but
also industries the director has worked in span a wide range from the housing industry
PTS have a partnership with a sock manufacturer in Poland, which has an over
forty-year history and extensive capability of producing socks. The UK market was an
unfamiliar market for the manufacturer, and PTS was the exclusive distributor for the
brand in the UK. Thus, finding viable business models for the manufacturer in the UK
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Although the fundamental target market was the UK, PTS also considered
scaling the business globally in the long term, and reinventing the whole brand for
internationalising the business is another target for the future. As marketing activities,
PTS attended a trade show of products for children in the UK, and also set up a
showroom for the manufacturer’s products. However, to identify further opportunities for
socks, PTS used design approaches with design research consultancy, Studio INTO.
INTO conducted an intense visual market research and facilitated an idea generation
session. Based on the findings from the research and the session, INTO proposed
several business model ideas and PTS selected an idea to explore further. The following
Findings
In this case, the overall purpose of prototyping was to find viable business
models for the sock manufacturer in the UK. Exploration of possible business models
was done through the market and customer research by INTO. After the market and
employees of PTS and INTO to synthesise the findings from the research. INTO
allow PTS to evaluate which direction would be potentially most successful. Thus, in this
process, the main purpose of prototyping was evaluation. Once the founder gained
confident about a business model, he arranged a meeting with the supplier (the
manufacturer of socks). As the founder of the company had a good relationship with the
supplier, it was not difficult for the company to gain feedback from suggesting a further
plan for the future. When activities of learning from feedback are regarded as
prototyping, the process of this prototyping can be seen as for persuading the
manufacturer.
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The initial business model was a distribution model to the consumer market as
the manufacturer had their own brand and various product lines successful in Poland,
and using the asset was a less problematic approach. PTS started from joining a
tradeshow and setting up a showroom for the products in the UK. Soon after PTS
engaged with the UK market through the activities, however, they realised mismatch
between the market demand and the fashion design of the products. The realisation
urged them to explore new business models different from the current model for the
manufacturer in the UK. As a key research partner, PTS involved INTO at this point. INTO
conducted a broad visual and brand research on the sock industry in the UK, which was
followed by a workshop with internal staff and experts to generate ideas for possible
directions for the sock manufacturer. To evaluate possible business models generated
by the visual customer research, INTO summarised the output from the idea generation
workshop and identified three opportunities for PTS and the sock manufacturer. In the
review meeting, PTS showed their interest in a business model of working as an agent
for clients that need to have a small-batch production as the sock supplier had a
capability of flexibly producing socks with diverse colours and designs. Although the
members of PTS had various experiences of setting up new businesses, the fashion
industry, especially in the UK, was still new for PTS. Thus, their attention was paid to the
formation of alliances with key partners such as market experts and fashion designers,
as expertise in the fashion market was acknowledged as a lacked skill for supporting the
partnerships, and the advantage influenced the focus of their business activities.
Through design research by the partnership with INTO, potential business models were
identified. However, the proposed business models were still abstract and needed to be
verified. For instance, one of the identified value proposition was a flexible production
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allowing customers to produce a small amount, as the manufacturer can handle a
relatively small amount of production. However, the interviews with small fashion labels
revealed that the ideal amount of minimum orders is smaller than the standard of the
manufacturer. Thus, there is a gap between the identification of business models and
The internal staff in PTS mainly managed the process. As the director was an
prototyping process. Also, the other manager had a connection with the fashion industry
and influenced the learning sources for prototyping. INTO supported the process for the
preliminary visual research and organising a workshop and sessions. Also, Syntex, the
sock manufacturer, was a key partner and their decisions influenced the direction of the
business in the UK. Therefore, the director took care of the communication with the
partner and also used the opportunity to measure the viability of the business direction,
while he was determined to pursue the opportunity even if the response would not be
much positive.
In this case, the supplier of the socks had their own brand, and their business
model based on the brand was successful in Poland, but the replication of the business
model did not work in the UK. For instance, PTS joined a tradeshow in the UK with the
product lines in Poland, and the reception from the buyers was not all negative but not
as positive as in Poland. The feedback was gained from actual potential buyers. In this
sense, the environment was close to the real setting, and it made the company turn to an
business opportunities in the UK, a visual trend research and an idea generation
workshop were conducted, and three potential business models were developed in
diagrammatic maps. The map was developed by the internal members among PTS and
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INTO, and the diagrammatic maps were simplified representations of their business
model. Thus, the environment can be seen as virtually set up, and the simplicity allowed
the project members to quickly explore three types of potential business models. The
business model was still identified as a diagrammatic map based on the business model
canvas format, and further exploration was needed to confirm the viability of the
business model. Eventually, PTS was convinced with one of the business models to
confirm the viability. As the director had confidence and skill sets to establish
partnerships with various partners through his business background, he intended to use
PTS consists of a few members with their speciality and expertise. Therefore, the
business model canvas, the researcher discussed the director of PTS about further
steps to develop the business model. The director had a plan to talk with the suppliers
and develop the partnership among various actors behind their services before
contacting potential customers. The director considered that he could gain further
rather than continuing customer research. This action-oriented attitude resonates with
‘effectuation’ (Sarasvathy, 2008). During the process, the researcher suggested that
should be done before starting to make partnerships with key external partners.
However, the director also suggested that after making the alliances with key partners,
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they would understand better the market condition. In other words, the process of
making alliances works as a learning opportunity for developing the business model.
Based on the theory of effectuation, the attitude of learning through doing is a key trait
for entrepreneurship. On the other hand, the importance of customer research before
implementing businesses are also asserted. Therefore, the decision of whether moving
on the business model development or verifying the feasibility of the business model
cannot be simply made with a single principle. There seems to be a dilemma in the
decision-making process.
The representation of business models was used for the internal communication
for exploring possible business models and also negotiations with key partners including
The prototypes were developed mainly as narratives and business model canvas.
Thus, the fidelity was relatively low as a representation, but the simplicity was suitable
for quickly gaining feedback and responding to the learning outcomes. The director had
a good relationship with the sock manufacturer as a key partner, and the director
recognised that gaining a further support from the partner was an important milestone
for the development of the business. Thus, he did not heavily rely on the quality of
prototypes for the engagement with the partner, but rather agility of gaining the feedback
In this case, an overview of the agent business model was quickly captured
through an archetype and a business model diagram without articulating details of each
component of the business model. In this sense, the scope was not deep but wide. The
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In this case, business models were represented mostly in two levels. One way
was archetypes such as ‘agent’ business and ‘brand’ business. Using archetypes as a
to quickly share the outline of a business model (Massa & Tucci, 2013; e.g., Johnson et
al., 2008). Another way was a mapping of business components based on business
model canvas. The researcher had an opportunity to have a conversation with the
company with a business model canvas showing their potential business model. The
conversation revealed that which part of the business model needed to be articulated,
and it guided the following action. The director clearly understood the importance of
Value Value
Deliver Deliver
To To
Create Create customers in
customers in
Poland UK
Capture Capture
Summary
The interviews included the senior manager, the project manager and the
creative director to clarify how they manage the iterative process of developing business
models. This case study showed how PTS explored possible business models for a
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business based on the partnership with a sock manufacturer in Poland. Although PTS
started with a traditional distribution model, they identified other opportunities from a
creative workshop. They focused on a model from variously identified models and
moved to the negotiation with potential partners to formulate a partnership for value
creations. The process also worked as a process of evaluating the business ideas. The
director was aware of the fact that some part of the business model was uncertain, but it
what was the key issues on making innovations for the organisations. Row B is what the
actions relevant to design thinking in the case is. Row C indicates how familiar with
design thinking the organisations are. Row D shows which part of the business model
Design research
Agency:
High
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Although each case has a different connection to design thinking, the useful
insights for developing the framework were gathered. The key learning points from each
outcome
• Case Study 02 – Proposing new projects to real clients is one of the biggest
Surely, this connection is important to clarify the consistency of the cases. The
other key element that is identified is the attitude to uncertainty and complexity. As
discussed in the subsection for the criteria of the case selections, despite the
inconsistency of the size and the commerciality of the organisations for the cases, the
similar patterns were observed in how to face uncertainty and complexity. This aspect
can be used for selecting cases for the further case study research in business model
Validation Interviews
4.3.1. Overview
After the theoretical framework had been developed, validation interviews were
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As the expert interviews, this interview was also designed as semi-structured
interviews (Whiting, 2008; Harrell & Bradley, 2009) to be consistent, and the following
Questions
Introduction The main objective of this research is to theorise business model prototyping, and I have
(5 minutes) developed a provisional theoretical framework of business model prototyping.
Through this interview, I would like to validate findings and improve the framework from
your feedback as a practitioner and an expert.
Final thoughts What would you have any final thoughts on business model prototyping?
(10 minutes) Would you have any suggestions for further research?
The interviewer took notes during the interview and also audio-recorded the
interview. The record was transcribed to review afterwards. As one of the objectives of
this interview is also gaining insights, the interviewees were allowed to freely talk even
though it does not follow the pre-defined topics. The framework was not shared before
the interview, and the interviewer (the author) described what they were to see their
reactions.
4.3.2. Findings
Although the framework of the purpose consisting exploration, evaluation and
persuasion were accepted by the interviewees, some points were discussed. One thing is
criteria about what you are testing [is important]”). This point was also suggested in the
expert interviews (EI01, EI03). There is, however, literature suggesting different types of
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prototyping with different levels of clarification of preliminary hypotheses (e.g., Blomkvist
& Holmlid, 2011a). Another point is that there can be a purpose of ‘creation’ (VI04). While
exploration can be seen as a purpose including creation, it may simply imply exploring
the existing context not developing and proposing new things. The purpose, creation,
process model. An interviewee pointed out that using a formal process model was
seemingly problematic for a dynamic process such as design and prototyping (VI03). On
the other hand, another interviewee suggested that further articulation of the relationship
between different dimensions may be useful for the practical use to guide the process
(VI02). In the argument of this dimension, this research suggests that prototyping is not
part of one phase in the design process, but a philosophy and culture of design are
spreading into all the phases of the design process. If so, prototyping used in a different
phase may be a different type of prototyping methods (VI02). Thus, clarifying the
relationship between the phase and the type of prototyping methods is useful for
process (e.g., Case 01, Case 02) as also Bogers and Horst (2014) suggest in literature,
the division of the prototyping process between ‘managerial level’ and ‘designer level’ is
necessarily only for designers but all the participants (VI04). The other is that although
reflection is a key activity for design, it seems to be an embedded part of each phase
(VI03), different actors have a different view on what the business model is and it is
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participants is required to understand and prototype business models. Especially, who is
in charge of prototyping is influential (VI01 - “who will decide in a company” that we are
prototyping with a business model”). Regarding the environment, it is suggested that the
difference between real settings and virtual settings is less clear when the target of
prototyping is about future, as it does not exist yet (VI03). In the situation, the
Also, although, in literature, multiple parallel prototypes are useful to avoid the fixation of
ideas (e.g., Dow, Fortuna, et al., 2012), a question about how many prototypes should be
Problems of organisational culture and mindset are raised again (VI01 - “Propensity of
patterns are the conflict between using a business model and organisational culture
preferring planning (VI04), and lack of tendency of experimenting that allows learning
business models (VI04), and the discussion suggests the exploration of the literature by
Nonaka and Takeuchi (e.g., Takeuchi & Nonaka, 1986; Nonaka & Takeuchi, 1995; Nonaka
only being aware of the interdependency can help organisations to avoid sticking to a
certain aspect of a business (VI01). Also, further clarification of the relationship between
the context and the engagement (or what types of prototypes should be built in which
context) is practically useful (VI02). While the selection of fidelity depends on the context
73
About the relationship between complexity theory and organisational science, see Anderson
(1999).
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and the phase of the design process (VI04) as the literature also suggests (see Design
and design thinking subsection), it is also pointed out that “any product can be a
prototype in the long run” (VI04) as also identified in Case 01. This suggests that in
business model prototyping, the boundary between prototypes and final outcomes is
less distinct than prototyping for product design (e.g., Moggridge, 2007). While the
vagueness, it is cautioned that prototyping for business models and prototyping for
products and services as minimum viable products (VI04; about minimum viable
product see Reis (2009)). As this point is controversial with findings from other sources,
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Discussion: a
theoretical framework of
business model
prototyping
This chapter will re-address the research question and reflect the findings to
discuss the important contributions of this research. This research proposes business
theoretical framework of business model prototyping developed from this research. The
discussion reflects findings from the expert interviews and case studies with existing
theory from literature (see Dubois & Gadde, 2002; 2014), and uses the research
paradigm of critical realism, considering “reality is ‘real’ but only imperfectly and
to know it” (Sobh & Perry, 2006, p.1195). Thus, rather than examining the difference
between theories and empirical findings, this section aims to interweave theories and
findings to create a new theoretical framework. This section does not only discuss
findings from the fieldwork but also provides theoretical arguments that proposes
This chapter uses some abbreviations. LR, EI, CS and VI indicate Literature Review,
206
The collected data from fieldwork revealed that prototyping is not clearly applied
in the practice of business model development. The focus of the research moved from
framework, the existing frameworks of prototyping (Table 5-1) are reviewed and
Authors Blomkvist and Beaudouin-Lafon Jensen et al. Lim et al. (2008) McCurdy et al.
Holmlid (2011) and Mackay (2015) (2006)
(2007)
Discipline Service design Interactive design Engineering Human-Computer Human-Computer
design Interaction Interaction
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Figure 5-1: The frameworks behind the business model prototyping framework
While the existing theory provides the foundation of the framework, the findings
and insights from the case studies and the interviews contribute to the selection of key
dimensions and subdimensions. For instance, if you look at only the items in the lists of
prototyping dimensions (Table 5-1), there seems to be a lot of items relevant to what the
prototype is such as fidelity, interactivity and material. The insights from the case
studies and the interviews, however, rather emphasise the importance of other factors
Through this analysis and synthesis of data from the literature and the empirical
data collection, this research proposes a business model prototyping framework with
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Purpose
Context Process
Engagement
evaluation, and persuasion. The findings show that exploration is undervalued but is
prototyping is used is often regarded as phase-based (e.g., Seidel & Fixson, 2013;
Liedtka, 2015; Zott & Amit, 2015) – i.e. that it fits within clear set of goods or services
development processes – the results show how much impact an organisational culture
and philosophy have in the process of prototyping (Schrage, 1993; Thomke & Nimgade,
2000; Pering, 2002; Brown, 2005). ‘Context’ influences learning through prototyping. The
feedback. ‘Engagement’ with users and other actors in prototyping is a crucial factor in
improving the learning outcome (Beaudouin-Lafon & Mackay, 2007; Han, 2009; Rizzo &
Cantù, 2013; Bogers & Horst, 2014; Jensen et al., 2015). It is managed by fidelity, scope
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can be done through various methods and processes. Thus, business model prototyping
theoretical foundation to the design research community to expand the capability of the
of the existing frameworks shows, which will be argued more detail in the next section,
the theoretical grounds for prototyping are still mostly product-based concepts. This
Review of existing
frameworks
This section reviews five conceptual frameworks of prototyping in existing
literature. As various frameworks coexist, there are also various ways to select and
synthesise the key dimensions of prototyping. However, the main objective here is not to
business model prototyping. Thus, the selection and synthesis of the key dimensions are
based on the assumption that prototyping applies to something intangible and complex
problems (e.g., Brown, 2009; Lockwood, 2010b; Jobst & Meinel, 2014; Almahmoud et al.,
2016). Table 5-1 displays selected lists of prototyping dimensions from Human
measuring prototypes only by whether they are low fidelity or high fidelity is too simple,
and propose five dimensions for investigation: the level of visual refinement, the breadth
of functionality, the depth of functionality, the richness of interactivity and the richness of
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data models. As their main concern is on an interaction between computers and users,
scientists, Michel Beaudouin-Lafon and Wendy Mackay (2007) propose a set of key
• interactivity - the degree of the capacity for users to interact with the prototype
• evolution – the role of the prototype in the whole expected life cycle
among science, engineering, and design, they claim that “prototyping is primarily a
Other researchers in HCI, Youn-Kyung Lim, Erik Stolterman and Josh Tenenberg
‘filters’ and ‘manifestations of idea’ as parts of prototyping. Filtering dimensions are the
focus of design ideas that designers choose to prototype, and manifestation dimensions
are how to represent the ideas. In the framework, both filters and manifestations have
• Appearance
• Data
• Functionality
• Interactivity
• Spatial structure
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The latter’s three sub-attributes are defined as (p. 11):
(corresponding to fidelity)
In this framework, what to prototype and how to prototype are considered as two
Dimensions in the framework contain purpose, position in the process, author, audience,
validity, technique, fidelity and representation. While the frameworks from HCI and
interactive design tend to focus on how prototypes are developed, this framework pays
visual detail, purpose, surroundings and technology. Although the work focuses on
engineering design, their review also recognises Blomkvist and Homlid's study from
Through the review and comparison of the frameworks, this research develops a
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‘Purpose’ is what prototyping is done for, ‘process’ is how prototyping is
attributes depends on how to make the participants engage with prototypes and
prototyping processes. Thus, this research uses the term, engagement as a dimension
Also, as these key dimensions influence each other (Blomkvist & Holmlid, 2011a),
they do not stand independently on its own. Thus, this research asserts business model
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Overview of the dimensions
The previous subsections have theorised prototyping with four dimensions,
purpose, process, context and engagement, from the synthesis of frameworks of the
existing literature. This subsection summarises the key points of the dimensions.
evaluation to persuasion.
The process can be discussed into two parts. One is the position on prototyping
in the design process. The other is the prototyping process itself. Regarding the position
prototyping is argued as the culture or philosophy of design that can be applied in all
processes.
designing, building, running and evaluating phases. Circular models also can be seen in
other fields dealing with uncertainty and complexity, such as innovation and
entrepreneurship.
culture. Desirable participants involve a wide range from internal actors to external
actors, although the participants need to be selected on the basis of time and resources
multiple prototypes are preferable to avoid the fixation of ideas. Culture refers to
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organisational culture and individual mindset which influence learning and decision
making during and after a prototyping phase. This is a rather meta-level context
prototypes are relatively more recommended in the context of design thinking, but the
part or a whole of an idea with a certain depth in the detail. How ideas are
communicated through a prototype also influences the quality of a feedback. These are
Purpose
5.3.1. Three purposes: exploration,
evaluation and communication
In the argument of design, especially of design thinking, an overarching objective
implementing a product or service (Rodriguez & Jacoby, 2007; Lande & Leifer, 2009;
Jensen et al., 2015), or as simply expressed, ‘build to learn’ (Kelley & Littman, 2006;
Gerber, 2009).74
However, it is also argued that prototyping has multiple functions and play
74
Rodriguez and Jacoby (2007) assert that prototyping is “[a] process of accelerating feedback
and failure” (p.57).
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general purposes of prototyping are identified in three ways: exploration, evaluation and
communication (Blomkvist & Holmlid, 2011a; e.g., Schneider, 1996; Buchenau & Suri,
2000; Smith & Dunckley, 2002; Voss & Zomerdijk, 2007) (Figure 5-3). 75
discusses the context of prototyping in design thinking and clarify the reasons to the
translating ideas in a tangible form in engineering and design practice (Carleton &
Cockayne, 2009; Sanders, 2013; Liedtka, 2015). Prototyping is also discussed in various
areas such as engineering design (Yang, 2005; Gerber & Carroll, 2012), software
engineering (Budde et al., 1984; Law, 1985; Mayhew & Dearnley, 1987), Computer-
75
This is not the only way to categorise purposes of prototyping. For instance, researchers of
Human-Computer Interaction, Youn-Kyuung Lim, Erik Stolterman and Josh Tenenberg (2008)
assert that “prototypes are the means by which designers organically and evolutionarily learn,
discover, generate, and refine designs” (p.2).
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Human Interaction (Lim et al., 2008), product design (Buchenau & Suri, 2000; Kelley &
Littman, 2001; Moggridge, 2007), and management (Schrage, 2000; Thomke, 2003).
Because of this diverse arguments, the definitions of prototyping are also varied
(Beaudouin-Lafon & Mackay, 2007; Lim et al., 2008). Despite the lack of a widely
thinking (Brown & Wyatt, 2010; Dow, Fortuna, et al., 2012; Lockwood, 2010b; Jobst &
Meinel, 2014; Liedtka, 2015). As the role of design expands to be more strategic, the key
features of prototyping also extend to be more strategic and contextual (Sanders, 2013;
Liedtka, 2015).
transition of design practice and claims that the main usage of prototyping is shifting
from persuasion to evaluation and exploration. She points out that when persuasion was
the main purpose of prototyping, handcraft skills were crucial as digital technologies for
prototyping was emerging but not yet widely distributed. In the 1990s, however, the
development of digital modelling tools enabled designers to see the designed outcomes
in a much earlier phase of the design process (see also Schrage, 2000; Thomke, 2003).
This change brought the research part of design to the front end of design projects
(Carleton & Cockayne, 2009; Sanders, 2013), and prototyping moved from an earlier
stage to a later stage to evaluate ideas (Carleton & Cockayne, 2009; Sanders, 2013). With
the advent of interaction design, the role of prototyping shifted from a persuasion tool to
a learning device for interaction with various actors. Interestingly, it is acknowledged that
low-fidelity of prototypes can have the advantage to get a constructive feedback (Rudd
et al., 1996). Furthermore, Sanders (2013) argues that prototyping has focused on the
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definition of prototypes as “the first or preliminary model of something” (2013, p.63), as
prototypes are no longer limited to physical forms but are regarded as any types of
however, even in the context of product design, the form of prototypes also extends to
abstract forms. Buchenau and Suri (2000), then researchers in IDEO, propose a concept
of ‘experience prototyping' as design no longer only deal with physical objects but also
experiences. They define that “an Experience Prototype is any kinds of representation, in
like to engage with the product, space or system we are designing” (p.2). They also claim
conditions through active engagement with prototypes” (p.1). Based on this shift, the
focus on prototypes as abstract forms can be useful for this research. On the other
hand, this focus could miss the benefit of prototyping from using a physically tangible
medium. Therefore, the advantage of being physically tangible will be discussed in the
section of Engagement.
This subsection has shown the expansion of the meaning of prototyping and
prototypes for business model innovation. The following argues each purpose.
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5.3.2. Communication for persuasion
Although the three purposes are widely supported by literature, this research
communication is important also for exploration and evaluation. Blomkvist and Homlid
(2011a) describe that prototyping for communication tends to be used for presenting
ideas to and persuading audiences (see also Buchenau & Suri, 2000). The term is used
purposes.
business models. Massa and Tucci (2013) argue that business models play an
important role in representing key elements of business and business model tools to
2010)
76
In some literature, the difference of purposes are emphasised in the terminology, piloting and
prototyping, as the former mainly works for exploration and the latter for persuasion (e.g., NESTA,
2011).
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• The involvement of external audiences through the articulation and instantiation
All of the functions are relevant to communication. Business model tools seem
in the current design practice (see Sanders, 2013), the role of evaluation and exploration
turns to be more significant, but the difference between the two are not fully articulated.
5.3.3. Evaluation
A purpose-oriented classification of prototyping is proposed by software
1980's in the study of software engineering, and the papers in the conference were
Floyd (1984) categorises prototyping into three types: exploratory, experimental and
evolutionary prototyping. While the last one is about the process, the first two
77
Also, in the context of prototyping for public services, NESTA (2011) divides prototyping into
exploratory and developmental prototyping.
78
The two objectives are further examined by other researchers (e.g., Law, 1985; Mayhew &
Dearnley, 1987; Budde et al., 1992). Consultant for computing, David Law (1985) additionally
proposes performance prototyping and organisational prototyping, which are variations of
experimental prototyping. The former is also referred to as “synthetic” (Hughes, 1985). Law also
identifies three pre-requisites for successful prototyping: suitable tools, change in attitudes and a
methodology (Mayhew et al., 1989). By reviewing the categorisation of Floyd’s and Law’s,
Mayhew and Dearnley (1987) proposes a framework of prototyping.
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words, it is for evaluating ideas for further deployment. Houde and Hill (1997) also state
that “prototypes provide the means for examining design problems and evaluating
solutions” (p.368). The difference between exploration and evaluation is not always clear,
but Blomkvist and Holmlid (2011a, p.4) argue that, compared to exploration based on
hunches and intuitions, prototyping for evaluation is "based on more elaborate design
about what it should achieve”. In this understanding, evaluation requires business model
(Gerber, 2009) and complexity surrounding wicked problems (Jobst & Meinel, 2014). In
to reduce the uncertainty and complexity. For instance, Schrage (2000) indicates
prototyping as simulating and modelling reality. The key point of his claim is that
technological development for simulating new businesses makes it easy to reduce the
In the study of business models, however, it has been argued that identifying a
right business model in advance is challenging. Chesbrough (2010, p.356) claims that
requires significant trial and error, and quite a bit of adaptation ex post”. Similarly,
management scholar, Rita McGrath asserts that “business models often cannot be fully
anticipated in advance. Rather, they must be learned over time, which emphasizes the
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( 2010, p.248). These assertions assume that right business models can be identified
through trials and errors, even though business models cannot be predicted in advance.
management scholars use the terms, ‘trial and error’ and experimentation, the concept
of wicked problems assert that there is no opportunity for learning by trials and errors for
complex problems (Rittel & Webber, 1973). This is because the situation is too complex
to be the same all the time and it suggests that it is difficult to validate ideas in a test
environment without exposing businesses in real situations. This theory suggests that
5.3.4. Exploration
In the argument of design thinking, the key role of prototyping is to explore
Evaluation is for narrowing down options, but exploration aims to broaden the
avoiding risks (Rodriguez & Jacoby, 2007). This suggests that designers do not perceive
(1993, p.59) also emphasises that “prototypes are as much a medium for managing
risks as for exploring opportunities”. Thus, although reducing risks is undoubtedly a key
79
The explorative role of prototyping was already identified at least in 1980s in software
engineering (e.g., Floyd, 1984), but it is not connected with the context of innovation.
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Brown and Wyatt (2010) claim that prototyping in design thinking is not for the
validation of finished ideas but part of the creative process, but rather an exploratory
Permanente, in which “using the insights gleaned from observing these important times
learn from building and implementing a product or service (Kelley & Littman, 2001;
Martin, 2009). Furthermore, Liedtka (2015) claims that one of the characteristics of the
[The] emphasis on the concrete and the visual to highlight the key role of
visualization and prototyping. Certainly, prototyping has long been a central
feature in fields such as architecture and product development, but design
thinking’s view of prototyping is somewhat different: the function of
prototyping in design thinking is to drive real world experimentation in service
to learning rather than to display, persuade, or test” (p.927)
(1999), she suggests that “these prototypes act as […] ‘playgrounds’ for conversation
rather than ‘dress rehearsals’ for new products” (p.927). In Management Education, it is
also argued that while prototyping in engineering focuses on the process of product
development, prototyping in design thinking is for gaining feedback and learning (Glen et
al., 2015).
seen, there is an expansion of design’s role in the shift. Lim et al. (2008) claim that the
80
They state that “a vibrant design thinking culture will encourage prototyping - quick, cheap, and
dirty - as part of the creative process and not just as a way of validating finished idea” (p.43).
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traditional research on prototyping focuses on the roles of prototyping for validation, not
exploration. Sanders also points out that traditionally, prototyping is “to help us see what
it could be” (p.63), but in emerging design practices prototyping is “to help us, all of us, to
radically new business model. The invention may happen as a result of prototyping, but
business model innovation itself does not generate a completely new business model.
certain context (Zott & Amit, 2015). Additionally, even inventing a new business model
Furthermore, business models themselves are not final outcomes but tools
(Osterwalder et al., 2005) and models (Baden-Fuller & Morgan, 2010) to support
business development. In this sense, business models themselves work like prototypes
as a tool for learning. However, business models themselves are abstract, and turning
them into prototypes is helpful for managing uncertainty and complexity of business
model innovation. This point can be seen as a characteristic of the design methodology
(VI01; see also Lockwood (2010b)). For tackling complexity, business model innovation
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Sanders further suggests other methods of prototyping for exploration such as empathy
probes (Mattelmäki & Battarbee, 2002), primes/sensitizing tools (Visser et al., 2005), and video
prototypes (Westerlund, 2009).In addition, she mentions new types of prototyping in speculative
design such as Critical design objects (Dunne & Raby, 2001), cultural probes (Gaver et al., 1999;
Gaver et al., 2004) and provotypes (Mogensen, 1992; Boer & Donovan, 2012).
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2010). However, it does not mean exploration solves all the problems surrounding
business model innovation. Rather, exploration exists in all aspects of the activities
1991; Benner & Tushman, 2003; Andriopoulos & Lewis, 2008). However, by facing the
exploitation is rather blurred, and the vague boundary is also identified as ‘overlapping
development’ (Takeuchi & Nonaka, 1986) in management. With this vague boundary,
exploration in a real situation is potentially useful to manage the overlapped activity and
implementation rather than only testing business models in a virtual setting. Exploitation
of values or even prototyping for persuasion can be used as exploration (see Case 02).
Even if prototyping is done as an evaluation of pre-defined ideas, new findings may exist
outside of pre-acquired assumptions and hypotheses (see also Case 01, Case 02).
In the case studies, the boundary among exploration, evaluation and persuasion
were seemingly vague. A finding from this analysis is that the three purposes,
exploration, evaluation and persuasion, are not completely separate but only move in
options, evaluation tends to reduce the options to identify the best option. Persuasion is
used for involving actors to certain ideas to gain more resources including payments
and investment.
When prototypes are regarded as ‘learning tools’ (Jensen et al., 2015), even the
process of persuading customers works as an exploration for new business models (see
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Case 02). This is partly because new ideas tend to lack a substantial support in
implementing the ideas. In agile development, it is also recognised that budget is not
always allocated in advance but “arrives in increments” (Kelly, 2011, p.17). In other
words, resources including budget, skills and knowledge must be gained throughout the
iterative process. Thus, promotional materials such as pictures and videos are regarded
as important to attract further resources as well as a key tool for gaining feedback (Case
01, Case 02). These findings also suggest that evaluation and persuasion can work for
exploration, and prototyping for complex things such as business is inherently for
could hinder new learning opportunities (EI02, EI03, VI01). Therefore, the vagueness of
the boundary does not simply mean a complete flexibility in prototype learning. Rather, a
careful balance between deliberate learning and open mindset is vital in exploring for
new opportunities.
Process
The previous subsection explores the purpose of prototyping: exploration,
suggest that the purposes of prototyping are not completely exclusive of each other and
evaluation and persuasion. In the literature, the purposes and position of prototyping are
related to each other (e.g., Voss & Zomerdijk, 2007; Blomkvist & Holmlid, 2011a; Sanders,
2013), and the process of business model prototyping should be consiered with the
purposes.
dimension. As we will see, the process of prototyping, as well as the design process, is
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argued in various ways. While normative process models of both design and business
model innovation suggest that prototyping is located in the late stage of the process, the
section clarifies the position of prototyping in business model prototyping and discusses
the business model prototyping process in two aspects. One is where prototyping
positions in the entire design process, and the other is what the process of prototyping
Continuum, Stanford Design School, Rotman Business School, Darden Business School),
Liedtka (2015) proposes three sequential stages in the design process: exploring stage,
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idea generation stage and testing stage. Prototyping is included in the testing stage. She
also mentions the similarity of the steps to the key methods of design thinking proposed
by Seidel & Fixton (2013): need finding, brainstorming and prototyping. Glen et al. (2015)
argue the importance of applying design thinking to the curriculum of business schools,
and propose simple steps to achieving this practice. Here, ‘prototyping and testing’
appears at the fifth stage out of an entire six steps. These models commonly locate
prototyping at a later stage in the process. This section follows the three-step models -
Stage 1: Data Gathering, Stage 2: Idea Generation, Stage 3: Testing - to keep the
simplicity of the design process based on the synthesis of various process models (The
Hasso Plattner Institute of Design at Stanford, 2010; Liedtka & Ogilvie, 2011; IDEO, 2013;
Seidel & Fixson, 2013; Continuum, 2014; Rotman School of Management, 2014; Glen et
there exists little academic research on the process of business model design, let alone
business model innovation (Bucherer et al., 2012; Zott & Amit, 2015). Due to difficulty in
finding normative process models for business model innovation from literature in
management, Zott and Amit (2015) explore process models in the design literature (e.g.,
Beckman & Barry, 2007; Bhavani & Sosa, 2008; Brown, 2008) and propose a five-step
process model for business model innovation: observe, synthesise, generate, refine and
implement. Following a notion by Owen (1993), they assert that the first two steps are in
the analytical stage, and the last three steps are in the synthetic stage. From the study of
business model design: mobilise, understand, design, implement and manage. One of
the characteristics of this model is that it starts from ‘mobilise’, which other models do
not often include. Combining the five steps by Osterwalder and Pigneur with knowledge
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from their experience, Bucherer et al. (2012) offer a similar process model: analysis,
et al. (2013) propose four phases of business model innovation based on innovation
management literature and their case studies: initiation, ideation, integration and
implementation. The first three phases are for designing business models, and the last
one is for realising it. By synthesising the models in the literature (Fritscher & Pigneur,
2009; Osterwalder & Pigneur, 2010; Bucherer et al., 2012; Frankenberger et al., 2013; Zott
& Amit, 2015), this research theorises the process of business model innovation with the
early stage (Jobst & Meinel, 2014). In engineering design, Yang claims a “prototype is an
early embodiment of a design concept” (2005, p.650). Also, in the argument of social
and testing ideas at an early stage before large-scale resources are committed to
implementation” (p. 6). Benefits of prototyping at an early stage involve saving costs and
time in product and service development (Houde & Hill, 1997; McCurdy et al., 2006;
Coughlan et al., 2007). These arguments suggest the importance of embodying ideas in
with the purpose of prototyping (Voss & Zomerdijk, 2007; Blomkvist & Holmlid, 2011a;
Sanders, 2013). From this perspective, prototyping for exploration tends to be located at
an early stage of the design process. As prototyping for evaluation needs to have more
specified ideas, it needs to be located at a later stage than exploration (Blomkvist &
Holmlid, 2011a). Moreover, prototyping for persuasion is located later than evaluation
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(Voss & Zomerdijk, 2007; Blomkvist & Holmlid, 2011a) or at the end of the process
(Sanders, 2013).
are used at a later phase, while low-fidelity prototypes are used at an earlier phase. For
instance, Skogstad (2009), Vetterli et al. (2012) propose four milestones of prototyping
Horse Prototype, Functional Prototype and Final Prototype. In this model, prototyping
(2009) proposes four classes of prototypes based on the difference of the purposes:
need to prove more specific issues using higher-fidelity prototypes. Both models indicate
the increase of fidelity during the iterative prototyping process. Also, it is argued that “the
level of precision usually increases as successive prototypes are developed and more
and more details are set” (Beaudouin-Lafon & Mackay, 2007, p.1019). Similarly,
Sommerville ([1995] 2010) and Yang (2005) suggest that there are three stages of
changes in a late stage are supposed not to be radical but only incremental. In these
process models, the purpose and the stage of prototypes are connected through fidelity
embodiment of ideas. The process models are based on the assumption that ideas
represented in prototypes are gradually verified through iteration. This assumption could
be controversial when design problems are seen as wicked problems, as the concept of
wicked problems asserts that verifying the viability of solutions through trials and errors
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is questionable because of the complexity in the context surrounding problems (see
Rittel & Webber, 1973). In addition, the process model moving from low-fidelity
prototypes to high-fidelity prototypes does not explain radical changes of the direction
in new business, such as ‘pivot’ in entrepreneurship (e.g., Ries, 2011; Blank & Dorf, 2012).
The relationship between the purpose and position of prototyping can also be
seen in the argument on the relationship between prototyping and piloting. In the context
prototyping and piloting based on the purpose and the position in the design process.
Prototyping is in an earlier phase than piloting, and the main purpose is to develop
services. On the other hand, piloting is located at a later stage of the design process than
prototyping for exploration, and the purpose is the refinement of well-verified services
essentially for rolling out and scaling the service. Additionally, service designer working
with NESTA, Aviv Katz (2011) argues that the difference between prototyping and
piloting is “exploratory (done in early stages of insight and idea generation) and
developmental (done after the service has been specified and you know what you’re
designing). The former is quick and cheap; the latter requires more planning”. Here, also,
the purpose and position of prototyping are interconnected, and even fidelity of
prototypes is influenced by the purposes. From this point of view, prototyping can be
placed at both an early stage and a late stage, but the purpose of prototyping needs to
characteristic of prototyping (e.g., Hartmann et al., 2006; Brown, 2008; Leifer & Meinel,
2011). This iterative aspect is characterised as ‘agility’ (e.g., Neumeier, 2008b; Mootee,
2013). Agility is a widely used concept as a key element of design thinking for managing
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2008a; Lockwood, 2010b). Agility is also recognised as an effective element for
innovation (e.g., Thomke & Reinertsen, 1998; Bessant et al., 2005).82 In regards to
uncertainty in managing innovation, Christensen (2003) claims that a new market cannot
product or service to learn, not to complete it. Production processes should be flawless,
but production processes are viewed as part of learning activities, even failure can be
agility in design is not clearly articulated (see Lindberg et al., 2011). Iterative processes
are in common with other practices dealing with uncertainty such as agile development
in IT and the Lean Startup methodology in entrepreneurship. The concept of agility was
Larman and Basili (2003) claim in the historical review of iterative and incremental
development (IID), using iteration for managing uncertainty is not a new approach for
software development. Not only in IT and design, but there is also a methodology for
developing business models to a viable business through iteration called ‘Lean Startup’
methodology in entrepreneurship (Blank, 2005; Ries, 2011; Blank & Dorf, 2012; Maurya,
not a linear but an iterative process (Ries, 2011). In the Lean Startup methodology, the
concept of ‘pivot’ and Minimum Viable Product (MVP) that characterise the
82
For instance, Bessant et al. (2005) assert that organisational agility is required to seize
opportunities for discontinuous innovation.
83
See Royce (1970) about ‘Waterfall’ development that the argument of agile development
criticises.
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goes through an iterative process. The methodology relies on a launch of a product that
Minimum Viable Product. After each iteration, the user of the approach needs to interpret
the feedback from the market and decide whether to keep improving the current product
(persevere) or change the direction of the business (pivot). Pivot is defined as “structured
course correction designed to test a new fundamental hypothesis about the product,
thinking, Tilmann Lindberg, Christoph Meinel and Ralf Wagner (2011) argue that,
development. First, agile development tends to reduce options, but the iterative process
collaborative than that in design thinking. From this understanding, iteration in the
design approach is not only for mitigating risks but exploring potential opportunities and
exploration, iteration or agility is not only for incremental improvement but can be a
understanding the business model prototyping process. One is the position of business
model prototyping in business model design processes. The other is the process of
business model prototyping. However, while some normative process models locate
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philosophy of design approaches as well as the agile aspect of design. Findings from
fieldwork also could not settle the position of business model prototyping. Rather, this
research faces difficulty in clearly separating the design process and the prototyping
process. In this regard, this research supports the arguments asserting prototyping as a
culture and philosophy of design, and the notion can be applied to business model
innovation.
generation phase is set before the prototyping phase. For example, Seidenstricker et al.
(2014) suggest a systematic idea generation and selection phases for business model
prototyping should be conducted before prototypes are developed. One of the expert
conducting prototyping (EI01). This point is in line with the process models of design
release of the final product (e.g., Moggridge & Smith, 2007). In product design,
Moggridge and Smith (2007, p.685) clearly state that prototypes are “made before the
final solution exists”. However, from business model’s point view, final solutions can also
be a prototype in the long term (VI04). Also, prototyping is identified as the core of
implementation in social innovation (Brown & Wyatt, 2010), and one of the findings of
this research is that implementation is also an opportunity for learning about the
feasibility of business that makes it difficult to clearly divide the development and the
implementation of a business (e.g., Case 01, Case 02, VI04). In this process, business
models can be seen as fundamental tools for supporting the development of a new
phases rather derive from the level of exposure of porotypes to external actors such as
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customers and clients. Feedback gained from the exposure can be a key source of
learning for developing business models. Thus, implementation can be seen part of
learning. This point is rather close to the concept of ‘effectuation’, which is an attitude of
learning through doing rather than planning (Sarasvathy, 2001; also see Case 04).
Moreover, for business model prototyping, prototyping for evaluation or persuasion can
provide also learning opportunities for exploration due to the complexity of business
model development (Case 01, Case 02). Thus, it is difficult to identify where the position
business model development processes. Although this argument undermines the value
of normative process models, such models are useful for convincing actors unfamiliar
with the process (VI01, VI02). For the purpose, the process of design and business
complex problems by people outside of the design discipline. This simplification and
does not have static steps but a set of core activities (VI03). Thus, articulating the
formal models, some researchers point out that prototyping is part of the philosophy and
culture of design (Kauber, 1985; Schrage, 1993; Schrage, 1996; Thomke & Nimgade,
2000; Pering, 2002; Brown, 2005), which also suggests that prototyping is part of the
design process from the beginning to the end. An expert interviewee also highlights that
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prototyping is not a set of tools but rather a principle (EI02). This resonates with the
space model of the design thinking process proposed by Brown (2008). The space
phases. In this model, prototyping can be conducted throughout the design process.
Overall, while various process models indicate that prototyping is an activity in a late
stage of the whole process, some theories suggest that prototyping can be effective at
an early stage if the position of prototyping is correctly aligned with the purpose of
philosophy and culture of the design process. The process of business model
prototyping can also be considered as not only iterative but also overlapped over the
entire design process. This understanding of prototyping in design is in line with the
notion that design is an agile approach (e.g., Neumeier, 2008; Lindberg et al., 2011; Leifer
& Meinel, 2011; Mootee, 2013). While agility is argued as a characteristic of processes, it
characterises agility, it does not explain well about the discontinuity in the prototyping
process. The following sections will argue it with the concept of evolution and
emergence.
of businesses during the iterative business development process (e.g., Blank, 2005; Ries,
2011). Likewise, it is also asserted that while iterations are useful for incremental
there are interruptions such as unexpected events or new discoveries (Tyre & Orlikowski,
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1994).84 This point suggests that an iterative approach is effective to manage
uncertainty, but at the same time how to manage discontinuity in the process has to be
practice, the difficulty is in making a decision in the conflict between improving the
current solution and exploring new possibilities. It is asserted that “there is a tension
between evolving toward the final solution and exploring an unexpected design direction,
which may be adopted or thrown away completely” (Beaudouin-Lafon & Mackay, 2007,
p.1020). When regarding design problems as complex problems, each iteration in the
situation dynamically changes and each iteration affects the next iteration (Rittel &
Webber, 1973; see also Case 02). In other words, each iteration is not the same as it
affects the mindset and the knowledge of project members is accumulated through the
iteration. Thus, the analogy of tornado or a spring shape is more suitable than a
horizontally-recurred circle. Similarly, Lim et al. (2008) assert that the process of
increment and evolution are not often argued, software developer, Allan Kelly (2011)
divides agile development into three types, which are iterative, incremental and
development, predetermined tasks and goals are assumed to be well defined and
correct. Thus, even though it uses an iterative approach, all the effort is made for a big
84
This point can be linked with Lewin’s there-step change model (Lewin, [1951] 1964; see also
Schein, 1996).
85
“Prototypes are the means by which designers organically and evolutionarily learn, discover,
generate, and refine designs” (p.2).
237
development is similar to and based on incremental development, but the product
release cycle is shorter than iterative development to gain users’ feedback. Therefore,
changes are a positive move and reducing tasks is regarded as saving, although it still
with a loose set of requirements, as it assumes that it is hardly possible to identify all the
before prototyping is also questioned in product development (e.g., Boehm et al., 1984;
Rudd et al., 1996; Thomke & Bell, 2001). The process is goal-oriented, and through the
process, new requirements and opportunities are emerged and identified. The
development has to be measured by how much progress is achieved towards the goal
rather than by how many pre-set tasks are done. An important point for this research is
new requirements and opportunities. From this perspective, the findings of this research
suggest that the term, evolution should be intentionally chosen to describe the process
of business model prototyping. It is also argued that business models are a subject to
evolve rather than something staying in the same state (Chesbrough & Rosenbloom,
2002; Mitchell & Coles, 2003; Gerasymenko et al., 2015). Thus, at least in the context of
business model prototyping, the process can be seen as an evolutionary process as the
how the emergence of new requirements and opportunities occurs. Some arguments
suggest that iterations gradually improve a solution. For instance, Fixton and Rao (2014)
claim that “emergent strategy is an iterative process, one experiment leads to another,
and to another, in each case closing in on a workable solution” (p.49). As they apparently
regard the iterations as experiments, this might not be exactly the case of prototyping,
238
but an issue in emergent processes is that it is uncertain about whether the direction is
right or wrong, and the accumulation of knowledge through iteration is more likely to
lead to a fairly radical change of direction (Tyre & Orlikowski, 1994; Ries, 2011; Bogers &
opportunities. Peschl and Fundeider (2015, p.142) introduce the concept of emergent
exploration for a profound understanding of the key contexts.86 The aim of business
expected to lead the emergence of innovation through new business models. In the case
studies (especially in Case 01and Case 04), the learning opportunities were distributed
over the whole process of business development, and it was more chaotic than
gradually mitigating the uncertainty of new businesses. Rather, the advantage of the
iteration may be to generate the dynamics in the power structure for decision making to
widen a window of opportunity to change (see Tyre & Orlikowski, 1994). In other words,
iteration is not for gradually validating the parts of business models, but deconstructing
and rebuilding the organisational situation for identifying new opportunities for business
model innovation. Also, as the importance of principles and cultures is asserted, simply
86
The full description is “only, if one has achieved a profound understanding of the core/deep
meaning (of the innovation object, the organization, and its context), it is possible that one can
explore its potentials. By “core” we refer to the very essence, the heart, the very meaning, the
substance of an organization, of a product, service, business model, or, more generally speaking,
of any phenomenon. This exploration on the level of the core (beliefs and assumptions) might
lead to insights concerning the potentials and the emergence of new meanings, which are both
completely new and at the same time fit into the existing contexts, as they are rooted in the core
of the phenomenon and not in some imagination, projection, or wish of the observer” (p.142).
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5.4.3. Process within prototyping: a
circular process
The previous paragraphs overview the position of prototyping in the design
process, and it suggests there are contradictory notions on the position of prototyping.
This section will discuss how the process of prototyping is conceptualised in the existing
literature.
In the argument of the design process, the concept of prototyping is often used
to indicate agility of the process (see Design and design thinking subsection). Similarly,
there is some literature indicating that the prototyping process itself is cyclic, even
though the number of steps is varied (e.g., Simon, 1996; Wheelwright & Clark, 1994;
Thomke, 1998). For instance, as a simple model of design processes, Simon ([1969]
1996) suggests a generator-test cycle model. This model simply includes two phases.
The generator phase produces a solution, and it is tested in the later test phase.
development, Floyd (1984) suggests the four steps of prototyping: functional selection,
construction, evaluation and further use. In this process model, it is assumed that
prototyping. They do not include the evaluation phase in the model, but they
acknowledge these three steps are followed by evaluation of the results deciding
whether to launch the solution or to go back to the design phase. Similarly, Thomke
(1998) introduces four steps of the prototyping cycle that divide the test phase into ‘run’
and ‘analysis’ (see also Von Hippel, 2005; Bogers & Horst, 2014). Moreover, cyclic
process models are found not only in design. In the study of innovation management,
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Cole (2002) suggests an iterative approach repeating a cycle of prove-and-learn for
a cyclic process is going through the steps of build, measure and learn (Ries, 2011).
These models are designed for managing uncertainty and complexity as prototyping is
expected to do.
interviews, learning was conducted through informal interaction through the process in
(Schön, 1983) and “thinking through prototyping” (Klemmer et al., 2006), and the
concepts support the unstructured nature of the synthesising process. Bogers and Horst
(2014) advocate that the prototyping process happens on two levels. One is a formal or
process. While the former takes time, the latter could happen in seconds.
In review interviews, however, it was pointed out that reflection did not seem to
be at a different level but embedded in each phase for decision making for the next step
(VI03, VI04). Also, reflection is not limited to designers but all the participants in
prototyping (VI04).
Rather, serendipity can be a more suitable concept to describe instant informal learning
in prototyping (VI01). It is argued that serendipity is not a simple hunch but an outcome
informality might not be limited to the interactions among internal actors. This research
suggests that external actors play an important role in the learning process, and it is also
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suggested that formality in the communication with clients can deteriorate the quality of
Context
Although the importance of context in prototyping has been acknowledged (e.g.,
Nielsen, 1993; Snyder, 2003), it is not so well regarded as the attributes of prototypes
themselves such as fidelity (e.g., Virzi et al., 1996; Nilsson & Siponen, 2006), or materials
(e.g., Sefelin et al., 2003; Akaoka et al., 2010). Recently, however, some researchers have
factor in their outcomes (e.g., Lim et al., 2006; Sauer et al., 2010). This subsection
this section argues the concept based on the three aspects identified through the
prototyping is set up, and culture is organisational culture and individual mindset
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Figure 5-5: The framework of context
feedback and understanding the complex contexts (Buchenau & Suri, 2000; Mascitelli,
2000; Terwiesch & Loch, 2004; Bogers & Horst, 2014). The diversity of actors involved in
the process is relevant to the quality of the outcomes of the process. To put it another
way, not only how to build prototypes but also who is involved in the prototyping process
Ideally, all the actors should be involved in the prototyping process (Blomkvist &
Holmlid, 2011a), but practically only a limited number of actors can be involved in the
process so that the selection of actors involved in prototyping is important (Vink et al.,
2008; Blomkvist & Holmlid, 2011b). One of the aspects to influence the actor selection is
the purpose of prototyping. For instance, while prototyping for persuasion usually needs
243
to involve clients (Blomkvist & Holmlid, 2011a), prototyping for evaluation usually
requires customers and end users to be involved in (Blomkvist & Holmlid, 2011a).
Participants of prototyping is not limited to the design team and can be internal
and external actors of the focal organisation (Blomkvist & Holmlid, 2011a; Bogers &
Horst, 2014). In interaction design, common actors are interaction designers and
usability experts, but marketers, managers and users are also reported as involved
actors in prototyping for collaboration (Bogers & Horst, 2014).For service design, internal
experts, project managers, business managers and designers (Blomkvist & Holmlid,
2011a). In new product development (NPD), it is identified that involving internal actors
from various functions and hierarchical levels is significant, especially for R&D,
production, and management (Adler, 1995; Song et al., 1997; Song et al., 1998; Buur &
Matthews, 2008; Atuahene-Gima & Wei, 2011). Potential external actors are clients
(Buchenau & Suri, 2000; Blomkvist & Holmlid, 2011a) and end users (customers)
(Terwiesch & Loch, 2004; Bogers et al., 2010; Poetz & Schreier, 2012) as well as external
suppliers (Bozdogan et al., 1998; Van Echtelt et al., 2008; Henke & Zhang, 2010).
be ignored. For small organisations, as they do not have a plenty of internal resources,
external advisors and mentors tend to be influential in decision making for business
backgrounds and skill sets of participants are also influential (Jensen et al., 2015).
embrace in business model prototyping (Case 01, Case 02, Case 03, VI04). For
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communication among actors is an important activity to learn potentially viable business
business model prototyping due to the complexity of the contexts surrounding business
model development.87 Part of the reason is that business models themselves are a
Moreover, an issue of finding key actors is that the actors may not be identified
before prototyping is conducted (Case 01). Thus, the reflection on the selection of actors
Environment
The environmental setting is regarded as important as participants themselves,
(Blomkvist & Holmlid, 2011a; Jensen et al., 2015) as well as the quality of learning (Lim
et al., 2008). In HCI research, for example, Mackay (2002) claims that users show
Beaudouin-Lafon, 2004; Appert et al., 2005). There are mainly two ways to manage the
Closeness to reality
To make sure the learning points from prototyping are valid, the contextual
environment should be close to the actual context in which products or services are
used (Blomkvist & Holmlid, 2011a). Therefore, in design literature, it is preferable for user
real situation as possible to maintain the reliability of feedback (Convertino et al., 2004).
87
The same point is argued for service prototyping (Blomkvist & Holmlid, 2011a).
245
It is concerned especially when researchers or designers use indirect representations
such as role playing (Blomkvist & Holmlid, 2011a) and ‘personas’88 (Turner & Turner,
2011), as the use of stereotypes could mislead design teams (Blomkvist & Holmlid,
2011a). The gap between a prototyping environment and the actual context could not
only underestimate the value of design ideas but also potentially cause over-
expectations or oversell the ideas prototypes represent (Alavi & Napier, 1984; Iivari &
Karjalainen, 1989). Another problem is that if sources of learning are not authentic and
the contextual setting is not appropriate, prototypes and learning outcomes could be
used in a distorted way (Blomkvist & Holmlid, 2011a). Blomkvist and Holmlid (2011)
describes the problem with an example in which actual users of prototypes pretend the
close to a real context is rather difficult than general prototyping as business situations
rather than virtually setting up a situation for prototyping, taking advantage of a real
setting is effective to learn for business model development in literature (e.g., minimum
viable product (Ries, 2011; Moogk, 2012; Blank, 2013; Münch et al., 2013)) and were also
observed in the fieldwork (Case 01, Case 02). Furthermore, mobilising additional
as the organisation needs to prepare for a significant change of business direction that
actors is a key activity during the prototyping process, and this may be difficult to
88
About a design research method using ‘personas’, see Cooper (2004).
246
Multiplicity of business model
prototypes
Not only closeness of the situation to the actual context but the number of
prototypes can influence the learning outcomes. In the literature, It is asserted that
developing multiple prototypes in parallel can be more effective in the design process
(Ward & Liker, 1995; Tohidi et al., 2006; Dow, Fortuna, et al., 2012). The same point is
studies, it was observed that a business could have multiple business models in a single
context, and business models are not locked in one map (see Case 01). An expert
interviewee also mentioned that a business is not necessarily limited to one business
model but can have multiple business models. Although completely different prototypes
models in a component, such as revenue streams, to explore the feasibility (see Case
01).
it consumes time and costs, and also lacks rich evidence to convince supporters of
ideas. That said, in the process of developing businesses, business models themselves
Culture
In addition to participants and environment, organisational culture in the
makers (Blomkvist & Holmlid, 2011a; Knapp et al., 2016). Although some frameworks of
prototyping do not mention about culture, it is because those frameworks tend to focus
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on how to build prototypes rather than the entire context of prototyping. Although
positivistic point ofview, a step-by-step type of instructions for the process is not suitable
for business model innovation as various contextual factors influence the process. 89
mindset (Carlgren, 2013) or mentality (Hassi & Laakso, 2011) is pointed out for design
design (Gerber & Carroll, 2012). Organisational culture influences personal mindset of
the members of the organisation and vice versa. Thus, they cannot be clearly separate.
However, it would be worth noticing that there are different levels of factors in the
culture of prototyping. Therefore, the following part separately argues the two concepts.
Organisational Culture
The influence of organisational culture and politics on prototyping is pointed out
in both design and management research (e.g., Schrage, 1993; Kelley & Littman, 2001)
against conducting prototyping (Gerber & Carroll, 2012). Schrage (1993) anecdotally
introduces a case of IBM PCjr, in which he asserts that the product was withdrawn due
to a ‘specification-driven’ culture of the firm. However, the influence is not one way. For
89
Similarly, Nussbaum (2011) criticises design thinking as a failed experiment, as it turns to be a
linear, phase-based methodology (see also Hestad & Brassett, 2013).
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be influential in politics in an organisation (Henderson, 1995). The relationship between
the author of prototypes and decision makers is also important, as it influences how the
learning outcomes are reflected in the decision-making process (Blomkvist & Holmlid,
2011a; Knapp et al., 2016). Thus, although stakeholder involvement is important for
prototyping, it does not simply mean asking what they think can provide right answers.
prototyping should not be made for, but with participants. Findings on culture in the
fieldwork seem to be in line with the theories in literature, or the findings from the
fieldwork emphasise the influence of culture in business model prototyping more than
literature. In the fieldwork, the issues of organisational culture and mindset were
acknowledged (EI02, EI04, VI01). Also, Case 03 suggests that implementing agility is not
the leading members of implementing the agile process was external project members,
and hiring internal staff became an issue for keeping the agile process within the
organisation. Review interviews also suggest that lack of prototyping culture accepting
failure (VI01) and preference for business plans (VI04) can prevent the organisation from
Mindset
In prototyping, not only an organisational level of culture but also the importance
Suri, 2000; Gerber & Carroll, 2012). The mindset appreciates the value of low-fidelity
prototyping and learning by doing. The overall objective of business model prototyping is
learning, and the organisational mindset influences the learning process (Buchenau &
Suri, 2000; Chesbrough, 2010; Gerber & Carroll, 2012). Also, Gerber and Carroll (2012)
suggest that the practice using low-fidelity prototyping influences not only the result but
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also how people feel the process. In other words, the practice and the mindset influence
each other. Gerber and Carroll (2012) further indicate the prototyping mindset influences
in three ways. The practice “1. reframes failure as an opportunity for learning 2. supports
a sense of forward progress, and 3. strengthens beliefs about creative ability” (p.70).
of the process. However, as Gerber and Carroll (2012) claim, the psychological
experience of prototyping has not yet been fully investigated, and this suggests that
understanding the psychological aspects will be beneficial also for business model
prototyping. In the fieldwork, it is also pointed out that fixation to an idea and lack of
openness to new ideas are issues when prototyping is conducted (EI02, EI04). Fixation is
also a problem in the process (Cardoso & Badke-Schaub, 2009). Additionally, for trying
new things, taking risks is important and the mindset is needed to prepare for taking
risks (Rauth et al., 2010; Carroll, 2014 see also Case 02, VI01). Also, many findings from
is carried out. Mindset is connected with how to perceive and deal with the complexity,
because the relationship with prototyping and final outcomes tends to be blurred in
business model prototyping, and the mindset seems to influence the perspective. In
other words, the main outcome in the short term can be a prototype in the long term.
Engagement
It is argued that engagement with users and other actors is an important aspect
for prototyping (Beaudouin-Lafon & Mackay, 2007; Han, 2009; Rizzo & Cantù, 2013;
Bogers & Horst, 2014; Jensen et al., 2015). Prototypes support the facilitation of
communication within and across different actors in design processes (Erickson, 1995;
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Kolodner & Wills, 1996; Schrage, 1996; Schrage, 2000; Kelley & Littman, 2001; Yang,
2005; Blomkvist & Holmlid, 2009). However, it is considered as a difficult activity (Voss &
Zomerdijk, 2007), and the difficulty will be discussed with the concept of ‘boundary
objects’.
discusses engagement largely regarding ‘interactivity’, and focusses upon only whether
the prototype has an interactive function (e.g., Beaudouin-Lafon & Mackay, 2007; Lim et
al., 2008). In addition to the interactivity of prototypes themselves, the proposed model in
this thesis considers interaction among actors and situations through prototyping as a
key factor in the value of prototyping (see Latour, 1996; Reckwitz, 2002; Kimbell, 2012).
finished products – is also a widely discussed subject regarding prototyping (e.g., Rudd
et al., 1996; Virzi et al., 1996; Houde & Hill, 1997; Walker et al., 2002; Lim et al., 2006;
McCurdy et al., 2006; Sauer & Sonderegger, 2009). However, as business models,
prototypes are not necessarily physical, because the level of abstraction of business
models is high in itself. Business models can be even narratives (Magretta, 2002; Massa
& Tucci, 2013). For this thesis, fidelity in the dimension of engagement, in the argument
of engagement, relates to how precise the prototype affects the engagement of actors in
the design and development of business models. Thus, this thesis sees engagement as
prototyping (Brown, 2008; Blomkvist & Holmlid, 2011a; Jensen et al., 2015), it is difficult
to collaborate with people from different backgrounds as they tend to have a different
view of their own businesses, let alone people outside the organisation such as partners
and customers (Erickson, 1995; Voss & Zomerdijk, 2007; Blomkvist & Holmlid, 2009). To
251
resolve the difficulty, prototypes can work as a medium of sharing the common
understanding of their businesses and services (Star & Griesemer, 1989; Henderson,
1991; Carlile, 2002; Nicolini et al., 2012; Bogers & Horst, 2014). In other words,
prototyping encourages actors to engage with the process. Kelley and Littman (2001)
argued as the concept of ‘boundary objects’ (Star & Griesemer, 1989; Henderson, 1991;
Carlile, 2002).90 By sociologists, Susan Star and James Griesemer (1989, p.393),
boundary objects are defined as “objects which are both plastic enough to adapt to local
needs and constraints of the several parties employing them, yet robust enough to
maintain a common identity across sites. They are weakly structured in common use,
Boundary objects exist between different social worlds and work as bridges
between them (Nicolini et al., 2012) or a platform for communication among various
perspectives (Bogers & Horst, 2014). This concept of boundary objects can explain a
function of prototypes for supporting various actors to engage in the business model
development.
90
Carlgren (2013) asserts that design thinking itself can work as ‘boundary objects’.
91
The more extensive definition is that “objects which are both plastic enough to adapt to local
needs and constraints of the several parties employing them, yet robust enough to maintain a
common identity across sites. They are weakly structured in common use, and become strongly
structured in individual-site use. They may be abstract or concrete. They have different meanings
in different social worlds but their structure is common enough to more than one world to make
them recognizable, a means of translation. The creation and management of boundary objects is
key in developing and maintaining coherence across intersecting social worlds” (Star &
Griesemer, 1989, p.393).
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This research identifies three key elements that support prototypes to work as
(Figure 5-6).
5.6.1. Fidelity
Fidelity of prototypes needs to be aligned with the ability of participants to
correctly grasp the role and purpose of prototyping for enabling the participants to give a
meaningful feedback (Bryan-Kinns & Hamilton, 2002; Markensten, 2005; Buxton, 2007;
Samalionis, 2009; Blomkvist & Holmlid, 2011a).92 Thus, it is important to set a proper
prototypes (e.g., Rudd et al., 1996; Virzi et al., 1996; Houde & Hill, 1997; Walker et al.,
2002; Lim et al., 2006; McCurdy et al., 2006; Sauer & Sonderegger, 2009). In the
92
Passera, Kärkkäinen and Maila (2012) call this fit ‘plausibility’, which they suggest is
experiential.
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argument of design, the advantage of low-fidelity, or ‘quick-and-dirty’, prototypes for
exploration is emphasised (e.g., Dijk et al., 1998; Sefelin et al., 2003; Buxton, 2007; Brown,
2008; Gerber & Carroll, 2012; Hare et al., 2013). (e.g., Buchenau & Suri, 2000; Brown,
designers can be open to the feedback when they spend less effort and time for the
prototype and avoid the fixation with their initial idea (Brown, 2008; Gerber & Carroll,
2012). An expert interviewee also indicates that Industrial designers, Dijk et al. (1998)
also assert that the experimentation with pilots is usually lengthy and expensive, and
quick evaluations with abstract prototypes are more effective for exploration. Prototypes
should be developed only enough to get valuable feedback and improve or generate
ideas.
prototyping (Rudd et al., 1996; Houde & Hill, 1997; McCurdy et al., 2006).
Interactive design researchers, Jim Rudd, Ken Stern and Scott Isensee (1996)
disadvantages of both. One interesting claim of their research is that while prototyping
beneficial for business model prototyping. From this point of view, consideration on the
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fidelity of prototypes is important for learning, as it influences the efficacy of the learning
process.
In addition, some researchers also claim that the simple dichotomy of low-fidelity
and high-fidelity of prototyping is problematic (McCurdy et al., 2006; Lim et al., 2006) and
Table 5-2: Advantages and disadvantages of high-fidelity and low-fidelity prototypes (adopted from Rudd,
Stern and Isensee (1996))
than the degree of fidelity in the context of business model development (e.g., Ries,
2011). For instance, the concept of minimum viable products indicates that the
software engineering, Floyd already realised in the 1980s the importance of minimalism
recommended if there are tools available which keep to a minimum the effort required in
constructing the prototype” (1984, p.7). Lim et al. (2008, p.3) also propose ‘the economic
principle of prototyping’, stating that “the best prototype is one that, in the simplest and
most efficient way, makes the possibilities and limitations of a design idea visible and
measurable”.
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In the fieldwork, it seems that the issues of fidelity are not keeping prototypes
low-fidelity but how to take a balance between precision and agility (Case 04, VI04). The
emphasis on using low-fidelity prototypes can be valuable also for business model
prototyping, but the findings from the case studies suggest that the relationship between
early stage with low-fidelity and low-budget prototypes. However, it is doubtful whether
the same level of learning from the implementation of ideas in a real context or ‘high-
fidelity’ prototypes can be gained from such low-fidelity prototypes. This is because the
of learning from failure, a benefit of using prototyping is also claimed as it can allow the
International Organization for Standardization, 2010; see also Norman & Verganti, 2014).
In other words, how failures actually influence the process is not clarified, and how much
It hindsight, it may look as if what you have learned from a large mistake could
have been learned from a smaller one, but they are different especially when the
problems tackled are complex, as the context of the failures is distinctively different. As
most of businesses and projects have constraints, the learning process should be
effective. Thus, maximum learning with minimum effort should be praised, but it should
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be acknowledged that being low-fidelity, or quick-and-dirty, does not always produce rich
outcomes from low-fidelity prototypes are the same as the learning outcomes from
However, what is minimum for business seems not to be objectively clear but
prototyping, but in the case of business model prototyping, low-fidelity is not necessarily
always right. It is because validity is important for business model prototyping, and
What makes difficult to understand the concept of business models is that there
are various ways of representing business models. Massa and Tucci (2013) identify
various tools to represent business models and suggest that the ways of representing a
business model can be structured by the level of abstraction (see Figure 2-1). As
prototyping.
5.6.2. Scope
As some prototypes represent only part of final products or solutions, scoping
what is prototyped is an important point to consider (Lim et al., 2008). Also, how
characterise prototypes. Floyd (1984) describes there are two ways of selecting
functions to prototype:
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• Vertical Prototypes: The prototype represents a detailed function, but not
horizontal prototypes represent the whole impression of a final design but are not fully
developed. Houde and Hill (1997) criticise the categorisation of prototypes by attributes,
or what the prototype is made of, such as paper prototypes. Instead, Houde and Hill
categorisation includes role prototypes, look and feel prototypes and implementation
prototypes, which represents the whole experience of users. The first three categories
horizontal prototypes in the terms of Floyd’s. Similarly, McCurdy et al. (2006) argue this
two aspects of representation as ‘breadth’ and ‘depth’. The argument above suggests
fidelity can be managed by controlling the scope with breadth and depth.
93
Floyd calls them vertical prototyping and horizontal prototyping.
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The issue of complexity
In business model prototyping, the selection of scope can be controversial. As
we have seen, a characteristic of business models is that it can be simple but inclusive.
models should be holistic. Some components are identified within a business model,
independently viable component may not work in a certain business model. In other
words, even if separately verified parts are assembled to be a business model, it does
final outcomes and prototypes is not as clear as argued in the literature of design. Some
arguments in design thinking about prototyping point out the difference between
prototypes and the final solution. For example, Designer, Bill Moggridge (2007, p.685)
exists’. This is clearly based on the assumption that there is a boundary between
prototypes and the final solution. Based on this assumption, it is also plausible to say
prototypes are something ‘filtered’ from intended final design outcomes (e.g., Lim et al.,
2008).
is difficult to gain a profound knowledge from a simulated situation. In other words, the
259
prototyping process requires a certain amount of validity in the representation, and the
In the definition of design by Simon (1996) suggests that even if prototypes work
successfully in a virtual situation, it does not guarantee the success in an actual context.
A review interview agrees this point, suggesting that all products are a prototype in a
developing product to market in the early stage (Cooper & Vlaskovits, 2010; Ries, 2011;
Blank & Dorf, 2012). The main purpose is to gain actual data through an actual product
launch. In this approach, the boundary between prototypes and the final solution is
blurred or ignored. The prototype should be minimally developed just enough to get
feedback as the method of minimal viable products (Ries, 2011; Moogk, 2012; Blank,
Surely, from the perspective of risk management, a virtual situation and limited
exposure of the representation of the solution are preferable as it can avoid the risk of
being copied and damaging brand images. However, to cope with the complexity of
maximise the validity of learning and gain a profound insight for business model
innovation. In the case 01, the main event rather worked as a prototypes when
5.6.3. Representation
Form
Representation is about how ideas are represented. Giving forms is important for
representation and gaining feedback even in subjects dealing with intangible outcomes,
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participants engage with prototyping (Ullmer & Ishii, 2000; Liedtka, 2015), and some
scholars call the function ‘tangible interaction’ (Hornecker & Buur, 2006; Baskinger &
Gross, 2010; Petrelli et al., 2014). In design subjects dealing with hardware, such as
engineering design and HCI, physical characteristics are key attributes for
representation, and prototypes can be easily associated with physical forms. Thus, from
are two dimensional (2D) or three dimensional (3D). In this sense, physical objects play
acknowledged (Houde & Hill, 1997; Beaudouin-Lafon & Mackay, 2007). For instance,
Houde and Hill (1997) define prototypes “as any representation of a design idea,
should be tangible even if the prototypes are for services, tangibility in this context does
not simply mean that the prototype is a physical representation. Tangibility can be
(Lockwood, 2010b; Sanders, 2013). Lockwood (2010b) asserts that “prototypes can be
for a service design - and always include a form of visualization of concepts” (p.). This
broad definition of prototypes can also include some methods and tools of service
design such as story boards, customer journey map and service blueprint as prototypes
(see also Polaine et al., 2013). Furthermore, even in product design, Moggridge (2007,
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necessarily physical.94 When prototypes are seen as boundary objects, prototypes can
1989, p.393; see also Cartwright & Mendell, 1984; Griesemer, 1990). Lim et al. (2008)
also assert that they use the term, ‘formation’, rather than ‘construction’ of prototypes
because prototypes are not always physically constructed and “can be formed by
“prototypes of a service innovation will of course not be physical, but they must be
p.87). Similarly, NESTA (2011) asserts that “[prototyping] allows alternative ideas to be
seen, felt, and experienced before choosing one (or more) for further development” (p.6).
playing an important role in prototyping for interaction and reflection (Klemmer et al.,
whole. Thus, for business model innovation, a necessary consideration for this
encourage actors to interact through prototypes, but for business model innovation, the
94
Buchenau and Suri (2000, p.424) also define prototypes as “representations of a design made
before final artifacts exist”.
95
In some arguments, the practice of prototyping is limited as a practice using a physical
representation of outcomes (e.g., Brown, 2008). On the other hand, in some arguments the
concept is not clearly separate from the theoretical aspect of prototyping. Also the term
‘prototyping’ is used for meaning a physical representation itself rather than the process
262
In addition to forms, interactivity of prototypes – whether prototypes are
prototype (McCurdy et al., 2006; Beaudouin-Lafon & Mackay, 2007; Jensen et al., 2015).
prototypes and paper prototypes. However, they also notice that interactive prototypes
prototypes are online or offline, software or paper, is less important, but whether
considered.
How to represent
Mapping tools are a popular tool in the process of prototyping for complex
outcomes (Case 01, Case 03, Case 04). In the literature of business model design, there
are also various ways to communicate the ideas among actors. One way is using
visualising tools such as mapping. Business Model Canvas (Osterwalder & Pigneur,
2010) is a good example of turning the business model to be tangible (Blank & Dorf,
2012), and there are modified versions of the mapping tools for entrepreneurs (Maurya,
2012) and social entrepreneurs (McCahill, 2013) to help them to visualise the abstract
structure of businesses or activities. Those tools are useful for simplify a complex
context to make it easy for various actors to understand the complex context. On the
(Blomkvist, 2011). Therefore, although the concept of prototyping in this section is more
theoretical than physical prototypes, it can be based on the sources both from the theoretical
arguments of prototyping and the arguments on the practice using physical prototypes. This
point is relevant to the vagueness of the meaning of tangibility.
263
other hand, actual projects, services and products also work as a stimulus or a trigger to
entice various actors to engage with the process and allow them to give feedback.
Also, as using a real context is useful for prototyping of complex things, pitching
ideas to potential clients and implementation of actual projects were used for gaining
feedback and learning in the cases (Case 01, Case 02). From this reflection, mapping
tools are effective for identifying assumptions and problems from a holistic perspective,
and a more detailed representations are useful for gaining feedback. In terms of
interactivity, as mapping tools are not a direct representation of the product and the
service, identifying whether it directly represents the interactive part of the product or
service is difficult or is not really important for the approach. Rather, giving a holistic
view to the participants helps them to interact with the designers of prototypes.
Furthermore, there are different ways of representing one business model, and
they are modified following the purpose of using the prototype. Thus, it can be thought
that it is important not to fix one way of showing a business model but handle a set of
From these arguments and findings from empirical research, this thesis
suggests two elements for identifying the minimum level of fidelity: simplicity and
inclusivity. The two elements can be difficult to achieve at the same time as they have
more inclusive representation of an idea, but the prototyping process might become
slower due to lack of simplicity. Schrage (1996) introduces an example that Detroit car
manufacturers adhere to physical clay prototypes was beat by the competitors with
rapid virtual prototypes. However, the balance between the two elements needs to be
considered to fit the prototyping process with the objective and reduce the waste of time
and effort. Following these ideas, the required level of fidelity of prototypes basically
264
depends on the learning objective and should be minimum. Additionally, as the process
is assumed to be iterative, the agility leads faster cycles of iteration, and it will be a
Simplicity
Through the case studies, it is identified that the interactivity of prototypes is
relevant to the abstraction of ideas and the complexity of reality. From the former’s point
concrete form. On the other hand, from the latter’s point of view, the interactivity is
Inclusivity
According to the existing literature on prototyping, the scope and focus of
important part of prototyping (Lim et al., 2008). For business model prototyping,
however, holistic approaches are seemingly more important than other types of
identified through a holistic view that the usage of business models provides.
prototypes. The simplified idea may not be useful for representing the complexity of a
models, the validity of representations may be still doubtful. Thus, a key question for
265
business model prototyping is not which part prototypes prototype, but how prototypes
prototyping is not a single method or tool but consists of various methods and tools.
Also, the dimensions of business model prototyping identified in this research are not
discourses and significance of this activity for business model innovation.96 Thus, this
methodology for exploring possible business models through designing, and gaining
(Figure 5-7).
emphasised (e.g., Gasparski, 1986; Baskerville, 1991; Blaug, 1992). In a simple sense,
96
This point can be argued from the comparison between performative views and normative or
ostensive views. One of the difficulty in defining business model prototyping is that the value of
the prototyping approach may not be captured from a normative view for the concept, which
pursue what it ‘is’ and what value it ‘has’. Latour (1986) originally asserts this view as ostensive
views. The same problems are pointed out in the arguments of intellectual capital (e.g.,
Mouritsen, 2006) and design thinking (e.g., Johansson-Sköldberg et al., 2013). It is argued that
normative views are not preferable for some concepts which are extensively influenced by
contexts. For these concepts, clarifying how it ‘does’ in an organisation and what value it ‘may’
produce is more useful than developing a general understanding of the concept. This view is
conceptualised as ‘performative’ views (see Mouritsen, 2006). As business model prototyping
deals with complex problems as the previous subsection shows, it is also difficult or hardly
impossible to exploit the approach only with a normative understanding of the concept.
Therefore, also this section discusses the value of business model prototyping based on a
normative framework, the argument also pays attention to the performative aspect of business
model prototyping. Therefore, instead of proposing a step-by-step process of business model
prototyping, this research proposes business model prototyping as a methodology.
266
methodologies are regarded as “the study or description of methods” (Baskerville, 1991,
p.750), and each methodology includes multiple methods (Ishak & Alias, 2005; Wiberg,
of specific methods (Gasparski, 1986; Blaug, 1992), but “a study of the relationship
between theoretical concepts and warranted conclusions about the real world” (Blaug,
1992, p.xii). In a more practical sense, “a guideline for solving a problem, with specific
components such as phases, tasks, methods, techniques and tools” (Ishak & Alias, 2005,
p.326). Based on this understanding, this research proposes business model prototyping
not as a specific procedure but as a guideline for exploring potentially viable business
models.
267
Conclusion
Although the importance of exploration for business model innovation is
acknowledged (e.g., Chesbrough, 2010; Sosna et al., 2010), the concept of business
model prototyping is less argued and understood. Thus, this thesis has explored the
concept of business model prototyping to clarify the role of design thinking in business
context and engagement — as a foundation for further research on the subject and . The
main contribution to knowledge of this thesis. The framework is also useful for bringing
the design perspective to the debate of business model innovation, and conceptualising
This thesis identifies the value of connecting the design methodology research
studies and management research. Most importantly, the value of prototyping in design
for business model innovation has not been well addressed. As the literature review
further understanding of innovation, the role of design and design research in innovation
management has not been fully captured in innovation studies yet. Additionally, the
topic, and the usage of the term is still ambiguous. Thus, the literature reviews also
explored the theoretical landscape of fundamental concepts for this research such as
innovation, business models and design thinking. The broad theoretical exploration in
this research bridges the gap among the subjects for further understanding of
innovation management.
268
This thesis also defines business model prototyping as a methodology for
business model development and innovation. As there are various tools and methods for
future directions of this research. ‘Implications’ section proposes what can be suggested
from this research both for research and for practice. However, there are limitations in
this research that restrict findings from this research, which are shown in ‘Research
limitations’ section. Based on the limitations, the following ‘Future directions’ section
Implications
This section shows implications of this research from perspectives of research
and practice. The implications for research are divided into three levels. The first level is
the disciplinary level, which implies a gap between design and dominant disciplines in
innovation studies. The second is the methodological level reflecting the role of
abductive approaches for design methodology research. The third is the theoretical level,
at which are three implications, and the major implication is a theoretical framework of
business model prototyping for further research. Moreover, distinguishing the difference
The implications for practice are threefold. One is the importance of a holistic
269
for research about the difference between experimentation and prototyping in business
model innovation. The other implications are based on the reflection on dimensions of
innovation and design thinking have been discussed in various contexts and
and design are not theoretically grounded with widely accepted definitions. The efforts
nascent stage of the development, but the theoretical exploration through this research
‘experimentation’, and there is not much consideration on the role of design and design
thinking for exploring business models (e.g., Chesbrough, 2010; Brunswicker et al.,
2013). The theoretical foundation provided by this research includes the argument of
design and design thinking, and it can support to narrow the gap between the research
Methodological Implications
This research relies on the integrated retroductive-abductive research strategy,
270
asserted by Dubois and Gadde (2002; 2014), as a theoretical framework of the research
design. These research strategies are based on the abductive logic (Peirce, 1934a),
which can be shared with the approach of design (Tomiyama et al., 2003; Kolko, 2009a;
Kroll & Koskela, 2015) and design thinking (Martin, 2009; Dorst, 2011).
are rarely useful. As Cross (2007a) argues, the science of design is to examine design
activities by a scientific approach, and it does not mean design activities need to be a
master level was based on the methodology of design practices and appreciated more
interpretive approaches.
academic research, it was difficult to shift from design methodology, which is for
creating new things, to sociological methodology, which is for revealing social activities
that already exist. In the early stage of this research, a proposal of a more-action based
research was refused and what was recommended instead was case studies examining
cases that were already finished due to avoiding the risk of failure.
Based on the condition, this research started as a case study research, but there
business model innovation. There are various possible reasons for the difficulty, but a
potential reason was that although the value of business model prototyping can be
theoretically identified, prototyping practices for business model innovation did not exist
yet or at least were not in common as much as the cases can be easily found. Some
industrial experts I asked about potential cases even replied that they themselves were
271
for finding cases not for data collection, they were not stored as explicit evidences, but
those conversations gradually moved the target of cases from direct representations to
Gadde, 2002; 2014). Also, the philosophical stance respecting both for theories and
empirical findings was helpful for theorising the research methodology, as the practice
of business model prototyping might not exist yet and simply relying on theories or
empirical findings seemed to lead this research to be less plausible. Therefore, setting
the purpose of the research to match theories and empirical findings was useful for
building a more suitable theory for business model prototyping. Through this experience,
systematic combining can be suitable for design methodology research for developing a
new practice when you cannot have a direct control of subjects to examine.
Theoretical implications
At the theoretical level, there are three implications:
272
Secondly, this thesis contributes to knowledge on business model innovation by
suggesting the potential usefulness of prototyping in design thinking for business model
innovation. The arguments and study of innovation are mostly dominated by the concept
least theoretically dividing the two concepts to further understanding of the process. As
design methodology in managing complex problems (Cross, 1982). This is also the case
innovation proposed in this research can be used as a starting point for further
examination.
business model as well as analytical tools for business models (e.g., Osterwalder &
Pigneur, 2010), but the practical use of the tools is less discussed. This research
multiple dimensions of business model prototyping. Thus, this research concludes that
273
6.1.2. Implications for practice
A holistic framework for tackling
business model development as
complex problems
Although tools of business models are useful to holistically capture a business
model as a whole (Beha et al., 2015), the actual contexts of businesses also need to be
considered. While such mapping tools are useful to spot potential opportunities,
thesis finds business models are not singular and can be prototyped for different
purposes with various levels of abstraction (Massa & Tucci, 2013). Thus, in business
complexity of business in order to help key actors to engage with the business idea.
Experimentation to prototyping
In business model innovation, interdependency among business components
For innovation managers, the theory of wicked problems is useful to understand the
tolearn by trials and errors for complex problems (Rittel & Webber, 1973), and the case
studies also indicate even a relatively small change in a business model could take a
long time to figure out an effective coordination of business model components (Case
03).
although the term, experimentation, is often used to represent the need for an iterative
274
approach to manage the complexity. The theoretical framework of business model
prototyping proposed in this research suggests the consideration points for practitioners
to manage business model innovation. While visualisation tools for business models are
popular, less attention are paid to the importance of setting up the right context.
Findings from interviews and case studies also support the importance of contexts, and
Implications on dimensions
In the field of business model prototyping, the boundary between an exploration
Lack of resources (e.g. finance, knowledge or skills) can cause difficulties when
bringing new ideas from development to implementation. One of the key activities in the
sharing the ideas with key actors. Thus, the securing process is crucial also because
whether the idea can attract additional supports or not can be an indicator of the
feasibility.
The prototyping process can be flexible but still needs to be managed. Rather,
the findings in this research suggest that business model prototyping cannot be
managed only by following a phase-based process and gradually moving from low-
aware of their mindset and organisational culture when leaning from prototyping. In
other words, prototyping process should enhance both the individual's mindset and the
275
For instance, low-fidelity prototypes are argued as an effective approach for
getting feedback and exploring new ideas. On the other hand, high-fidelity prototypes
have an advantage of empowering a user-driven process (Rudd et al., 1996). They are
also used as an effective approach for convincing key actors in the decision-making
identifying the minimal level of fidelity for maximise learning from business model
Research limitations
I have to admit that theorising an emergent concept was a tough challenge. The
theoretical framework proposed in this thesis is just one way of approaching this
sources and the scope of the conceptual landscape. However, the theoretical framework
and identified research questions provide foundations and directions for future research.
Thus, before indicating possible directions for future research, this section reflects and
articulates some limitations and methodological lessons from this research project.
276
6.2.1. Disciplinary limitations
Innovation
studies
Innovation
Management
Design Management
For developing the theory of business model prototyping, this research explored
the theoretical landscape of various concepts such as innovation, design thinking and
disciplines from innovation studies to management to design, and the definitions are
Some design scholars also suggest that the design practice itself is shifting from
Kimbell, 2012; Yee et al., 2013). Thus, the selection of key concepts and the articulation
standards. This research explores literature and field data through case studies and
design as the disciplinary position for this research. While the focus enables the
277
research to be original, the gap between other subjects such as innovation studies and
methodologies in design for innovation. It is claimed that the study of design should be
treated as a subject of social science rather than natural science (Cross, 2007a).
the gap between design methodology research and design practices can also be
investigate the gap. The aim is to develop a possible theoretical framework of business
model prototyping rather than formulating a general theory. However, as the structure of
to be. A fully adjusted research scheme for abductive research may be useful in further
Moreover, as the subject was argued in various disciplines, the fundamental concepts
278
such as innovation, business models and prototyping were conceived in different ways
coherent logic and terminology for discussion and conclusion. Thus, the researcher's
interpretation and translation may have had a significant influence in the outcome and
Blaikie’s framework of research design (2007; 2009) and case study research (Yin,
2013). As this research relies on a few cases, it follows the ‘replication logic’ (Yin, 2013).
It is argued that based on the replication logic, the number of samples does not reduce
the value of research (Yin, 2013). However, further replication of the cases strengthens
the generalisability of the findings. Quantitative research based on statistical logic may
reveal another aspect of business model prototyping and the value of combined
Moreover, limited resource accessibility also has had an influence in the selection
research discipline grows, the limitation caused by research resources could be solved in
the future. Even the growing interest in the subject was observed in this research and the
accessibility of information was gradually improved. The growing interest can support
279
Future directions
The previous section presented the limitations of this research. Based on the
understanding, this section suggests possible directions for future research. The
directions are divided into three levels: disciplinary level, methodological level and
theoretical level. The disciplinary level describes how design as a discipline can be
innovation studies and management research. The methodological level presents what
can be achieved through different research methodologies. Finally, the theoretical level
Innovation
Studies
Innovation
Management
Design Management
280
I was introduced to the concept of design thinking. At the time, design thinking was still a
nascent and emerging concept. Through the experience in the master course, I learned a
wide range of concepts and practices relevant to design thinking. However, the
This research not only examined the concept of prototyping, but how it could be
sectors has also been an emerging trend in the industries (Yee et al., 2013). Bridging the
thinking.
management scholars, there are sceptics and controversies over the validity in the
design methodology research. Thus, there are several attempts to define and
understand design thinking, but the conclusions are usually drawn to make distinction
thinking in practitioners and management scholars. The situation made me think that
design thinking approaches. In order to fully understand the context of design thinking, it
al., 1997).
perspectives, it is also beneficial for innovation studies to include more profoundly the
281
knowledge of the design methodology research. In this study, it was also identified that
innovation studies have become more interdisciplinary than before, but mainly among
the field of policy research, technology and business rather than in the area of design.
managing complex problems, but the applications of the methodology to new areas are
instance, the design methodology research tends to perceive subjects from educators’
and consultants’ points of view. On the other hand, entrepreneurship research tends to
research will allow researchers and practitioners to view the subject from multiple
research.
for business model innovation. While the approach allows the researchers to immerse
themselves in the context, they should be aware that there are various practices for
developing business models, and the critical and theoretical analysis are essential rather
than simply understanding what happens in practice. This research aims to develop an
overarching model of prototyping in business model innovation, and the findings will be
282
to reveal more detailed criteria for the selection of methods and the decisions for the
development. Moreover, it will help researchers to understand skill sets and traits at an
individual level for successfully applying the prototyping methodology for business
model innovation.
complement the findings of this research, which follows the logic of replication (Yin,
2013) and relies on a small number of cases and data sources. Although it does not aim
approach such as surveys with a large number of samples will cover the blind spots
caused by the limitations of the data collection methods used in this research. Once the
may further validate and develop the knowledge on business model prototyping and
development.
recommended to use mixed methods for further robustness in research findings (Blaikie,
qualitative approach. However, the growing interest and increasing understanding of the
concept were observed during the course of this research. Thus, combining the findings
will contribute to further understanding how to deal with business model innovation
through prototyping. Figure 6-3 shows how different research methods can be combined
283
The t heor et ical
m odel
Pr ov ide a f ou ndat ion
Pr ov ide a f ou ndat on
A r ev ised m odel
there were several limitations on the selection of data sources. Therefore, some
characteristics in specific contexts are left for further research. There are four directions
to extend the theoretical landscape. First, little attention is paid to sectorial differences in
this research. Hence, research focusing on a particular sector or segment can reveal
284
process. Secondly, focusing on a certain size of organisations can reveal an impact
specific to the scale of organisations for business model prototyping. Thirdly, most of
the data were collected in the UK, and geographical characteristics can be captured by
spreading research globally. Fourthly, although this research explored some historical
literature, the cases were mainly contemporary, while the conducted interviews focused
on current practices and perspectives. Therefore, a more in-depth study into historical
the practice.97
business model prototyping, as there has been little theoretical foundation. Thus, this
thesis proposes what business model prototyping can be, and it generates questions
this section discusses the potential questions in manage business model prototyping.
97
Balance between rigidity and adaptability: In the reflection of this research, it is clear that the
interest of business developers has been moving from the capability of rigid planning to the
adaptability to complexity during the course of this research. On the other hand, it seems that
literature suggests that the need for the adaptability to the complex real world has co-existed with
the desire for the rigidity (e.g., Andriopoulos & Lewis, 2008; Raisch & Birkinshaw, 2008; Martin,
2009; Khanagha et al., 2014). This research itself aimed to decode the process of business
development and reconstruct it through the perspective of the design methodology and
prototyping. However, it should not be a simple denial of the current practice, but as the concept
of prototyping suggests, it should be synthesised to be the next level of understanding the reality.
Thus, it is hoped that this research stimulates other researchers to further examine the subject of
business model prototyping from different perspectives and approaches.
285
• How to manage engagement / develop business model prototyping?
These questions are not exhaustive, but merely serve as suggestions for possible
are:
• How to be responsive?
important but also challenging. It is especially an issue when the uncertainty surrounding
a business is high. Clear ideas or hypotheses lead to clear analysis in gaining new
in prototyping for products (Houde & Hill, 1997). Collected data alone, however, cannot
provide a clear answer about whether to keep improving the current solution or shift to a
human factors (Ries, 2010). Design thinking methodology suggests that the learning
process should be synthetic (e.g., Kolko, 2009a; Gumienny et al., 2011; Kelley & Kelley,
2013). In design thinking, feedback is synthesised, not validated. Kelley and Kelley (2013)
include synthesis as one of the crucial phases of design thinking. Design methodology
suggests a systematic way of synthesising learning ideas (Kolko, 2009c). It is also the
286
case in business model prototyping. However, the synthesis process is not clearly
approaches (McClure, 2007; Croll & Yoskovitz, 2013), there could be further research
design thinking) and quantitative approach. This research identifies that while rigid
approaches for analysing learning outcomes are suggested in the literature, the learning
process tends to be more intuitive (see Ries, 2011). Thus, it seems to be difficult to
capture how it works by observing form hindsight or the outside of the context.
Findings from the case studies showed that new opportunities were rarely
identified in advance, but discovered through the prototyping process as it provides a lot
of learning points about possible directions (see also Chesbrough, 2010). Therefore,
rather than spending too much time setting up a prototype, it may be beneficial to adopt
a reflective and responsive mindset that fosters the importance of learning while
prototyping. How to set up a reflective and responsive mindset, therefore, will be another
98
An exception is an argument of Jon Kolko (2009a; 2009b; 2009c; 2010; 2011; 2014).
99
An example of research on the psychological aspect of prototyping by an ethnographic
approach is Gerber and Carroll (2012).
287
important for decision makers in particular to have an open-mind for new opportunities,
even though the process is in the execution phase of the business. Context-setting is as
crucial as the selection of tools in gaining an effective feedback from business model
mindsets for business model prototyping is an important subject for future research and
practices.
there are two key aspects to consider. One is how to select the minimal level of fidelity to
maximise the learning from prototyping. The other is how to manage multiple prototypes
of business models.
objective, while keeping the holistic perspective in the process. Businesses at an early
stage are more flexible than ones at a later stage as it has not spent too much time and
literature of design thinking (e.g., Brown, 2009), this research identifies that there are
many shapes of business model prototypes that can be categorised by the level of
model prototyping and clarifying the required level of abstraction for different objectives
and examined how they are utilised in business model development. The literature
review also identified various mapping tools used in business models at different
288
abstraction levels (Massa & Tucci, 2013). The findings indicate that a key role of
understanding shows that the key components of business models are contextually
decided rather than generally formulated as a normative model. From this perspective,
Morgan, 2010; Massa & Tucci, 2013). Although some scholars and practitioners develop
their own formats of business models, the intentions are more or less to promote their
methodology. Thus, the arguments tend to focus on a single tool rather than how to use
a single business. In other words, a business can have multiple business models, and a
business model can have multiple business model prototypes. Thus, another question is
how many business model prototypes should be developed, and the answer will be
This section has suggested future research directions at various levels, and the
theoretical framework proposed in this thesis will work as a foundation for the further
research. The framework itself can be revised through diversified research approaches
as the future directions at methodological level suggest, but it will work as a ‘prototype’
289
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Appendices
Accepted Papers
8.1.1. Design Management Academy
Conference 2017
Conference Paper
Amano, T., Brassett, J., Hestad, M. & Lawrence, G. (2017) Rethinking the Prototyping Process
for Applying Design Thinking to Business Model Innovation. In: Hong Kong.
This research proposes a prototyping perspective in design for business model innovation
to facilitate disruption. The value of design-led approach for managing innovation has
been recognised under the concept of ‘design thinking’. In the research on innovation, the
concept of business model innovation has been discussed as business models started to
be acknowledged as a key aspect of managing innovation. Although experimentation for
business model innovation is argued to be of importance, how to apply prototyping of
design thinking to business model innovation has been limitedly theorised. This research is
based on a literature review to articulate theoretically the concept of prototyping in
business model innovation. Through the literature review, this research identifies four key
dimensions of prototyping in business model innovation: purpose, process, context and
engagement. This paper focuses on the Process dimension to interrogate the existing
argument.
Introduction
Over the past decade, business model innovation has been acknowledged as an emerging subject
and a new approach for innovation management in particular (Chesbrough, 2007; Baden-Fuller et al.,
2010; Schneider & Spieth, 2013) and more broadly for management of organisations as a whole (Pohle
& Chapman, 2006; Chesbrough, 2007; Amit & Zott, 2010; Teece, 2010). The connection with disruptive
344
innovation with business model innovation is widely acknowledged (e.g., Markides, 2006; Chesbrough,
2010; Koen, 2015)
Part of the reason why the interest in business model innovation is growing is that the domain of
innovation studies itself has extended from a subject focusing on technology policy to an
interdisciplinary subject. As the dynamics and complexity surrounding our society are increasing
(Wallner, 1999; DG MediaMind Research, 2013; Hausman et al., 2014), organisations come under
further pressure of finding a way of managing innovation to survive (Dervitsiotis, 2012). As approaches
to tackle the issue, business model innovation and design thinking are emerging subjects in various
research fields such as management (e.g., Boland & Collopy, 2004; Martin, 2009; Lockwood, 2010),
innovation studies (e.g., Martin, 2012; Fagerberg et al., 2013) and design methodology research.
As for business models, despite the growing interest, there is still little agreement on what business
models are (Teece, 2010; Spieth et al., 2014; Wirtz et al., 2016). Reflecting the diversity of the argument,
researchers on business models, Lorenzo Massa and Christopher Tucci (2013) suggest a broad definition
of the concept: “the [business model] may be conceptualized as depicting the rationale of how an
organization […] creates, delivers, and captures value […] in relationship with a network of exchange
partners” (p.423; see Afuah & Tucci, 2003; Osterwalder et al., 2005; Zott et al., 2011).
In the research on business model innovation, some researchers attempt to apply experimental
approaches (e.g., Sosna et al., 2010; Hawryszkiewycz, 2014), but there is still little research on
prototyping and exploration of new opportunities in designing business models (Osterwalder & Pigneur,
2013). Furthermore, the approaches are mainly labelled as ‘experimentation’ (Bucolo & Wrigley, 2012),
and the terms, ‘business model experimentation’ and ‘business model prototyping’ are often
interchangeably used (e.g., Girotra & Netessine, 2013), or prototyping is argued without the articulation
of the meanings (e.g., Chesbrough, 2010; McGrath, 2010). According to design methodology research,
however, the application of the scientific approach to complex problems has been problematic (Rittel,
1972b; Schön, 1983; Buchanan, 1992; Cross, 2011). Thus, developing the theory of business model
prototyping will potentially enable researchers and practitioners to understand the process of business
model innovation further.
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Design thinking can contribute to business model innovation as there are some key points in
common, and the commonality suggests that the application of the design methodology can be effective
also for business model innovation. Prototyping is regarded as an important aspect in the design
methodology and process (e.g., Thomke, 1998; Buchenau & Suri, 2000; Terwiesch & Loch, 2004;
Hartmann, 2009) as well as a key element of innovation processes in management (Leonard & Rayport,
1997; Mascitelli, 2000; Schrage, 2000; Thomke, 2008). This section reviews the role of prototyping in
design and design thinking.
Sanders (2013) asserts that as fields that design contributes to expand, the role of prototyping also
changes. The focus of using prototyping was “to help us see what it could be” (p.63), but in the
expanded design fields, the focus also expands “to help us […] to make sense of the future” (p.64). For
this type of prototyping, prototypes are not simply representations of objects but need to be tools for
collectively exploring, expressing and testing hypotheses about future ways of living in the world” (p.64).
As prototyping in this thesis is for business model innovation, which is a new area for the design
methodology, the argument in this thesis follows the distinction between prototyping and prototypes
and the definitions of the concepts above.
Distinctions of prototypes from other concepts are argued in some literature. For instance,
interaction design scholar, Lars Erik Holmquist (2005) distinguishes prototypes from mock-ups and
representations. In his theoretical framework, prototypes embody functionality, mock-ups show
appearances and representations have both of the attributes. In this thesis, prototypes are not strictly
limited as the embodiment of functions for two reasons. One is to avoid turning the terminology to be
too complex. The other is that this research rather regards prototypes as “learning tools” (Coughlan et
al., 2007, p.124).
As for piloting, in the context of design thinking, the main objective of prototyping is to get feedback
and learn from building and implementing a product or service (Brown, 2008; Lockwood, 2010). This
point is sometimes argued as a distinctive difference between prototyping and piloting, which aims at
evaluating the feasibility of the product or service (NESTA, 2011).
Therefore, as long as mock-ups and representations are used for learning, they are perceived as
‘prototypes’ in this research. Further detail will be argued in the following subsections.
346
• precision – how much detail is represented in the prototype
• interactivity - the degree of the capacity for users to interact with the prototype
• evolution – the role of the prototype in the whole expected life cycle
While Beaudouin-Lafon and Mackey see HCI as an interdisciplinary subject among science,
engineering, and design, they claim that “prototyping is primarily a design activity” (2007, p.1018).
Other researchers in HCI, Youn-Kyung Lim, Erik Stolterman and Josh Tenenberg (2008) propose a
theoretical framework of prototyping consisting of a dimensions of ‘filters’ and ‘manifestations of idea’
as parts of prototyping. Filtering dimensions are the focus of design ideas that designers choose to
prototype, and manifestation dimensions are how to represent the ideas. In the framework, both filters
and manifestations have sub-attributes. The former’s sub-attributes are:
• Appearance
• Data
• Functionality
• Interactivity
• Spatial structure
The latter’s three sub attributes are defined as (p. 11):
• Material - Medium (either visible or invisible) used to form a prototype
• Resolution - Level of detail or sophistication of what is manifested (corresponding to fidelity)
• Scope - Range of what is covered to be manifested
In this framework, what to prototype and how to prototype are considered as two key metrics of
arguing types of prototyping.
From a service design perspective, Blomkvist and Homlid (2011) formulate a framework of service
prototyping based on expert interviews and literature review. Dimensions in the framework contain
purpose, position in process, author, audience, validity, technique, fidelity and representation. While
the frameworks from HCI and interactive design tend to focus on how prototypes are developed, this
framework pays more attention to the context surrounding prototyping processes.
More recently, engineering design academics, Matilde Jensen, Stephanie Balters and Martin Steinert
(2015) reviewed the literature of theoretical prototyping frameworks to formulate a general model of
prototyping. Through a statistic analysis of the literature, they identify important themes of prototyping:
material, interactivity, visual detail, purpose, surroundings and technology. Although the authors aim to
contribute to engineering design, their review includes Blomkvist and Homlid’s work above and the
framework also acknowledges the importance of context in prototyping.
Through the review and comparison of the frameworks, this research develops a theoretical
framework of prototyping consisting of key four dimensions: purpose, process, context and
engagement.
‘Purpose’ is what prototyping is done for, ‘process’ is how prototyping is conducted. ‘Context’ is in
what circumstance prototyping is carried out and ‘engagement’ is how prototyping encourages the
participants to engage. Context includes participants, environment and culture as the sub-dimensions.
Although ‘engagement’ is usually argued as representation, interactivity or fidelity of prototypes, the
selection of those attributes depends on how to make the participants engage with prototypes and
prototyping processes. Thus, this research uses the term, engagement as a dimension relevant to
representation, interactivity and fidelity of prototypes.
347
Table 8-1 Prototyping dimensions.
Authors McCurdy et al. (2006) Lim et al. (2008) Jensen et al. (2015) Beaudouin-Lafon and Blomkvist and Holmlid
Mackay (2007) (2011)
Stage II: Idea Ideation Create Ideation Ideation What if? Brainstorming (3) visualisation and
generation sense-making
(4)
ideation
Stage III: Experimentation Make it real: Prototype and test Prototyping and What wows? Prototyping (5) prototyping and
Testing and evolution prototype, experimentation What works? testing
test, and (6) viability testing
deploy
Researchers of business model innovation struggles with finding a process model of
business model innovation in management. Thus, they borrow the structure from design
(e.g., Zott & Amit, 2015). Although the importance of business model innovation has been
recognised, there exists little academic research on the process of business model design,
let alone business model innovation (Bucherer et al., 2012; Zott & Amit, 2015). Due to
difficulty in finding normative process models for business model innovation from
literature in management, Zott and Amit (2015) explore process models in the design
literature (e.g., Beckman & Barry, 2007; Bhavani & Sosa, 2008; Brown, 2008) and propose
a five step process model for business model innovation: observe, synthesise, generate,
refine and implement. Following a notion of Owen (1993), they assert that the first two
steps are in the analytical stage, and the last three steps are in the synthetic stage.
From the study of entrepreneurship, Osterwalder and Pigneur (2010) also propose a
five step model of business model design: mobilise, understand, design, implement and
manage. One of the characteristics of this model is that it starts from mobilise, which
other models do not often include. Combining the five steps by Osterwalder and Pigneur
with knowledge from their own experience, Bucherer et al. (2012) offer a similar process
model: analysis, design, implementation and control. In the study of product
development, Frankenberger et al. (2013) propose four phases of business model
innovation based on innovation management literature and their case studies: initiation,
ideation, integration and implementation. The first three phases are for designing
business models, and the last one is for realising it.
By synthesising the models in literature, this research theorises the process of business
model innovation with the stages of mobilise, understand, innovate, develop and
implement (see Table 8-3). As it suggests, prototyping is located in a late stage of the
process, the implement phase in particular, also in the process models of business model
innovation.
Table 8-3 Process models of business model innovation
Author Discipline (Moblise) Understand Ideate Develop Implement
353
rolling out and scaling the service. Additionally, service designer working with NESTA, Aviv Katz (2011)
asserts that the difference between prototyping and piloting as, “there are two main types of
prototyping: exploratory (done in early stages of insight and idea generation) and developmental (done
after the service has been specified and you know what you’re designing). The former is quick and
cheap; the latter requires more planning”. Here, also, the purpose and position of prototyping are
interconnected, and even fidelity of prototyping is influenced by the factors. From this point of view,
prototyping can be both in an early stage and also a late stage, but the purpose of prototyping needs to
shift from exploration to evaluation to persuasion.
Agility in prototyping
While design processes based on phases are identified as we have seen above, learning through
iterative processes is frequently mentioned as a characteristics of prototyping (e.g., Hartmann et al.,
2006; Brown, 2008; Leifer & Meinel, 2011). This iterative aspect is also characterised as ‘agility’ (e.g.,
Neumeier, 2008b; Mootee, 2013). Agility is a widely used concept as a key element of design thinking
for managing uncertainty in facilitating disruptive types of innovation (e.g., Brown, 2008; Neumeier,
2008a; Lockwood, 2010b). Agility is also recognised as an effective element for managing innovation as
well as business processes, as it is in effect to manage uncertainty surrounding innovation (e.g., Thomke
& Reinertsen, 1998; Bessant et al., 2005). In terms of uncertainty in managing innovation, Christensen
(2003) claims that a new market cannot be analysed even by market experts. To tackle the uncertainty,
designers build a product or service to learn, not to complete it. Production processes should be
flawless, but when you regard production processes as part of learning activities, even failure can be
used as a learning opportunity (see Rodriguez & Jacoby, 2007).
Despite the growing awareness on the importance of agility, the meaning of agility in design is not
clearly articulated (see Lindberg et al., 2011). Iterative processes are in common with other practices
dealing with uncertainty such as agile development in IT development and the Lean Startup
methodology in entrepreneurship. Indeed, it is asserted that the concept of agility was originally
formulated in the study of software development (Abbas et al., 2008). Larman and Basili (2003) also
claim that, through the historical review of iterative and incremental development (IID), using iteration
for managing uncertainty is not a new approach for software development. Moreover, not only in IT
development and design, there is a methodology of developing business models to a viable business
through iteration called ‘Lean Startup’ methodology in entrepreneurship (Blank, 2005; Ries, 2011; Blank
& Dorf, 2012; Maurya, 2012). The methodology encourages entrepreneurs to expect business
development is not a linear but iterative process (Ries, 2011).
In the Lean Startup methodology, there are two key concepts, pivot and Minimum Viable Product
(MVP), that characterise the methodology. Similar to prototyping in design, the lean startup
methodology usually goes through an iterative process. The methodology relies on a launch of a product
that is minimally developed to gain feedback from the market, which is conceptualised Minimum Viable
Product. After each iteration, the user of the approach needs to interpret the feedback from the market
and decide whether to keep improving the current product (persevere) or change the direction of the
business (pivot). Pivot is defined as “structured course correction designed to test a new fundamental
hypothesis about the product, strategy, and engine of growth" (Ries, 2011, p.149).
Despite the similarity to other approaches for tackling uncertainty, researchers of design thinking,
Tilmann Lindberg, Christoph Meinel and Ralf Wagner (2011) argue that, although a core feature of
design thinking is described as “iterative learning and development processes” (p.11), agility in design
thinking is different from agile development in IT development at some points. First, agile development
tends to reduce options, but the iterative process in design thinking is for diversifying ideas. Secondly,
agile development in IT development is less collaborative than that in design thinking. From this
understanding, iteration in the design approach is not only for mitigating risks but exploring potential
opportunities and supporting collaboration with and involvement of stakeholders. When prototyping is
regarded as an exploration, iteration or agility is not only for incremental improvement but can be a
source of discontinuous changes.
354
Prototyping as philosophy and culture
The previous subsections show the discussions to locate prototyping in a certain phase of a design
process. In addition, prototyping is also discussed as a culture and philosophy of design approaches as
well as the agile aspect of design. Rather, this research faces difficulty in clearly identifying in which
phase prototyping should be. In this regard, this research supports the arguments asserting prototyping
as a culture and philosophy of design, and the notion can be applied for business model innovation.
From business model’s point view, final solutions can be a prototype in a long term. Also, prototyping is
identified as the core of implementation in social innovation (Brown & Wyatt, 2010). In this process,
business models can be seen as fundamental tools for supporting the development of a new business.
Therefore, the difference between the development and implementation phases rather derive from the
level of exposure of porotypes to external stakeholders such as customers and clients. Feedback gained
from the exposure can be a key source of learning for developing business models. Thus,
implementation can be seen part of business model development. This point is rather close to the
concept of ‘effectuation’, which is an attitude of learning through doing rather than planning
(Sarasvathy, 2001).
Moreover, for business model prototyping, prototyping for evaluation or persuasion can provide also
learning opportunities for exploration due to the complexity of business model development. Thus, it is
difficult to identify where the position of business model prototyping should be in the entire process of
business model development in advance. Rather, learning opportunities seem to exist at any point of
business model development processes.
Although this argument undermines the value of normative process models, such models are useful
for convincing stakeholders unfamiliar with the process. For the purpose, the process of design and
business model innovation is simplified to clarify the benefits of applying a design approach to complex
problems by people outside of the design discipline. This simplification and formalisation, however, also
causes confusion of the position of prototyping in the process. Thus, articulating the position of
prototyping in the design process as a phase-based model may not be suitable to represent the
dynamics in the process.
By contrast to the arguments supporting formal models, some researchers point out that
prototyping is part of the philosophy and culture of design (Kauber, 1985; Schrage, 1993; Schrage, 1996;
Thomke & Nimgade, 2000; Pering, 2002; Brown, 2005), which also suggests that prototyping is part of
the design process from the beginning to the end. This resonates with the space model of the design
thinking process proposed by Brown (2008). The space model suggests the interconnections among
inspiration, ideation and implementation phases. In this model, prototyping can be conducted
throughout the design process.
Overall, while various process models indicate that prototyping is an activity in a late stage of the
whole process, some theories suggest that prototyping can be effective in an early stage if the position
of prototyping is correctly aligned with the purpose of prototyping and the fidelity of prototypes.
Furthermore, prototyping can work as a philosophy and culture of the design process. The process of
business model prototyping can be also considered as not only iterative but also overlapped over the
entire design process. This understanding of prototyping in design is in line with the notion that design is
an agile approach (e.g., Neumeier, 2008; Lindberg et al., 2011; Leifer & Meinel, 2011; Mootee, 2013).
While agility is argued as a characteristic of processes, it is also considered as an organisational property
or “competence” (e.g., Neumeier, 2008a). When prototyping is regarded as philosophy or culture of
design, agility can be regarded as part of the philosophy or culture. Although agility is characterised with
the iterative process, it does not explain well about the discontinuity in the prototyping process. The
following sections will argue it with the concept of evolution and emergence.
355
Orlikowski, 1994). This point suggests that an iterative approach is effective to mange uncertainty, but
at the same time how to manage discontinuity in the process has to be considered to successfully
exploit the value of the prototyping process as exploration. In practice, difficulty is in making a decision
in the conflict between improving the current solution and exploring new possibilities. It is asserted that
“there is a tension between evolving toward the final solution and exploring an unexpected design
direction, which may be adopted or thrown away completely” (Beaudouin-Lafon & Mackay, 2007,
p.1020).
Regarding design problems as complex problems, each iteration in the prototyping process should
include the reconfiguration of prototypes as the business situation dynamically changes and each
iteration affects the next iteration (Rittel & Webber, 1973). In other words, each iteration is not the
same as it affects the mindset and knowledge of project members is accumulated through the iteration.
Thus, the analogy of tornado or a representation of the process in a spring shape is more suitable than a
horizontally-recurred circle. Similarly, Lim et al. (2008) assert that the process of prototyping is organic
and evolutional.
Although the differences among iteration, increment and evolution are not often argued, software
developer, Allan Kelly (2011) divides agile development into three types, which are iterative,
incremental and evolutionary development. Iterative development turns large requirements to be small
sized requirements that can be managed by short term iterations. In iterative development,
predetermined tasks and goals are assumed to be well defined and correct. Thus, even though it uses an
iterative approach, all the effort is made for a big product launch and changing requirements is
perceived negatively. Incremental development is similar to and based on incremental development,
but the product release cycle is shorter than iterative development to gain users’ feedback. Therefore,
changes are a positive move and reducing tasks is regarded as saving, although it still starts with
predetermined requirements. By contrast, evolutionary development starts with a loose set of
requirements, as the approach is based on the assumption that it is hardly possible to identify all the
requirements in advance. Not only in software development, specifying required features before
prototyping is also questioned in product development (e.g., Boehm et al., 1984; Rudd et al., 1996;
Thomke & Bell, 2001).
The process is goal-oriented, and through the process, new requirements and opportunities are
emerged and identified. The development has to be measured by how much progress is achieved
towards the goal rather than by how many pre-set tasks are done. An important point for this paper is
that evolutionary development is a parallel process of creating solutions and discovering new
requirements and opportunities.
From this perspective, the findings of this research suggest the term, evolution should be
intentionally chosen to describe the process of business model prototyping. It is also argued that
business models are a subject to evolve rather than something staying in the same state (Chesbrough &
Rosenbloom, 2002; Mitchell & Coles, 2003; Gerasymenko et al., 2015). Thus, at least in the context of
business model prototyping, the process can be seen as an evolutionary process as the development of
prototypes works as an exploratory process for new opportunities.
Following the argument of the evolutionary process, another question is raised; how the emergence
of new requirements and opportunities occurs. Some arguments suggest that iterations gradually
improve a solution. For instance, Fixton and Rao (2014) claim that “emergent strategy is an iterative
process, one experiment leads to another, and to another, in each case closing in on a workable
solution” (p.49). As they apparently regard the iterations as experiments, this might not be exactly the
case of prototyping, but an issue in emergent processes is that it is uncertain about whether the
direction is right or wrong, and the accumulation of knowledge through iteration is more likely to lead to
a fairly radical change of direction (Tyre & Orlikowski, 1994; Ries, 2011; Bogers & Horst, 2014).
Emergence requires deep understanding of the context of innovation opportunities. Peschl and
Fundeider (2015, p.142) introduce the concept of emergent innovation, and suggest that the realisation
of potential opportunities requires an exploration for a profound understanding on the key contexts.
The aim of business model prototyping can be to gain this level of understanding of a new business, and
it is expected to lead the emergence of innovation through new business models.
356
The advantage of the iteration may be to generate the dynamics in the power structure for decision
making to widen a window of opportunity to change (see Tyre & Orlikowski, 1994). In other words,
iteration is not for gradually validating the parts of business models, but deconstructing and rebuilding
the organisational situation for identifying new opportunities for business model innovation. In addition,
as the importance of principles and cultures is asserted, simply following the process may not result in
intended outcomes.
Conclusion
This paper reviews the arguments about process models of prototyping for managing innovation.
While some normative process models are developed in the existing literature, this research identifies
the nature of prototyping as a philosophy or culture embedded in the entire innovation process. As
there is difficulty in finding the existing literature about the process model of business model innovation
(Zott & Amit, 2015), this research contribute to the literature by providing a prototyping perspective to
the discussion on business model innovation. This research mainly relies on literature, and further
research based on empirical data will strengthen the prototyping perspective for managing business
model innovation.
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Workshop
Amano, T. & Hayashi, N. (2017) Stretch: business model exploration by a design-oriented card
game. In: Hong Kong.
Theoretical relation
While the importance of design and design thinking for business development has been
acknowledged (Bonakdar & Gassmann, 2016; Brown, Martin, & Berger, 2014; Bucolo & Wrigley, 2012),
the gap between the two worlds still causes difficulty in making innovation through design approaches
(Bolton & Green, 2014). It represents an intersection of design methods and management methods to
create new business models. There are some tools for analysing business models (Massa & Tucci, 2013;
e.g., Osterwalder & Pigneur, 2010; Maurya, 2012), but exploration tools are few. It is argued that the
design methodology has an advantage of exploration of new ideas (Beckman & Barry, 2007; Brassett &
Hestad, 2013; Brown, 2008; Kolko, 2015; Lockwood, 2010; Martin, 2009), and Stretch takes advantage of
design approaches to business model development.
The number of startups is rapidly growing in the UK, which increased from 581,173 in 2014 to
608,100 in 2015 (including over 200,000 even only in London). Furthermore, the number in 2016
surpassed the record already in November (Yoshioka, 2016). The rapid growth implicates that there is a
growing demand to learn entrepreneurship, but also indicates that most of the entrepreneurs are less
experienced in business development than they used to be and need to have an enterprise education
and training at a foundation level. Thus, tools and methods need to be simple and user-friendly enough
for beginners to engage. However, business education has been traditionally theoretical and lecture-
based, and the tools are complicated.
In Stretch, a business model consists of four elements: value, create, deliver, and capture (see
Johnson, 2010; Massa & Tucci, 2013; Osterwalder & Pigneur, 2010). Specific colours are assigned to
each element (red for value, orange for create, green for create, and blue for capture). Each element has
12 patterns, and a deck of Stretch has 48 cards in total (Figure 1). The simplified representation of
business elements supports the users to conceive of ideas quickly and engage with the concept of
business models.
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Figure 8-1 A product image of Stretch
Workshop
approach
The workshop has two sessions. The first one has a guideline following a basic mechanic of the card
game and gives a brief understanding of Stretch’s characteristics. The second session allows the
participants to freely play Stretch. It is followed by a time to critically reflect the game itself and business
models.
The basic mechanic introduced in the first session is the following. The goal of the game is to
collaborate to make as many business model formations as possible and use all the cards in your hands.
Every player starts with five cards dealt face down. The rest of the cards are placed as a draw pile also
with the face down. If some of your players are not familiar with your business, giving its brief
introduction would help other players to imagine what could be the business model. If you randomly
play without a particular business in business, it would be good to set an imaginary business people can
quickly think of, such as a flower shop and a food company.
The first player is usually the player on the left side of the dealer, and the gameplay typically follows
a clockwise direction. Every player views his or her cards. In each round, players collaboratively make a
formation of a business model. The first player in a round put a card from his or her hands face-up, and
describe what you think the business would be. The next one cannot put a card with the same colour.
He or she has to put a card with another colour and add a story of the business model fit with the cards.
If you do not have other colours, you have to draw cards from a draw pile until you get one. Once you
made a set of four colours, the group wraps up the discussion on the business model and put them aside
to move to the next round. Keep playing until all the cards in your hands are used, and try to make as
many business models as you can.
In the second session, the groups are rearranged and set some rules by themselves to explore
further possibilities of utilising the design-oriented tool for business model development.
The workshop is designed for a group work, and the ideal number of people in a group is five. If the
groups can be organised as five people, five decks of Stretch will be prepared for up to 25 people
forming five groups. The format is:
1. 20 mins: An overview of the concept of business models
2. 20 mins: The First Session (a guided session)
3. 10 mins: Break
4. 20 mins: The Second Session (a freestyle session)
5. 20 mins: Q&A and reflection
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Take-aways for the participants
As explicit outcomes of the workshop, the participants will generate various formations of business
models and identify some business model archetypes applicable to a business idea. The findings will
lead the participants to action plans to explore and verify the feasibility of the insights on business
models. One of the obstacles to identify suitable business models is that people tend to follow existing
and verified business models for their business. A problem for managing innovation, however, is that
verified business models do not guarantee success in the future (Christensen, 2003; Martin, 2009).
Repeatedly playing Stretch helps the players to keep their mindset to be open for new formations of
business model elements as well as new opportunities for business model innovation.
In addition to the outcomes, the workshop potentially provides various benefits. First, through the
workshop the participants will learn the key theories and typical patterns of business models. Secondly,
the participants can see how a design-oriented tool applies to a business and management mission.
Finally, using the tool will encourage the participants to discuss the potentials of design approaches to
business model issues.
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About the Workshop Facilitators
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8.1.2. 1st Business Model Conference
Amano, T., Brassett, J., Lawrence, G. & Hestad, M. (2017) A Theoretical Framework of Business
Model Prototyping: Applying Design Thinking to Business Model Innovation. In: Venice, Italy.
8.1.4. Purpose
Over the past decade, business model innovation (BMI) has been acknowledged
(Chesbrough, 2007; Baden-Fuller et al., 2010; Schneider & Spieth, 2013) and more
Chesbrough, 2007; Amit & Zott, 2010; Teece, 2010). Furthermore, surveys on senior
executives indicate the importance of business model innovation; for example, IBM
published a report featuring business model innovation back in 2006 (IBM, 2006).
Management consultancy, the Boston Consulting Group (BCG) also started to consider
and examine the value of BMI at a relatively early stage (Lindgardt et al., 2009). BCG has
published an annual survey of senior executive views on innovation since 2004, one that
charts the growing interest in the field in the period. BCG’s 2014 survey indicates that
innovation is a top three priority for executives (Andrew et al., 2010; Taylor et al., 2012;
Wagner et al., 2013; Wagner et al., 2014). Of particular significance, the survey asserts
that successful innovating companies more often than not engage in business model
enhanced attention to BMI issues (Chesbrough, 2010). These concepts are also core to
recent theorising in relation to design thinking (Cross, 2011; Liedtka & Ogilvie, 2011).
However, the application of design thinking to business model innovation is not well
366
theorised. This paper proposes a theoretical framework of business model prototyping
that demonstrates a means of applying design thinking for business model innovation.
Approach
The paper will include a literature review and discussion of fieldwork that has
Relevant ideas from the literature review, and findings from the fieldwork are combined
to generate an enhanced and coherent theory (Dubois & Gadde, 2002; Dubois & Gadde,
approach – a key characteristic of design practice and design thinking (Neumeier, 2008;
has also been deployed in development of our framework. In addition, the study has
dimensions (purpose, process, context and engagement) that constitute what we will
show as the basic vectors of the business model prototyping framework that we
propose. This basic version has been elaborated via use of fieldwork findings (from
expert interviews and case studies) to create a more nuanced model, one that is
reflective of both theory and practice. We contend that this business model prototyping
framework is a substantive contribution to BMI theory and practice, which we will detail
further below.
Findings
367
The key finding of this work is a theoretical framework of business model
evaluation and persuasion. We will show that exploration is an undervalued, but highly
prototyping is used is often regarded as phase-based (e.g., Seidel & Fixson, 2013;
Liedtka, 2015; Zott & Amit, 2015) – i.e. that it fits within clearly set processes of the
development of goods or services – we find that how prototyping fits within processes
Nimgade, 2000; Pering, 2002; Brown, 2005). ‘Context’ influences learning through
(e.g., Nielsen, 1993; Snyder, 2003), it is not so well regarded as the attributes of
prototypes themselves, such as fidelity (e.g., Virzi et al., 1996; Nilsson & Siponen, 2006)
or materials (e.g., Sefelin et al., 2003; Akaoka et al., 2010). Recently, however, some
culture – as an influential factor on their outcomes (e.g., Lim et al., 2006; Sauer et al.,
with users and other actors in prototyping is a crucial factor of improving the learning
outcome (Beaudouin-Lafon & Mackay, 2007; Han, 2009; Rizzo & Cantù, 2013; Bogers &
Horst, 2014; Jensen et al., 2015). Prototypes support the facilitation of communication
within and across different actors in design processes (Erickson, 1995; Kolodner & Wills,
1996; Schrage, 1996; Schrage, 2000; Kelley & Littman, 2001; Yang, 2005; Blomkvist &
Holmlid, 2009), which is considered a difficult activity (Voss & Zomerdijk, 2007). The
368
traditional literature on prototyping coming from product design, however, discusses
engagement largely in terms of ‘interactivity’, and focusses upon only whether the
prototype has an interactive function (e.g., Beaudouin-Lafon & Mackay, 2007; Lim et al.,
this paper considers interaction among actors and situations through prototyping as a
key factor in the value of prototyping (see Latour, 1996; Reckwitz, 2002; Kimbell, 2012).
Fidelity – either lo-fidelity rough and dirty models, or high-fidelity almost finished
products – is also a widely discussed subject regarding prototyping (e.g., Rudd et al.,
1996; Virzi et al., 1996; Houde & Hill, 1997; Walker et al., 2002; Lim et al., 2006; McCurdy
et al., 2006; Sauer & Sonderegger, 2009). However, as business model prototypes are not
necessarily physical, because the level of abstraction of business models is high in itself,
their prototypes can be manifest in diverse ways, even narratives (Magretta, 2002;
Massa & Tucci, 2013). For this paper fidelity, in the dimension of engagement, relates to
how precise the prototype affects the engagement of actors in the design and
development of business models. Thus, this paper sees engagement not as interactivity
From reflecting on these dimensions, this paper concludes that business model
prototyping is not a single method or tool but consists of various methods and tools.
Also, the dimensions of business model prototyping identified in this paper are not
discourses and significance of this activity for business model innovation. Thus, this
(Gasparski, 1986; Baskerville, 1991; Blaug, 1992; Ishak & Alias, 2005) for exploring
369
possible business models through designing and gaining feedback from the
Research Limitations
This work follows a logic of replication (Yin, 2013) and relies on a small number
of cases and data sources. Although it does not aim to generalise the concept of
large number of samples could complement the limitations of the data collection
methods used. Therefore, once this type of business model prototyping is disseminated,
and design practitioners could potentially further validate and develop the knowledge on
Originality/Value
First, while the importance of exploration for business model innovation has
been widely acknowledged (e.g., Chesbrough, 2010; Sosna et al., 2010), there are few
design and design thinking for innovation has been addressed well over the last decade
or so, the value of prototyping for business model innovation has not.
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8.1.5. Design Management Institute
Conference 2014
Amano, T. (2014) Prototyping in Business Model Innovation: Exploring the Role of Design
Thinking in Business Model Development. In: The Proceedings of the 19th DMI International
Design Management Research Conference: Design Management in an Era of Disruption.
London, UK, The Design Management Institute, pp.2780–2796.
The role of design for innovation management has been argued especially under the
discourse of design thinking by scholars and practitioners. For fostering innovation, one of
the obstacles is the uncertainty over the process, and prototyping has been acknowledged
as a key element of the design methodology to embrace the uncertainty. However, the
focal point of the discourse is often on the human-centric aspect and there is less
argument on prototyping.
Concurrently, the argument of design methodology for innovation has started to identify
the need for a more comprehensive approach than approaches focusing on product
innovations, and the argument has expanded to business model innovation.
By clarifying the concept of business model innovation and the relevant concepts by
literature review, this paper proposes a theoretical model of business model prototyping
with the four key elements: iterative and agile learning, tangibility, complexity and
synthesis. It is accompanied by the examination of the possible domains of further
research.
Through the development of the theoretical model, this research serves as the basis for
arguing the relatively neglected issue of prototyping for business models.
Keywords: Design thinking; prototyping; business model; innovation; business model innovation
Introduction
It has been acknowledged that managing innovation is surrounded by a high degree of uncertainty
(Christensen, 2003) and the required strategy to embrace the risk in the uncertainty is different from
management strategies in the conventional management discipline (MacGrath, 2000; Ries, 2011; Blank
and Dorf, 2012). In line with the growing importance of innovation, the strategic role of design has been
argued under the concept of design thinking as an alternative methodology for fostering innovation
(Dunne and Martin, 2006; Brown, 2008; Lockwood, 2010; Plattner et al., 2010).
*
Corresponding author: Tsuyoshi Amano | e-mail: [email protected]
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Also business models have become a popular concept relevant to innovation (Amit and Zott, 2010;
Chesbrough, 2010; Teece, 2010), and some tools based on the concept are developed to explore new
opportunities in the uncertainty (Osterwalder and Pigneur, 2010).
While innovation is traditionally regarded as a matter of technology and products (Fagerberg, 2006;
Chesbrough, 2007; Norman and Verganti, 2012), it has started to be acknowledged that business model
innovation is a new area of innovation. Different from innovations categorised by the output of
innovation such as product innovations, the concept of business model innovation rather provides a
new approach to fostering innovation than specific cases, and the concept is still under development
(Schneider and Spieth, 2013).
This paper will examine the possibility of applying the methodology of design thinking, especially
focusing on the method of prototyping, to business model innovation. It will also propose a theoretical
framework of business model prototyping focusing on the four elements of the concept: iterative and
agile learning, tangibility, complexity and synthesis. Finally, it suggests the possible area of further
research.
Key Concepts
Innovation
It is recognised that there is a wide range of research and attempts to define innovation (Fagerberg,
2006; Cruickshank, 2010). Therefore, before moving to an argument on the contribution of design
thinking to business model innovation, this chapter will clarify the definition of innovation for this paper
as the conceptual foundation, and it also reveals the conceptual difference between product
innovations and business model innovation.
This definition encompasses various types of outputs as innovation and emphasises implementation
as a key aspect of innovation.
Cox (2005, p.2) also defines innovation as ‘the successful exploitation of new ideas’. Here also
exploitation is the key point of innovation. It seems that, as innovation tends to be misunderstood as
invention, which is more likely to be mere idea generation, these definitions try to ground innovation on
a larger basis including the implementation of ideas. Following the definitions, this paper regards
innovation as a comprehensive activity.
Product innovations
OECD (2005) also proposes a taxonomy of innovation that divides innovation into four types: product
innovations, marketing innovations, process innovations and organisation innovations. It defines that
‘Product innovations involve significant changes in the capabilities of goods or services. Both entirely
new goods and services and significant improvements to existing products are included’ (p.18). This
definition suggests that this categorisation is based on the output of innovation. For instance, the
characteristics of product innovations in this definition is that the innovations are delivered through
goods or services. Another point of this definition is that the word ‘product’ does not only mean goods
but also includes services. In other words, the physicality of the products is not focused as the key
element of products.
It is not new to think that the boundary between products and services is vague. For instance, an
argument on service-dominant logic reveals that the product is only a medium to provide a service and
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it should be regarded through a logic concentrating on services (Vargo and Lusch, 2004). In this logic,
products are a physical medium of the services to deliver the value.
Business models
The definition of business models
There are numerous arguments on the definition of business models and the general definition has
not been formulated (George and Bock, 2011; Schneider and Spieth, 2013). In the early stage of the
research on business models, the term was used to mostly describe the financial side of business
(Schneider and Spieth, 2013). In the progression of the argument, it became a concept representing the
holistic architecture of a business. Teece (2010), for instance, asserts that business models are more
conceptual and holistic than a mere financial model.
To settle the definition, this research focuses on the definitions by key researchers on innovation.
Chesbrough and Rosenbloom (2002) describe it as a medium between the technical domain and
economic domain. Their argument basically suggests that technological progress itself hardly fosters
innovation, and the consideration of commercialisation of ideas will be needed to exploit the
opportunity. Johnson (2010) also points out the importance of the delivery of values. He argues that a
business model ‘defines the way the company delivers value to a set of customers at a profit’.
Research by Osterwalder (2004) is also broadly acknowledged, and the definition of business models
encompasses a more comprehensive set of the elements in the concept. The definition is that ‘a
business model describes the rationale of how an organization creates, delivers, and captures value’
(Osterwalder and Pigneur, 2010, p.14). The creation of value is the traditional focal point of innovation
management, which is about the generation of new ideas, products and services. The delivery of value is
an adaptation of the new ideas to the market including the customer segment, channels and customer
relationship. Capturing value is the monetisation of the scheme. Through clarifying the three key aspects
of business models, the definition shows business models as a holistic overview of a business.
Key aspects of business models
The argument on the definition of business models indicates that comprehensiveness is one of the
key elements of business models.
Another key aspect is agility. Blank and Dorf (2012) compares the advantage of business models with
that of business plans. His assertion is that most of the business plans for a new market or a new
business do not survive at the first contact with customers in many cases. In other words, those plans
actually include many assumptions.
This point resonates with one of the assertions by Christensen (2003). He argues that a market
research, even if it is made by expert analysts, cannot predict the future of a new market and simply a
market that does not yet exist cannot be analysed. He adds that most of new successful ventures
actually abandoned their original plan in the implementation of their business.
Rather than spending much time only for planning, Blank (2005) suggests that those who develop
new businesses should go out and start to validate the scalability of their business from the early stage.
Christensen (2003) also suggests that action needs to be taken to learn before planning, and planning is
only needed for learning new markets.
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Comparison with product innovations
Innovation as the output of innovations
The previous section reveals inclusiveness and agility as the key characteristics of business models.
In this understanding, the concept of business model innovation does not fit in the categorisation of
innovations OECD provided. As we have seen, the categorisation by OECD is based on the outcomes of
innovation. For example, product innovations are the innovation of products and marketing innovations
are the innovation of marketing methods. The report uses the plural form for innovation and this also
implies this point.
Business model innovation as an approach
On the other hand, the concept of business models include various aspects of businesses. The
insights from the analysis of business models can end up as any type of innovations in the taxonomy of
OECD. The analysis of a business model, for instance, might identify a new value creation or a new way
of delivering value as a potential opportunity of innovation. The former can be categorised as product
innovations and the latter can be process innovations.
Business models are also tentative (Osterwalder and Pigneur, 2010), and it is rather a conceptual
tool or concept itself to explore latent opportunities than an outcome directly influencing the business.
Therefore, business model innovation is hardly settled in this categorisation. It seems that business
model innovation is not the innovation of business models but the innovation through the analysis of
the business model. In other words, the characteristics of business model innovation is how to identify
the opportunities for innovation rather than the type of the outcomes.
Need for a new approach to innovation
The reason why the research on innovation began to more frequently discuss business model
innovation is not because product innovations became obsolete and we need to move to a new realm of
innovation, but because it is gradually revealed that focusing on a single element of the business can
miss the potential opportunities of innovation and the opportunities can actually be in the area of other
elements of the business. For example, while you focus on a product innovation, the actual
opportunities of innovation can be in other areas such as the realm of marketing innovations or
organisation innovations.
An advantage of business model innovation approach, as we have seen, is to enable innovators to
capture the whole picture of their business or activities and help to identify possible opportunities of
different types of innovation.
The clarification of the conceptual difference between product innovations and business model
innovation will support the argument in the following section on design thinking as the strategic role of
design and the contribution to business model innovation.
Design thinking
The previous argument clarifies what business model innovation is. This section moves to the
argument of the contribution of design and design thinking for innovation, especially product
innovations and business model innovation.
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Design thinking as the strategic role of design
Design has been discussed as a broader activity, even since Simon (1996) argued design in his
discussion on the sciences of the artificial. He argues that ‘everyone designs who devises courses of
action aimed at changing current situations into preferred ones’ (p.111). In this point of view, the role of
design is not necessarily limited in the area of physical objects but rather it is about providing better
situations.
Moreover, there has been an argument for the strategic role of design under the concept of design
thinking.
Despite the controversy, this section builds the theoretical ground of the strategic role of design
from the concept of design thinking, as the concept is relevant to the application of design approach to
outside of the design discipline, which is the main theme of this research.
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A proposed concept: business model prototyping
This paper proposes a conceptual model of business model prototyping. The key elements are the
following:
• Iterative and agile learning
• Tangibility
• Complexity
• Synthesis
The subsequent sections will discuss the detail of each aspect.
Tangibility
Tangibility should be considered as a key characteristic of business model prototyping.
Prototyping can be also part of visual storytelling, as prototypes are fundamentally tangible
representations of the concepts. Lockwood (2010) asserts that visualization of concepts is always
included in prototypes, and the form of prototypes is various from concept sketches to physical mock
ups. The variation can also include some methods and tools of in service design such as stories boards,
customer journey map and a service blueprint (Polaine et al., 2013).
This tangibility of prototypes in design thinking makes it easier to obtain feedback and facilitate
interaction among stakeholders (Brown, 2009). There is usually difficulty in the collaboration among
people in different departments as they tend to have a different view of their own businesses and
customers from each other. Prototypes can work as a medium of sharing the common understanding of
their business and service (Star and Griesemer, 1989; Henderson, 1991; Carlile, 2002).
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Business model canvas can be a good example of turning the business model to be tangible (Blank
and Dorf, 2012), and there are similar mapping tools for entrepreneurs (Maurya, 2012) and social
entrepreneurs (McCahill, 2013) to help the visualisation of the abstract architecture of the business or
activities.
Complexity
Arguments in design thinking about prototyping sometimes point out the difference between
prototypes and the final solution. For example, Moggridge and Smith (2007, p.685) regard prototypes as
‘a representation of a design, made before the final solution exists’.
However, as business models represent a highly contextualised environment of business, it is
difficult in some cases to gain a profound knowledge from a simulated situation.
As a way of resolving this problem, some practitioners recommend to launch a developing product
to market in the early stage (Cooper and Vlaskovits, 2010; Ries, 2011; Blank and Dorf, 2012). The main
purpose is to gain actual data through an actual product launch. In this scenario, the boundary between
prototypes and the final solution is blurred.
If we think back to the definition of design by Simon (1996), design is for creating a preferred
solution and it can be an endless activity. There is always a possibility that any final solution can be
overcome by a preferred solution in the future.
Obviously, from the perspective of risk management, a virtual situation and closed exposure of the
representation of the solution are preferable as it can avoid the risk of being copied and brand damage.
However, in some cases, the actual exposure of prototypes to the real market is required to gain a
profound insight for business model innovation because of the complexity. Therefore, the level of
exposure should be considered depending on the learning objective.
Synthesis
One of the biggest challenges in prototyping for business models is the way to interpret the feedback
they get. A suggestion from the methodology of design thinking is that it should be synthetic. The way to
respond to the feedback in design thinking is presumably more synthetic than validation. Kelley and
Kelley (2013) include synthesis as one of the crucial phase of design thinking.
Obviously quantitative analysis tools are useful for that matter, but the collected data cannot
provide the clear answer about whether you should keep improving your current solution or shift to a
radically different direction based on validated learning you got by that time. The decision is
fundamentally influenced by human factors. Because of this, feedback should be synthetically analysed
and an integrative alternative solution should be provided through the method of business model
prototyping.
Limitation
Due to the lack of general definitions of some important concepts in this paper, such as innovation,
business models and design thinking, this research focused on some of the seminal definitions. Other
theoretical basement obviously can lead to a different conclusion.
Also as this research is based on literature review, additional supports by empirical data are needed
to propose a more reliable suggestion.
Moreover, although this research relies largely on the concept of design thinking, the validity of the
argument of design thinking is controversial in the design research community (Kimbell, 2011;
Johansson-Sköldberg et al., 2013). The reason is that the origin is mainly from the research community
of management (Martin, 2009) and the practice of a leading design agencies such as IDEO (Brown, 2009)
and they hardly refer to the literature in the design research community. Therefore, if the concept is
revised by a more comprehensive theory, it might lead to other conclusions.
Further Research
This paper explores the theoretical model of business model prototyping. There are other possible
future directions of further research.
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Methodology
Research themes
How business model prototyping can turn the complexity of a business t o be tangible
This paper argues that the complexity of a business represented by a business model is one of the
obstacles to facilitate business model innovation, and the advantage of prototyping is tangibility to
support the learning process and collaboration.
The concept of design thinking regards prototypes as visualisation of concepts rather than only a
partial representation of the final solution, and there are popular tools to visualise a business model
such as business model canvas.
However, a business model itself is also a simplified overview of a more complex reality of the
business. Only visually mapping out the elements does not appear to be sufficient enough to embrace
the complexity of the business.
In the context of entrepreneurship, utilising the real market to tap into the complexity is one of the
methods to tackle the problem (Blank, 2005; Ries, 2011). Obviously, the advocates of design thinking
have also promoted the importance of field research in the real situation to gain insights (Neumeier,
2008; Lockwood, 2010; Kelley and Kelley, 2013), but the main objective is basically the development of
new products and services.
How the tangibility of prototyping can be expanded to the level of business models to tackle the
complexity can be a theme of the future research.
Conclusion
This research discussed the key concepts relevant to business model prototyping, proposed the
theoretical model indicating the key elements, iterative and agile learning, tangibility, complexity and
synthesis. Built on the analysis, it also suggested the possible opportunities for the further research.
Prototyping has been a key method in design thinking and it has a potential for contributing to
business model innovation. While there are commonalities between prototyping in design thinking and
the application to business model innovation, such as iterative learning and agility, there is also a
particular problem of business model prototyping to tackle such as the complexity. The tangibility of
prototyping will provide an advantage for solving the problem, but it needs further research to clarify
the role.
This research is an attempt to produce an integrated and more inclusive concept of business model
prototyping. Empirical research will be the next step to verify the key elements identified in this
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research. As the research theme, how to synthesise the gained knowledge into a new solution and how
to turn the complexity of the business to be tangible need to be examined.
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